Royal Caribbean executives talk amazing demand, beach club, ordering new ships and more

Royal Caribbean Group’s earnings call on Thursday was filled with insights into what the company is thinking on a variety of subjects.

While the hour-long call with Wall Street analysts is meant to provide clarity for investment purposes, it also doubles as a way to share guidance on the direction of the cruise industry.

For consumers, there’s candid discussion of topics that will have an impact on what it’s like to go on a cruise.

Here’s an overview of the topics discussed that cruisers will want to know about.

Better demand than ever expected

Without a shadow of a doubt, business is really good across the Royal Caribbean Group brands.

“The first quarter was tremendous, sending us well on our path to a year that is significantly better than we expected just a few months back,” is what Royal Caribbean Group President and CEO Jason Liberty said at the onset of the call.

“What transpired over the past three months was even better than our already elevated expectations. Our brands are stronger than ever and demand for our vacation experiences continues to accelerate.”

In the first quarter, over 2 million people took cruises on a Royal Caribbean Group brand ship, and that lead to a lot of people paying for cruises, along with add-ons extras.

Demand is so strong that the company is raising its earnings forecast by fifty percent compared to what it forecast in February.

At one point in the call, Mr. Liberty pointed out that April was double the usual business. He sees this as a sign demand for cruises is accelerating. They thought things were getting better in February, but it went much better in the months since.

Royal Caribbean Group Chief Financial Officer Naftali Holtz explained later in the call that having two million passengers was great, but higher cruise costs was a difference maker, “While a load factor recovery was a contributor, most of our yield growth was driven by rates that were up by 14% versus 2023.”

Cruises in the Caribbean stood out given that 55% of their fleet was in this market, and the combination of new cruise ships and “much higher pricing on existing ships” drove up revenue.

80% of customers are from North America

The vast majority of people going on a Royal Caribbean cruise are from North America.

“North America continues to be extremely robust, where approximately 80% of this year’s guests are sourced,” is a key stat that Mr. Liberty mentioned in his opening remarks.

While next year may see a slight shift in that number with China cruises restarting, Mr. Liberty doesn’t see a lot of change in that, “we’re going to follow the demand patterns and that is how we have we’ve done it for a very, very long period of time.”

New cruiser numbers are up

A fascinating stat shared during the call is how many new cruisers are coming to Royal Caribbean.

People that have never taken a cruise ever are up more than 16% year-over-year, while almost one in two guests are millennials or younger.

“Millennials and younger generations have gained 11 percentage points share compared to 2019,” Mr. Liberty explained.

Sourcing new customers is always important, not just for a new booking, but for the repeat business.  He said new cruisers that try a Royal Caribbean Group cruise are seeing return rates over 30% higher compared to 2019.

New Bahamas beach club will be the envy of other cruise lines

Royal Caribbean has said it targets the new to cruise market over other cruise lines customers, but that doesn’t mean there isn’t a game of one-upmanship to be played.

Royal Caribbean broke ground on its new private beach club that will be exclusively for the use of Royal Caribbean customers, and it’s located on the front door step of every major cruise line.

Royal Caribbean International President and CEO Michael Bayley pointed out, “The beautiful thing is the Royal Beach Club in Paradise Island is positioned pretty much at the entrance to Nassau.”

“On a given day, there’s 25 to 30,000 cruise guests coming in on multiple different cruise brands. And of course, when they sail into Nassau, the only thing they’re going to see is the Royal Caribbean Royal Beach Club, which is going to be absolutely stunning. And they will be unbelievably jealous knowing that they can’t go there.”

Royal Beach Club, Paradise Island is a new land-based offering for the cruise line, and it will have an admission fee with a limited capacity.

Mr. Liberty confirmed that other Royal Caribbean Group brands will be able to go to the beach club too, but no other cruise line customers.

Almost everyone is using the mobile app

Interestingly enough, almost every passenger is using the cruise app now.

About 94% of cruise ship passengers are using the app onboard, and that’s important because it makes for an easier cruise experience for the guest, while making it easier to spend more money at the same time.

“We are removing friction and unlocking travel planning by investing in a modern digital travel platform, making it easier than ever for guests to book their dream vacations while allowing us to expand wallet, share our digital experiences, delight guests,” Mr. Liberty said.

He touted a number of new features added to the app in the app, such being able to book flights, better cruise booking choices, tracking loyalty benefits, and more.

Read more: 14 improvements Royal Caribbean developed just for Icon of the Seas

Middle East issues not affecting European cruise demand

While the geopolitical problems in the Middle East are troubling, it’s not stopping people from taking a European cruise.

Europe accounts for around 15% of capacity for the full year, and close to 25% during the summer.

“Despite the fact that we had to modify some of our eastern Mediterranean sailings that were previously expected to call in Israel or sail through the Red sea, our European itineraries have been performing very well and we are currently booked nicely ahead of last year in both rate and volume,” Mr. Holtz said during the earnings call.

As for the issues affecting ships traversing the Red Sea, the company has already re-routed a number of ships and has, “contingency plans for a few other sailings that may be impacted in the fall.”

Ordering more ships?

One analyst asked Royal Caribbean Group about the prospect of ordering more cruise ships given that Carnival and Norwegian both placed big orders recently.

Mr. Liberty was quick to point out that new orders don’t take into account options and slot reservations.  

Options are opt-in ship orders a cruise line can elect to take that is built into the original ship order contract. Think of it like a sports contract where the player signs for a few years, but has the choice to stay with the team instead of returning to free-agency.

Slot reservations are a way cruise lines pay to reserve space at a shipyard in the future. There’s no order placed, but just in case they do place an order, there’s capacity to build.

“I think we feel very good, not only about our current order book and about the potential of that order book to grow moderately, but also our access to build those ships over an extended period of time,” Mr. Liberty said.