Royal Caribbean Group turned its first quarterly profit since the pandemic began, with third-quarter income of $33 million on revenue of $3 billion.
The company said the results were driven mainly by higher load factors from strong close-in demand, further improvement in onboard revenue and better cost performance.
During an earnings call with investors, Jason Liberty, Royal Caribbean Group's CEO, said the quarter's results were "better than expected" and that "demand for travel is ramping up as consumers continue to shift spend to experiences."
"Well, this is good news to us, as we are squarely in the experience business," he said. "The value proposition of cruise remains incredibly attractive; I would say too attractive. Our full addressable market is back and our brands are attracting new customers into our vacation ecosystem."
Bookings rose as Covid protocols eased
Booking volumes were "significantly higher" than the corresponding period of 2019, Royal said, pushed by the easing of testing and vaccination protocols.
"When those protocols fell off, we immediately saw a significant increase in the volume of bookings," Royal Caribbean International CEO Michael Bayley said during the earnings call. "And that volume continued and has accelerated. Our calculation in the American market was that the addressable market expanded by about 35 million people almost overnight. And we saw that coming through in our bookings. So it was a very positive step."
Cruises were booked closer to sailing than in the past, the company reported, resulting in about 50% more bookings in the third quarter for current-year sailings when compared with the same period in 2019. Approximately 95% of total third-quarter bookings were new, versus FCC redemptions. Liberty said the guest mix for the quarter was "equally distributed across loyalty, new-to-cruise and new to our brand, similar to what we saw in 2019."
Demand rises for 2023 vacations
The most notable booking change, Royal said, was a substantial acceleration in demand for 2023 sailings: Volumes for next year doubled during the third quarter compared with the second quarter and were considerably higher than bookings for 2020 sailings during the same period in 2019, the highest in company history.
Third-quarter load factors were 96% overall, Royal said, with Caribbean sailings reaching almost 105%. Revenues per passenger cruise day were flat versus the third quarter of 2019, despite the negative impact from the redemption of FCCs and lower than average load factors on its higher priced Europe itineraries.
Fourth-quarter and 2023 outlook
However, forecasting higher fourth-quarter costs related to fuel and the strong dollar, Royal projected a fourth quarter loss.
The outlook for 2023 is upbeat: While still early in the booking cycle, Royal said it expected a return to historical load factors in early summer and record yields for 2023.