Gross Margin Yields were down 12.4% as-reported and 10.5% in Constant-Currency. Net Yields were up 5.1% as-reported and 5.8% in Constant-Currency, compared to the first quarter of 2019.
MIAMI – Royal Caribbean Group reported first quarter Loss per Share of $(0.19) and Adjusted Loss per Share of $(0.23). These results were significantly better than the company’s guidance primarily due to strong close-in bookings at higher prices, continued strength of onboard spend, and favorable timing of operating costs. As a result of a record-breaking WAVE season and accelerating demand for its cruise experiences, the company is increasing its 2023 Adjusted Earnings per Share guidance to $4.40 – $4.80.
“We knew that demand for our business was strong and strengthening, but we have been pleasantly surprised with how swiftly demand further accelerated well above historical trends and at higher rates,” said Jason T. Liberty, president and chief executive officer of Royal Caribbean Group. “Leisure travel continues to strengthen as consumer spend further shifts towards experiences. Demand for our brands is outpacing broader travel due to a strong rebound and an attractive value proposition,” added Liberty. “We are increasing full year guidance, given the significant momentum in our business, and we are well on our way to achieve our Trifecta goals.”
Key Highlights
Stronger than anticipated demand has led to a record-breaking and extended WAVE season, which has and continues to translate into a robust booking environment – driving higher load factors and higher prices. These factors, combined with the continued strength in onboard spending, have led to the significant improvement (versus guidance) in the first quarter and the significant increase in the company’s full-year expectations for ticket and onboard revenue, as well as earnings.
First Quarter 2023:
- Load factors in the first quarter were 102%.
- Gross Margin Yields were down 12.4% as-reported and 10.5% in Constant-Currency. Net Yields were up 5.1% as-reported and 5.8% in Constant-Currency, compared to the first quarter of 2019.
- Gross Cruise Costs per Available Passenger Cruise Days (“APCD”) increased 8.2% as-reported and 8.8% in Constant-Currency, compared to the first quarter of 2019. Net Cruise Costs (“NCC”), excluding Fuel, per APCD increased 5.2% as-reported and 5.8% in Constant Currency, compared to the first quarter of 2019. Part of the improvement, compared to expectations, was due to favorable timing of operating costs.
- Total revenues were $2.9 billion, Net Loss was $(47.9) million or $(0.19) per share, Adjusted Net Loss was $(58.9) million or $(0.23) per share, Adjusted EBITDA was $641.7 million, and Operating Cash Flow was $1.3 billion.
Full Year 2023 Outlook:
- Net Yields are expected to increase 6.25% to 7.25% as-reported and 6.75% to 7.75% in Constant-Currency, compared to 2019.
- NCC, excluding Fuel, per APCD is expected to increase 5.2% to 6.2% as-reported and 5.5% to 6.5% in Constant Currency, compared to 2019.
- The company expects to significantly exceed prior record Adjusted EBITDA, achieved in 2019.
- Adjusted Earnings per Share for the full year are expected to be in the range of $4.40 to $4.80 per share.
Second Quarter 2023 Outlook:
- Net Yields are expected to increase 9.6% to 10.1% as-reported and 10.1% to 10.6% in Constant-Currency, compared to the second quarter of 2019.
- NCC, excluding Fuel, per APCD is expected to increase approximately 8.6% as-reported and approximately 8.9% in Constant Currency, compared to second quarter 2019.
- Adjusted Earnings per Share for the second quarter are expected to be in the range of $1.50 to $1.60 per share.
First Quarter 2023
The company reported Net Loss for the first quarter of $(47.9) million or $(0.19) per share compared to Net Loss of $(1.2) billion or $(4.58) per share for the same period in the prior year. The company also reported Adjusted Net Loss of $(58.9) million or $(0.23) per share for the first quarter compared to Adjusted Net Loss of $(1.2) billion or $(4.57) per share for the same period in the prior year.
First quarter revenue significantly exceeded the company’s guidance primarily due to very strong close-in demand, higher load factors at higher prices, and continued strength in onboard revenue. The company experienced particularly strong close-in demand for Caribbean itineraries, which accounted for close to 80% of first quarter capacity.
Gross Cruise Costs per APCD increased 8.2% as-reported and 8.8% in Constant-Currency, compared to 2019. NCC excluding Fuel per APCD increased 5.2% as-reported and 5.8% in Constant-Currency, compared to 2019. Part of the improvement, compared to expectations, was due to favorable timing of operating costs. Gross Cruise Costs per APCD and NCC, excluding Fuel, per APCD for the first quarter included $2.87 per APCD of lingering transitional costs and structural costs (e.g. full-year operations of Perfect Day at CocoCay and the new Galveston terminal). In the first quarter, the company continued to benefit from multiple actions taken over the past several years to reshape its cost structure which is helping to offset persistent inflation.
“First quarter results reflect continued strong demand for cruising and our teams’ focus on delivering the best vacation experiences that exceed guest expectations,” said Naftali Holtz, chief financial officer, Royal Caribbean Group. “We also benefited from favorable timing of operating expenses, as well as our continued focus on improving margins consistent with our Trifecta goals.”
Update on Bookings
Booking volumes in the first quarter were significantly higher than the corresponding period in 2019 and were considerably better than expected. This year, WAVE started earlier and extended further, generating a record level of bookings. These strong booking trends resulted in an acceleration of our booked position in relation to prior years. In addition, the company is generating significantly more bookings at meaningfully higher prices than in prior years, particularly from the North American consumer.
The remarkable WAVE booking period resulted in strong close-in demand at higher prices for the first quarter, and enabled a significant improvement in revenue expectations for all three remaining quarters. The increase in yield expectations for the year is predominantly related to higher load factors in the first quarter and higher prices for all four quarters, especially for Caribbean sailings. Consumer spending onboard, as well as pre-cruise purchases, continue to exceed 2019 levels driven by greater participation at higher prices. The company expects load factors to reach historical levels by late spring.
As of March 31, 2023, the Group’s customer deposit balance was at a record $5.3 billion.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
