Before a passenger gets on a Royal Caribbean (RCL) cruise ship, he or she must take a Covid test no longer than two days before departure. That creates an extra level of stress for would-be cruisers, who await the results and, with positive tests, could see their trips canceled before they begin.
At the pier passengers must show proof of those negative tests while also producing their original vaccination cards. All passengers over age 11 must be fully vaccinated at least two weeks before their trips. Add in the normal hassles of juggling passports and boarding passes, and passengers have four documents they must present multiple times before they can board the ships.
And once you board, the hassles don't completely go away. Royal Caribbean requires passengers to wear masks in all indoor areas aside from their staterooms or when stationary and actively eating or drinking.
These rules match what rival Carnival Cruise Lines (CCL) requires from its passengers. It's a situation caused by the pandemic, and for seasoned cruisers who often vacation on ships, it's the price of admission to get back to doing something they love.
For casual cruisers and families, however, the Covid protocols may make their vacations feel less like an escape from reality. That could be keeping them from booking until the situation gets closer to normal.
That has been a drag on earnings for both Royal Caribbean and Carnival, sending both to billions of dollars in losses. Those numbers have reversed somewhat since July when cruise ships tentatively began sailing from U.S. ports (with limited capacities). But the ongoing need for Covid protocols has muted demand, keeping both companies in the red.
And while the pandemic has not gone away, the new Royal Caribbean chief executive gave consumers looking for a more normal vacation, and shareholders, a reason for optimism.
Image source: Daniel Kline.
Royal Caribbean Has Put Safety Over Profit
Before he spoke about potentially lifting Covid-related rules, Royal Caribbean CEO Jason Liberty made clear that his company has been putting the safety of its passengers ahead of its bottom line.
"Since we resumed operations, our goal has been to making cruising one of the safest vacations anywhere in the world while providing an exceptional guest experience," he said during the company's fourth-quarter earnings call. "We continue to demonstrate that in a very tangible way."
Liberty pointed out that while cruise ships get a lot of media attention for positive cases, the actual number of people contracting Covid on ships has been very small.
"We have carried approximately 1.3 million guests since the restart, with about 2,500 guests testing positive for Covid-19, a positivity rate of 0.19%," he said. "This positivity rate is still a small fraction of what it is in society at large, and nearly all cases on board were asymptomatic or had mild symptoms."
The CEO also noted that while the Centers for Disease Control and Prevention rules regarding cruise ships have expired, his company has continued to abide by them.
"We continue to engage with the CDC and other public health agencies as we look to adjust our Covid-19 risk-mitigation measures in response to the changing nature of the virus," he added.
"Our healthy return to service plans anticipated twists and turns on our recovery path. We remain nimble in our approach adjusting to changes in the operating environment with a constant focus on our long-term strategy and success."
Royal Caribbean CEO Sees a Return to Normal
Liberty says that the worst of the pandemic -- and the Covid omicron variant -- has passed.
"As everyone is aware, the omicron variant has impacted most parts of society, as well as our operations," he said. "Since mid-December, we experienced an increase in the number of people testing positive for Covid onboard our ships. The good news is that in the last several weeks, cases onboard our ships have been declining rapidly, and we now have returned to exceptionally low pre-omicron levels."
The CEO, who was conducting his first earnings call since assuming the top job, noted that positive tests have declined over the past week with "only a handful of positive guest cases per cruise." The CEO did not quite say that Royal Caribbean would drop some of its safety protocols, but he set the stage for that.
"With the declining cases, operational challenges are also abating, so while the variant is not done, it appears that the worst is behind us," he said.
It was actually Royal Caribbean President Michael Bayley who suggested to potential travelers and shareholders that the company might reevaluate its Covid rules sooner rather than later.
"I think what we'll see is as we get into that environment, we'll start, again, working with the CDC. We'll start removing many of the protocols that exist today, and it will become easier and simpler for our customers," Bayley said.
The timing of that -- soon, but not immediate -- lines up with Liberty's forecast of continued losses in the first half of the year with a return to profitability in the second.
