Royal Caribbean and the other cruise lines were completely shut down for about 15 months due to the covid pandemic.
That period made executives at every major cruise company wonder whether the industry would ever build back to its former heights.
Before the pandemic, both Royal Caribbean (RCL) and Carnival Cruise Lines (CCL) had been delivering record results. Both seemed to have the formula down. And they were steadily building ever-bigger ships because the ship, not the ports of call, was the destination.
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After the pandemic shutdown, the industry recovered slowly. As covid-related restrictions went away, customers came back and, according to Royal Caribbean Chief Executive Jason Liberty, something interesting happened.
"Historically, you know, prepandemic about a third of our guests were new to cruise, a third of our guests were loyalists, and the third of our guests refers to brand," he told Yahoo's Diane King Hall.
"...We're seeing more new to cruise than we had seen in 2019. We're seeing more first-to-brand, which is very much in line with our growth expectations for our capacity [and] growth as our new ships come on."
Royal Caribbean ships have generally been sailing at or over 100% capacity and that's good news for the cruise line, but not so much for consumers.
Image source: Dukas/Universal Images Group via Getty Images
Royal Caribbean CEO Sees Higher Prices
During much of the period since Royal Caribbean returned to sailing from U.S. ports, the cruise line was selling most cruises at much lower rates than it did before the pandemic. It made up some of that revenue with onboard sales, but prices were depressed because the demand was simply not there.
That has changed dramatically as covid rules have fully gone away and traditional cruisers have come back. That has enabled Royal Caribbean to do something cruisers won't like.
"So we've actually seen and we continue to see the ability to raise prices in the current market," Liberty told Hall."
Higher prices, Liberty noted, are relative because cruises remain inexpensive compared with land-based trips.
"There's also a pretty significant value gap to land-based vacations...We have that opportunity now to begin to close that gap. And that gap was about 15% to 20% pre-pandemic. Today, it's about 35% to 45%. And we're going to make, you know, a pretty good dent in it here in 2023," he added.
Royal Caribbean's Audience Has Changed
Royal Caribbean runs three brands, but only its namesake brand and Celebrity are mass-market brands. Silversea, its third brand, offers a high-end experience and can be considered more of a niche product.
Royal Caribbean serves a multigenerational audience and families while Celebrity passengers tend to be in their 50s, according to the CEO. The company overall, however, has seen a different kind of customer.
"What we are seeing is the guest is actually a little bit younger on average than what we saw prepandemic. And a lot of that is because there's more millennials that are now into the system as they got married and started to have kids and are looking to experience incredible travel experiences," he shared.
Liberty says his company is well-positioned because consumers have made a clear choice to value experiences over acquiring things.
"The guest has shifted back to this trajectory of experiences outpacing buying stuff. And that's what we're seeing from our guests," he added.
"And what we collect in our survey data is they bought enough stuff. What they want to do is collect experiences, create stories with their friends and family, and loved ones. And fortunately, that's -- that's what we do for a living."
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