Royal Caribbean Group's first quarter earnings call with analysts shed light onto how strong their business is right, and why you may need to adjust your own planning strategy.
Reading the tea leaves of what executives said during the hour-long call, it's clear demand for cruises is the highest it's been since 2019, and that has ramifications for how to effectively budget and schedule your upcoming cruise.
"While demand has been strong across all products and markets, we continue to see exceptional strength from the North American consumer. This strength, in combination with the incredible Perfect Day at CocoCay has resulted in record yields for our Caribbean sailings," said Royal Caribbean Group CEO Jason Liberty.
The demand for cruises is so strong right now that it's not only erased any doubt about the cruise industry's ability to bounce back from the events of 2020 - 2022, but demonstrates how competitive things are going to be this year in terms of booking a new cruise.
These earnings call may sound like just another financial discussion, but it sheds light on trends we can expect when it comes to cruise planning.
In looking at the numbers, there are two trends you should be aware of if you're either going to book a 2023 cruise, or have one booked already.
Don't expect prices to come down
With demand so high for cruise bookings right now, I wouldn't expect to find bargain basement rates for cruises in the near future.
"Strong demand for Caribbean itineraries translated into higher load factors at better than expected pricing for both ticket and onboard," is what Mr. Liberty said at the beginning of the call.
"Yields grew 5.8% compared to record 2019 levels and were significantly above our guidance."
What this means is there were more people booked on Caribbean cruises than before, specifically with more than 2 people in the cabin, and those passengers paid more for the cruise fare and their add-ons.
Here are more quotes about how strong the business of selling cruises is in the first quarter.
"Our brands are stronger than ever and our yield in Q1 blew away previous records."
"The acceleration of demand, coupled with our team's incredible execution, is also translating into higher revenue and earnings expectations for the full year."
"Bookings outpaced 2019 levels by a very wide margin throughout the entire first quarter and into April."
He also emphasized the people are booking cruises back in a "normal" way, meaning some of the trepidation we saw following the cruise industry restart is pretty much gone now.
"The booking window is now completely back to normal, demonstrating consumers desire to continue to plan their vacation travel with us well in advance."
After hearing all of this, it sounds to me that even though Royal Caribbean has raised cruise fare prices (compared to 2019), consumers are still booking and in record numbers.
This means the chances of cruise fare prices going down on average seem remote, and if anything, I think it could embolden the company to continue raising fares.
My advice is if you haven't booked a cruise yet but want to, go ahead and lock in a price now before prices go up again. If you can book your cruise more than 6 months before the cruise begins, it will greatly benefit you.
One of my best Royal Caribbean cruise tips is to book your cruise as early as you can to lock in the best rates, keeping in mind residents of many countries (US and Canada, for example) can reprice the cruise if the price does drop up until the final payment date.
That isn't to say there won't be any last-minute deals for a cruise, but you shouldn't bank on it as your primary cruise booking strategy.
Cruise add-ons will sell out, so book early
One lesson I'll apply from the earnings call is when I book my Royal Caribbean shore excursions in the future.
Not only are people booking cruises like never before, but they're also buying more before the cruise begins.
"About two thirds of our guests booked some of their onboard activities in advance of their cruise," Mr. Liberty explained.
"The comparable figure in 2019 was 48%. So you can see we have used our time well to upgrade our systems."
Getting people to book things before the cruise commences is a big deal to the company, because it ends up being more profitable for the company, "Every dollar a guest spends, pre-cruise translates into approximately $0.70 of incremental spend."
What this means to me is the days of waiting until you got onboard your cruise ship to book a tour, drink package, or other add-on would be a mistake. I've always felt this way about drink packages, but excursions are a shift.
If more than half the people on your cruise are shopping for cruise add-ons in advance, that means more competition to book shore excursions and consequently a higher chance tours will sell out before the cruise begins.
Read more: Guide to picking the perfect Royal Caribbean shore excursion
I'd go one step further and recommend booking your tours months before your cruise, instead of weeks or days.
One of the biggest stumbling blocks for cruisers is when there are limited or no shore excursions left to book through the cruise line, and booking shore excursions on your own through a third party provider is a daunting prospect.
Read more: What to do if Royal Caribbean's shore excursions are sold out
It's not just shore excursions that can sell out, as specialty restaurants and dining packages are often selling out.
Remember, anything you book in the Cruise Planner website is fully refundable before the cruise begins. So if you book a tour or package four or five months before the cruise begins but change your mind later, there's no risk.
Read more: How to cancel and rebook pre-cruise purchases on Royal Caribbean's Cruise Planner
More cabins could become available later
Perhaps the most cryptic thing said during the earnings call was a short comment about cruise ship cabin availability.
Read more: The 5 best cabin locations on a cruise ship
Near the end of the call, Mr. Liberty talked about cruise cabin inventory, and how the increased demand might change how Royal Caribbean sells rooms next year.
I've always worked under the assumption when Royal Caribbean puts a new sailing for sale, every single cabin is available at once to book. But perhaps that is no longer the case.
"We used to kind of put everything out there and all the suites would be sold basically right off the bat. And then you would kind of work your way down to the inside cabins," he said in answering the question.
"While now, we we hold back inventory, and we release it based off of our what are much more sophisticated revenue management models that we have today."
Unfortunately, there was no other clarification or insight into what that statement means. For context, here's everything else he said immediately after that. Perhaps you can decipher it better than I can.
That's why I think sometimes when we get into conversations around "what percent booked are you", "how does it relate to this period versus that period", what we're really focused on is optimizing yield. And so there might be periods where quarter over quarter, or year over year, we want to be in a in a stronger booked position or lesser than what we were booked in a previous period. Because what we're focused on is maximizing yield, which sometimes comes with us having more inventory to sell.
The call wrapped up immediately after that comment, so it's hard to know precisely how Royal Caribbean is managing their stateroom inventory. It certainly sounds like when a new sailing becomes available to book, not every cabin is available off the bat.
Without having additional context, I simply wanted to provide this information so you can keep it in mind when booking new cruises, especially when Royal Caribbean adds new cruises to book.
It might mean if a certain cabin category is sold out initially, that it becomes available to book again down the road.
Or it could be a comment we're not properly understanding and stateroom inventory is not nearly as opportunistic as it sounds.
Planning a cruise? Start here:
- 8 cruise tips for first-time Royal Caribbean cruisers
- What’s included in your Royal Caribbean cruise fare
- 5 quick and easy tips for finding a great shore excursion on your own
- Food on a Royal Caribbean cruise
- Which is the best Royal Caribbean cruise ship?
- What is the best time to go on a Caribbean cruise?
