The marketing is definitely working at Royal Caribbean, with more people than ever cruising, especially new cruisers.
Royal Caribbean Group shared the results of its third quarter in 2024 on Tuesday, and one important metric to note is how many people that have never cruised before.
Speaking to Wall Street analysts on a conference call, Royal Caribbean Group President and CEO Jason Liberty gave an overview of consumer spending and delved into some interesting facts about who is cruising.
Not only is his company seeing incredible growth, but demand is soaring as well. And that demand is coming more and more from new cruisers.
In the third quarter of 2024, Royal Caribbean Group carried 2.3 million passengers across all of its brands of lines, which include Royal Caribbean International, Celebrity Cruises, and SilverSea.
That's more than they had in the same quarter of 2023 when 1.9 million passengers cruised.
"The majority of our guests this year are either new to cruise or new to brand," Mr. Liberty shared in the call.
Before you assume it's just rookie cruisers booking, loyal customers are also booking, "at the same time our loyalty guests are up 20% compared to last year."
Spending big on cruise add-ons
Regardless of who books, a lot of people are then going right in and spending even more money on additional experiences for their cruise.
The cruise fare includes the basics, but there are lots of other options to consider. Shore excursions, internet access, beverage packages, spa treatments, and more are some of the things people tend to book.
Mr. Liberty explained, "Once booked, guests are quickly engaged with us and buying on board experiences at higher speeds, translating into higher satisfaction rates and higher onboard spend. "
The term "onboard spend" refers to the category of purchases a customer makes that are above and beyond the cruise fare booking.
He indicated more than 70% of customers are purchasing onboard activities before they sail. Compared to a customer that waits to book their cruise extras onboard, Royal Caribbean Group is seeing people that pre-book spending more than double.
Part of their success in getting almost three quarters of their customers to spend extra are the ways they entice their customers.
"Half of our onboard revenue in the third quarter was purchased through our AI driven pre-cruise channels," Mr. Liberty said.
This comes in the form of specialized sales, promotions, and advertisements that target specific customers. It could be a generic sale, a promotion targeting senior citizens, or opportunistic holiday promotion.
Who is cruising right now
Royal Caribbean Group is seeing a very healthy consumer looking to book cruise vacations, and they're skewing younger and younger.
"American households are wealthier than ever, with continued wage growth and low unemployment driving strong consumer spending," Mr. Liberty declared during the call.
Specifically, they are seeing Millennials, families and active cruisers all excessively booking on both leisure travel and specifically cruise travel.
"Our addressable market is growing and we are attracting more new customers into our vacation ecosystem, particularly younger demographics."
Royal Caribbean's research shows that consumer spending on leisure has grown a lot faster than most other spend categories over the past 12 months, with spend on travel increasing at a faster pace than other leisure categories.
They believe this trend will continue over the next 12 months, with leisure travel spending growing by more than any other leisure category.
Consumers are paying more too
Not only is the business demand strong, but there's a clear indication customers are willing to pay more for it.
Mr. Liberty was candid in discussing the pricing trends his company employs, "the trends show that we continue to be able to elevate demand, elevate pricing each day."
"We continue to see strong volumes [of] the customers willingness to pay more."
Why? Mr. Liberty thinks their product is so compelling and demand for a cruise vacation, in general, is so robust, that it's viewed as a must-do.
"I think that the cruise experience is now considered to be a very mainstream vacation product. And there's still a significant value proposition versus land based vacation."
Do elections matter to cruise bookings?
There was an interesting question asked by one of the analysts if the upcoming U.S. election has any impact on demand for booking a cruise.
Royal Caribbean International President and CEO Michael Bayley debunked any sense that the election cycle, or who wins, makes a difference to his company's bottom line, "We've gone back and done the analysis over literally decades, and it may be there may be a little bit of volatility during the week of the election, but over when you spread it over a longer period, there's effectively no impact on bookings as a result of elections, no matter which way they go."
