CruiseCEO Richard Fain revealed people are still booking international cruises as the group posts a US$1.6 billion loss for the second quarter.

Royal Caribbean's CEO 'surprised' by strong bookings for 2021

Royal Caribbean International's Oasis of the Seas.
Royal Caribbean International's Oasis of the Seas.

Royal Caribbean Group CEO Richard Fain said Monday that the company has been "humbled and surprised" by the number of bookings it's received for 2021 sailings.

During a call with financial analysts to discuss second-quarter 2020 earnings, CFO Jason Liberty said that as the cruise company gets to the second half of Q2 2021 and beyond, "there is high demand, and our consumers are willing to pay at or above historical levels."

The company said in a statement that pricing for 2021 bookings is relatively flat when including the negative yield impact of bookings made with future cruise credits; it is slightly up year-over-year when excluding them.

For 2020, however, Royal Caribbean Group has cancelled almost all of its sailings through the end of October, minus programmes in China and Australia, and it said that the extended suspension of cruising has significantly impacted bookings for the remainder of 2020, which are lower than the same time last year and at lower prices.

The company's loss for the quarter was US$1.6 billion, compared with net income of US$472.8 million in the second quarter of 2019. Its revenue for the quarter was US$175.6 million, compared with US$2.8 billion in Q2 2019.

For the period since the company's last business update, about 60% of 2021 bookings are new, and the remainder are future cruise credits and from its Lift and Shift programme, which enabled cruisers to transfer 2020 bookings to the same sailing in 2021.

"I'm kind of hopeful we're going to see a lot of pent-up demand," Royal Caribbean International CEO Michael Bayley told analysts on a call to discuss the results. Looking at 2021 bookings by quarter, he said "there's a lot of activity as we move into the summer. And a lot of people have written off this summer, they've decided there's not going to be a big summer vacation for all the reasons we know, but people certainly want to have a vacation next year."

In response to an analyst's question, Bayley said that there hasn't been any change to its booking-channel mix.

"One thing is true is that ... many of our travel partners are obviously stressed," he said. "That's something we're aware of, obviously, and we're trying to be as supportive to our travel partner community. We'll need and want them to be booking for us."

As of June 30, Royal Caribbean Group had US$1.8 billion in customer deposits, of which approximately US$300 million correspond to fourth-quarter sailings.

Approximately 48% of the guests booked on cancelled sailings have requested cash refunds.

Another important task at Royal Caribbean Group has been to enhance its liquidity. Also as of June 30, Royal Caribbean Group said it had about US$4.1 billion in cash and equivalents. The company said that since its last earnings call it had taken additional actions, including issuing US$1 billion of priority guaranteed notes and US$1.15 billion of convertible notes; completing a US$900 million, 12-month debt amortisation holiday from its export-credit backed facilities; and amending more than US$11 billion of bank and credit-export facilities to provide covenant waivers through the fourth quarter of 2021.

It also said it further reduced operating expenses by increasing its fleet layups and dialling back on sales, marketing and administrative expenses. It said it was considering additional ways to reduce its monthly cash burn, which is currently between US$250 million and US$290 million a month.

Fain also called attention to the company's focus on getting safety protocols in place, coming up with new and innovative ideas – he mentioned a new muster-drill programme that would eliminate the historical crowding at muster stations – and learning from early restart programmes from Tui Cruises and Hapag-Lloyd.

He and other executives on the call likened the restart of cruises as a "dimmer switch" – a slow and gradual ramp-up of operations as opposed to flipping a switch and immediately returning to normal.

This report was updated with information throughout from Royal Caribbean Group's second-quarter earnings call.

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