Despite US$1.6B Q2 Net Loss, RCI CEO Confident Of Path Forward

Cruise Week

Oasis of the Seas. Photo credit: Royal Caribbean International.

Royal Caribbean Group reported a net loss for the second quarter of US$1.6 billion compared to net profit of $473 million in the prior year.

Although still early in the booking cycle, the company reported 2021 is trending well and is within historical ranges.

"Pricing for 2021 is relatively flat year-over-year when including the negative yield impact of bookings made with future cruise credits; it is slightly up year-over-year when excluding them," the cruise line reported.

As of 30JUN, 2020 the company had $1.8 billion in customer deposits of which approximately $300 million correspond to Q4 2020 sailings. Approximately 48% of the guests book on cancelled sailings have requested cash refunds.

Royal Caribbean Group estimates its cash burn to be in the range of $250 to $290 million per month during a prolonged suspension of operations. The company had liquidity of approximately $4.1 billion as of 30JUN, 2020, all in the form of cash and cash equivalents. 

Michael Bayley On Consumer Confidence & Recent COVID Outbreaks On Ships

Royal Caribbean International has worked hard over the decades to be trustworthy, and that's even more important now as the entire cruise industry works to regain consumer confidence, said President/CEO Michael Bayley on a recent Coffee Talk webinar with RCI's SVP, Sales Vicki Freed. 

"We've never made decisions that were based on anything other than doing the right thing for our guests, for our employees and for our communities. We would never want to resume service unless we were incredibly confident that we could create an environment that was healthier and safer than the environment from which people were coming," he said.

To ensure that this trust continues, Bayley said Royal leadership is "taking [its] time" on creating "thoughtful and creative" protocols. 

Citing research data conducted by Royal Caribbean, Bayley said "consumer confidence in cruising is directly related to the infection rate of Covid in the community from which people are polled."

He also noted consumers who have cruised before tend to be more pragmatic about the crisis than first-time cruisers. A seasoned cruiser's view is that, "'At some point this is going to pass, and we can't wait to go back to a cruise,'" he said. 

Royal, he says, has seen that view borne out in its booking patterns for 2021. 

When it comes to new-to-cruise, however, the story is different.

"That whole segment is taking a slight step back," Bayley said.

Royal's priority with first-time cruisers is communication, "explaining and slowly allowing the new-to-cruise segment to regain confidence that it's going to be a safe and good vacation to go on."

The hesitation, he predicts, will evaporate quite quickly when the biology is better and the protocols are working.

An AAA agent on the webinar brought up the recent incidents where several cruise lines have been hit with coronavirus cases just weeks after they restarted operations. Covid-19 was detected on ships operated by Hurtigruten, Paul Gauguin and AIDA Cruises. 

Bayley said these incidents have been a learning experience for Royal Caribbean and highlight its reasons for tackling a restart in a cautious manner. 

"That's why we at Royal Caribbean are being really thoughtful about this," said Bayley. "The last thing we want to do is to return to service and get it wrong. I think our customers and our travel partners really do expect us to get it right, and that's our focus."

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