Royal Caribbean confident of swift bounce-back after Middle East dip

Demand for Royal Caribbean Group cruises “will build back shortly” after a dip due to geopolitical uncertainty during the Middle East conflict, according to chief executive Jason Liberty.

Speaking in a trade Q&A session on the shakedown sailing of Royal Caribbean’s newest Icon Class ship Legend of the Seas, Liberty said he expected demand will recover following the peace deal between the US and Iran.

At a subsequent round-table, Liberty compared the impact of the war as being like “stubbing your toe” before making a swift recovery.

He added: “Your initial reaction is ‘ow’, but then you go: ‘I’m ok’, and you go back for your run again.”

He noted the whole cruise industry had been impacted by higher fuel prices and “muted demand” from passengers, particularly from middle income families coming to Europe, with prices rising due to cancelled and consolidated flights.

“When they see flights increasing from $1,400 to $2,200, the numbers just don’t add up,” he added.

However, he said prices had started to fall again from April and were continuing to normalise, with the group well sold for this summer.

“We continue to see strong consumer demand globally. Our customers have been very resilient even through all that noise. Their desire to make memories and take advantage of the value we offer has remained,” he said.

“We saw a slight delay in some of their thinking, so demand much closer in. But eventually, families couldn’t keep just staring at each other, waiting. So the impact was short-term.”

Liberty said the UK had been the most sensitive market for European cruises in the early stages of the conflict, but the drop was in the “low single percentage points” and a group-wide recovery had begun from April.

He also reassured agents the cruise giant was “not at the point” of adding fuel surcharges despite the rising cost of oil, adding: “We’re about 60% hedged on fuel, so we’re able to manage that."

And he said he was confident there was enough demand for all the new ships coming into service from Royal Caribbean Group and other companies.

“Cruising accounts for $100 billion a year revenue. Leisure travel in general is $2.4 trillion so we’re a very small sliver of the travel space and with only four main shipyards, no matter what we do, we won’t be able to keep pace so will continue to lose overall share,” he said.

Trade collaboration

Liberty thanked agent partners for their support of the brands, urging them to seek more collaboration in future as he expects to become the largest cruise company in terms of capacity in the next decade.

 “We are desperately trying to go from delivering a vacation of a lifetime to a lifetime of vacations,” he said.

“All of that requires incredible connectivity and partnership with an incredible team of travel partners that connect with us each and every day, connect with our guests and help us deliver those incredible vacation experiences.”

Speaking at the roundtable, he added: “[Agents] are increasingly part of our story commercially. They give us feedback from their customers and we know we need to deliver great experiences so that they are getting more high quality repeats.

“There are times when we start to cross lines, but then we bring it back on course and try and do everything we can to ensure we’re easy to do business with.”

Winter deployment

When asked about ships spending the winter season in Europe, Liberty said shoulder seasons had been “pushed more” but ruled out the option for a full winter of sailing due to colder weather and travel patterns.

He said: “It’s not just about bad rain but operating in the open seas so we need to make sure we are not going to have huge deviations or safety concerns that could occur.”

Royal Caribbean International president Michael Bayley added that net promoter scores dropped by 25 points for a cruise with rainy or cloudy weather, compared to sunshine.

Liberty added the group “needed to a better job” to cross-sell the three brands consistently to further the strategy of “a lifetime of vacations”, whether that is on an app, via call centres or future cruise sales desks on board.

Liberty revealed that in most cases the next brand Silversea passengers visited most often was Royal Caribbean as they travel with their children and grandchildren.

“Some of that is technology and some is getting a platform that incentivises everyone to work together,” he said, adding that he saw a passenger leaving the Royal Caribbean Group eco-system to be able to visit certain destinations as “a failure on our side”.

When asked about the likelihood of Royal Caribbean or Silversea launching river cruise brands like Celebrity Cruises, Liberty said that river cruise was “not a hobby” and he “would consider it for any of our brands if it makes sense”.