Private destinations such as Perfect Day Mexico will be “truly game-changing” for the Royal Caribbean Group, according to president and chief executive Jason Liberty.
Speaking on the line’s Q3 results call, Liberty hailed new private destinations like Perfect Day Mexico, three Royal Beach Clubs in Nassau, Cozumel and Vanuatu, plus the Silversea hotel in Puerto Williams, Chile, as “value drivers” for the business over the coming years.
The exclusive destinations would offer opportunities for prepaid and onshore revenue growth, Liberty emphasised, and would help the cruise line take a greater market share from the overall holiday market.
He added: “We remain focused on winning a greater share of the $1.9 trillion vacation market. Our plan to capitalise on this opportunity is grounded in our proven formula for success, moderate capacity growth, moderate yield growth and strong cost control.”
He said this investment was on the back of “momentum continuing to build” in terms of capacity, pricing and yield growth which had contributed to “an exceptional quarter” and year so far for the group, which is the parent company of Celebrity Cruises and Silversea.
Liberty also revealed that demand for the newest ship Utopia of the Seas, which launched this quarter, had “well exceeded expectations” in terms of ticket prices and onboard revenue.
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Robust demand at higher prices
Liberty also highlighted “strong close-in [late] demand at higher prices” across all key itineraries, along with “continued strength” in onboard revenue for the third-quarter performance.
He said pricing for fourth-quarter 2024 was 25% above 2019 levels, and the full-year was 26% above 2019, which was not just down to inflation or like-for-like growth but also new capacity and assets like Perfect Day at CocoCay “normalising within our business”.
He said: “The trends show that we continue to be able to elevate demand and elevate pricing each day.”
Liberty said demand was “shaping up” for 2025, with bookings outpacing 2024 levels during the third quarter and into October.
“Our book load factors are in line with prior years at nicely higher rates, allowing us to further optimise pricing and yield growth,” he added.
In the following Q&A session with analysts, Liberty said: “In the overall trends, we continue to see strong volumes and the customers’ willingness to pay more.
“I don’t think this is an inflation-related type of driver. I think the driver is that cruise or propensity to cruise is at a significantly high level and 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.”
He said he did not see “any ingredients” like demand for new ships, private destinations or similar “hitting any type of ceiling”.
Liberty added: “If anything, we see continued acceleration in demand for our business.”
New younger consumer base
Liberty also pointed to the brand’s “global and multi-generational appeal” allowing Royal Caribbean to “attract the highest yielding guests” from a younger consumer base.
He said: “Our addressable market is growing, and we are attracting more new customers into our vacation ecosystem, particularly younger demographics.
“In fact, the majority of our guests this year are either new to cruise or new to brand, while at the same time, while our loyalty guests are up 20% compared to last year.”
He cited research suggesting that over the next 12 months, leisure travel spend would grow more than any other leisure category, with Millennials, families and active cruisers were all over-indexing on both leisure travel and specifically cruise travel.
Future deployments
Royal Caribbean Group chief financial offer Naftali Holtz said 63% of the group’s capacity in the fourth quarter 2024 would be in the Caribbean, 13% in the Asia Pacific region and 9% in Europe, with the remaining capacity “spread across” other itineraries, including repositioning West Coast and expedition cruises.
He expected the fourth quarter to have 12.8 million available passenger cruise days, which refers to double occupancy of a cabin multiplied by the number of cruise days.
Holtz anticipated Royal Caribbean’s 2025 capacity to be up 5% as new Icon-Class ship Star of the Seas enters into service in the third quarter and Celebrity Excel in the fourth quarter
The capacity would also benefit from a full year of Utopia of the Seas and Silver Ray sailing.
Holtz added: “We are growing Caribbean capacity about 5% in 2025, and it will represent about 57% of our deployment.
“We expect the opening of Royal Beach Club Paradise Island in Nassau at the end of 2025 will benefit our 2026 Caribbean itineraries.”
He forecast European itineraries would account for 15% of capacity, Alaska about 6% and Asia-Pacific 11%.”