'Bullish' Demand As Cruises Boom: Royal Caribbean CEO

It’s interesting, Jason, because a lot of folks look at the cruise industry, this tremendous rebound since COVID and this idea that, yes, a lot of people have come back. You boosted your forecast, a lot of people are coming back. How convinced are you that this boom can keep running and at what pace? Well, first, it’s great to be here, Shonali, thank you for having me on today. Obviously, we, we feel really bullish about the demand that we’re seeing from our customers and the sustainability of our of of that demand. And I think it’s in a few different ways, one of which is the cruise industry is, is about 6565 billion a year in revenue and that’s a fraction of the $1.9 trillion travel economy that’s out there. And so. So we think that this is just because we’re just such a small sliver, there’s just a lot of opportunity then when you kind of get into consideration to how we trade versus land based vacation, there’s still a pretty steep discount or value play on on a cruise. But when you start getting into the demographics and secular trends on the secular trend side, you’ve seen now experiences outpace spend on stuff and and that and that rate has increased twofold coming out of COVID. So people are looking for experiences multi generational travel which very much supports the demographics that are going on and we happen to be in the experience space. The last point I just want to make on the experience side of it is that one of the things that you that you really see is that our guests are looking to walk away with great experiences and great stories. And we really have focused our business on making sure that we’re competitive to land based vacation and we’re closing that gap to land based vacation on both a pricing standpoint and also beginning to pick up on gaining share from land base, which is a very high priority for us as you have new customers. Something I’ve been wondering about is how much you have to outlay to support those customers. You know, I hadn’t really thought about this before, but Royal Caribbean must be buying an insane amount of lobsters and bananas. I mean how are you spending these days and how is inflation impacting you? Yeah, well we have on, on, on average somewhere between 170 and 180,000 guests with us each and every day. So we’re obviously buying a lot of commodities that support that. You know, we we, we buy probably close to 100 million bananas a year, about about 500, you know, thousand eggs per week. So there’s a lot of volume that goes in to support this business. But one of the things that we saw as we kind of crossed the year is a lot of those commodities not only flattened, but they’ve begun to come down a little bit. Obviously we saw a lot of inflation occur in 22 and 23 and fortunately we did the hard work during the pandemic to write our cost structure which absorbed the vast majority of that inflation that came into our business. You know, another question that people have is the demographic you’re playing with here. You know, it’s interesting. In other word, I hadn’t really heard before is new to cruisers. Are you getting recurring bookings here from die hard cruise goers or are you getting new people who are coming on board? Well, you know on our, on our on our loyalty base, you know for sure, you know we’ve seen about a 30% rise in repeat rates just here in the past year. So our loyal guests are very keen on sailing with us over and over again. But the rise in new to cruise and the rise to new to brand has been very impressive. And about today about a third of our guests are new to cruise, a third of our guests are first to Brandon, about a third of our guests are are loyalists. And we’ve seen a huge change in that shift over the past couple years. I think one of the other interesting facts is that the average age of our guest is also getting younger. One out of every two guests is now millennial or younger on our ships. And so we’re also the consideration for cruise has really reached to a competitive level with land based and and the millennials are really seeking those experiences. And when you combine them with the best ships in the world and going to the best destinations in the world and us having our private destinations right off the coast of Florida here that’s generating a new wave of demand that we did not see pre COVID, you know more cash on hand, all of these new two cruisers. How do you see yourself expanding moving forward is M and A a potential to expand? Yeah well certainly M&A is always the potential. I think for us we’re very focused and excelling in our core and growing our core and we’ve been very deliberate about having the best brands and and and the right segments with the best ships and going to the best destinations. So we’re investing quite heavily in in our core, growing our core private destinations and also a a huge upgrade to our commercial apparatus technology wise to make sure that we’re effectively employing things like AI to help curate the experience to take friction out of the guest experience each and every day. But I think when you when you when you kind of put that all together, there’s always M&A opportunities. There’s always ways that we think about how can we enrich the experience and most of all, how do we keep our customer in our ecosystem and that’s through loyalty. That’s by having the best brands in these segments so that our guests can trade based off the different experiences that they’re looking to do currently. What do you see the competitive environment looking like, especially when it comes to kind of these newer firms popping up. You have this company, Viking Holdings, focus on the luxury market expected to try to go public. Do you see more people entering the space and how do you navigate around it? Yeah well Vikings been around a long time and you know Torsten who runs Viking does an exceptional job and it and it’s it’s I think it’s good for us to have another public comparable that’s out there. I think when we look at the competitive set, I think what’s important is, is of course we always keep an eye on what are the other large cruise lines are doing and it’s tough to get into this business because the capital requirements are are really, really high. So it’s a high barrier of entry. But again we’re we’re much more focused on you know delivering a lifetime of vacations and you’ll you’ll see I didn’t use the word cruise because it’s a lifetime of vacations and experiences that we’re focused on and we’re looking on how can we be as competitive as we can be to land based vacation. So we can close that gap on there. I mean if you think about you know a 1% share shift in land based travel into cruise for us is worth 11 Oasis class ships and that’s what we’re focused on doing is trying to close that gap and that’s the competitive set that we’re really focused on.