Royal Caribbean provided the financial results for the fourth quarter and full fiscal year 2021 today and a current business update on its resumption of operations. With 50 out of 62 ships sailing from a variety of homeports and the entire fleet operational by the end of the year, the efforts from the company are certainly paying off.
In 2021, the company carried 1.3 million guests across its five cruise brands: Royal Caribbean International, Celebrity Cruises, and Silverseas, and a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises. While the business update is for 2021, Royal Caribbean looks forward to 2022.
Royal Caribbean Looks to the Future With Confidence
The financial results as they have been presented today provide an insight into the resumption process that the second-largest cruise company worldwide has gone through to get where they are today.
Although losses for the year still come in at $5.3 billion, and 2022 is still seen as a transitional year, the future is looking a lot brighter than last year, according to the new president and chief executive officer of the Royal Caribbean Group.
Jason Liberty: “2021 marked the beginning of our return to our mission of delivering the very best vacation experiences. During 2021, we made significant progress toward our recovery with over 85% of our capacity returning to operations and delivering safe and memorable experiences to approximately 1.3 million guests at record guest satisfaction scores. Our team has worked tirelessly to execute our successful and healthy return, and we are grateful for their extraordinary efforts.”
For 2022, Royal Caribbean is now operating 85% of total capacity and is already seeing solid bookings on par with historical occupancy levels for the second half of this year. However, bookings were still impacted by the arrival of Omicron, and Jason Liberty does expect that the moment Royal Caribbean Group returns to be a profitable operation has been pushed back by several months:
“While the timing of Omicron was particularly unfortunate for the first half of 2022 bookings and will likely delay our return to profitability by a few months, we do not expect it to impact our overall recovery trajectory and the strong demand for cruising.”
Occupancy Levels Criticalf for Positive Financial Results
The Omicron variant will lead to Royal Caribbean suffering a 5% loss of occupancy levels for Q1 of 2022. Yet, the company also expects the full fleet to be operational by the summer and occupancy to go up again, signs of which are already showing.
The traditionally very popular winter itineraries in the Caribbean reached a 65% occupancy level on core itineraries; these exclude the first four weeks after starting operations for a ship and itineraries developed during the pandemic.
Over the following months, the occupancy number will increase steadily as Royal Caribbean sees COVID infections onboard its ships drop to pre-omicron levels. It means the company will likely be cash-flow positive by late spring and return to profitability in the second half of 2022.
“Following a record U.S. black Friday and cyber weekend, the spread of the Omicron variant resulted in a softening in booking volumes and an increase in near-term cancellations,” said Naftali Holtz, chief financial officer.
“Similar to our experience following Delta, we expect bookings to materially increase as we get further beyond the peak of cases. We are already seeing cancellations subside and bookings improve to pre-Omicron levels, and we have adjusted our sales and marketing efforts in anticipation of a delayed and extended WAVE period.”
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Of course, while the traditional operating areas for Royal Caribbean are open and operating relatively smoothly, two areas remain closed, Australia and China. Australia is expected to open for cruising for its summer season. China remains closed, with little hope of re-opening for now. This will undoubtedly be a negative factor for investors, as China, in particular, is an important growth market.
What’s Next For Royal Caribbean?
Bookings remain within the historical results the company has seen in the past. This year the fleet will grow to 63 ships, with Wonder of the Seas already handed over and Celebrity Beyond joining later this year. Over the last twenty months, Royal Caribbean added six ships to its fleet, despite the pandemic.
Now the pandemic is winding down, more ships are coming online, bookings are on a strong level, and occupancy rates are increasing, there will be a positive frame of mind inside Royal Caribbean’s offices. However, Royal Caribbean will also be the first to acknowledge that this positive frame of mind could be wiped out by the following variant or outbreak onboard a cruise ship.
With $10.8 billion in losses over the last two years, Royal Caribbean can be positive looking to the future but is still on very thin ice due to the past.