Royal Caribbean Lifts Profit View Again On Cruise Boom, Higher Prices

Reuters | April 25, 2024

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By Juveria Tabassum and Doyinsola Oladipo

(Reuters) -Royal Caribbean Group on Thursday raised its annual profit forecast for a second time, after record bookings during the first quarter and higher ticket pricing boosted its results, sending its shares 4% higher premarket.

Soaring demand for vacations at sea has given cruise operators ample room to raise ticket prices as the industry looks to close the pricing gap between more expensive land-based holidays and give their profits a lift.

Royal Caribbean also beat expectations for quarterly profit and revenue, with half of its yield growth coming from higher ticket pricing.

“Our existing fleet along with our new ships continue to perform exceptionally well, highlighted by the market response to the launch of Icon of the Seas,” said CEO Jason Liberty.

The company now expects annual adjusted profit between $10.70 and $10.90 per share, compared with its earlier forecast of $9.90 to $10.10.

The Celebrity Cruises operator carried 2.05 million passengers in the quarter, nearly 14% higher year-over-year. It also reported record demand during the “wave season” – a period marked by special cruise deals and discounts for the year.

That helped its quarterly revenue of $3.73 billion surpass expectations of $3.69 billion, according to LSEG data.

Higher ticket prices have helped shield the company from slightly steeper net cruise costs expected this year due to increased dry dock days, as well as an impact from canceled voyages to the Red Sea amid tensions in the region.

The company expects net cruise costs excluding fuel to increase about 5.5% for the year, up from its earlier forecast for a rise between 3.75% to 4.25%.

Royal Caribbean’s adjusted earnings per share of $1.77 beat market expectations of $1.33.

“I remember owning the stock in 2022 and every client was giving me grief about it,” said Peter Ahluwalia, manager at Belinvest Global Equity Fund that holds Royal Caribbean stocks and chief investment officer at Swiss Partners Group. “We’re turning almost 45% return on equity at the moment, which is quite incredible.”

Shares of the company have risen 126% to about $137 in the past year.

(Reporting by Juveria Tabassum in Bengaluru and Doyinsola Oladipo in New York; Editing by Devika Syamnath)