Royal Caribbean Group: cuts net loss and reports $271 million profit in first quarter 2023
Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping group, has reported a sharp reduction in net loss and a substantial operating profit for the first quarter.
Net loss narrowed to $49.7 million from $859.2 million in the first quarter of 2022, while the Miami based company reported an operating profit of $47.9 million for the first three months of this year compared to a loss of $1,167.1 million a year earlier.
These results were significantly better than the company's guidance primarily due to strong close-in bookings at higher prices, continued strength of onboard spend, and favorable timing of operating costs.
"We knew that demand for our business was strong and strengthening, but we have been pleasantly surprised with how swiftly demand further accelerated well above historical trends and at higher rates," said Jason T. Liberty, president and chief executive officer of Royal Caribbean Group, in a statement. "Leisure travel continues to strengthen as consumer spend further shifts towards experiences. Demand for our brands is outpacing broader travel due to a strong rebound and an attractive value proposition," added Liberty. "We are increasing full year guidance, given the significant momentum in our business, and we are well on our way to achieve our Trifecta goals.”
Stronger than anticipated demand has led to a record-breaking and extended WAVE season, which has and continues to translate into a robust booking environment – driving higher load factors and higher prices. These factors, combined with the continued strength in onboard spending, have led to the significant improvement (versus guidance) in the first quarter and the significant increase in the company's full-year expectations for ticket and onboard revenue, as well as earnings.
First Quarter 2023:
- Load factors in the first quarter were 102%.
- Gross Margin Yields were down 12.4% as-reported and 10.5% in Constant-Currency. Net Yields were up 5.1% as-reported and 5.8% in Constant-Currency, compared to the first quarter of 2019.
- Gross Cruise Costs per Available Passenger Cruise Days ("APCD") increased 8.2% as-reported and 8.8% in Constant-Currency, compared to the first quarter of 2019. Net Cruise Costs ("NCC"), excluding Fuel, per APCD increased 5.2% as-reported and 5.8% in Constant Currency, compared to the first quarter of 2019. Part of the improvement, compared to expectations, was due to favourable timing of operating costs.
First quarter revenue significantly exceeded the company's guidance primarily due to very strong close-in demand, higher load factors at higher prices, and continued strength in onboard revenue. The company experienced particularly strong close-in demand for Caribbean itineraries, which accounted for close to 80% of first quarter capacity.
Gross Cruise Costs per APCD increased 8.2% as-reported and 8.8% in Constant-Currency, compared to 2019. NCC excluding Fuel per APCD increased 5.2% as-reported and 5.8% in Constant-Currency, compared to 2019. Part of the improvement, compared to expectations, was due to favorable timing of operating costs. Gross Cruise Costs per APCD and NCC, excluding Fuel, per APCD for the first quarter included $2.87 per APCD of lingering transitional costs and structural costs (e.g. full-year operations of Perfect Day at CocoCay and the new Galveston terminal). In the first quarter, the company continued to benefit from multiple actions taken over the past several years to reshape its cost structure which is helping to offset persistent inflation.
"First quarter results reflect continued strong demand for cruising and our teams' focus on delivering the best vacation experiences that exceed guest expectations," said Naftali Holtz, chief financial officer, Royal Caribbean Group. "We also benefited from favorable timing of operating expenses, as well as our continued focus on improving margins consistent with our Trifecta goals."
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