RCI – heavy losses despite rising bookings

2021-11-12T19:16:57+00:00 November 12th, 2021|Finance|

Royal Caribbean Group ((RCI) has claimed in its third quarter report that during the quarter, the company worked aggressively to restart its vessel operations.

This process is proceeding at a strong pace with two-thirds of the fleet in operation. The Delta-Dip caused a delay in the booking progress but did not alter the strong fundamental trajectory.

Key highlights included in the 3Q21 report were:

  • over 500,000guests sailed across RCI’s five brands since the restart of operations – over 1 mill guests expected by year end
  • by the end of this year, the Group anticipates that 50 out of 61 ships will have returned to service across its five brands, representing almost 100% of its core itineraries and about 80% of worldwide capacity
  • sailings for 2022 are booked within historical ranges and at higher prices than 2019, even including future cruise credits (FCCs)
  • guest satisfaction scores and on board spending per passenger are both at the highest levels in the company’s history
  • the Group expects to be cash flow positive by spring and profitable for the full year 2022
  • constructive dialogue with the CDC leading to the end of the prescriptive CSO in January.

For 3Q21, RCI reported a US GAAP net loss of $1.4 bill or $5.59 per share, compared to a net loss of $1.3 bill or $6.29 per share in the previous year.

RCI also reported an adjusted net loss of $1.2 bill or $4.91 per share, which was the same as 3Q20 but a loss of $5.62 per share.

These losses were as a result of the continued impact of the COVID-19 pandemic on the business.

As of the end of October, 40 ships from RCI’s five brands, or about 65% of its capacity, have resumed sailing.

RCI said that it was returning ships into operations at reduced load factors and slowly building to ensure health and safety, a world class guest experience, and financial prudence.

Richard Fain, outgoing Chairman & CEO (pictured), said: “We want to show, in a tangible way, the safety and simplicity of cruising. Our strategy continues to focus on getting the flywheel spinning smooth and fast, so that as we turn the year we will enjoy a stable and predictable platform with which to start the WAVE Period.”

Ships operating in the Group’s core Caribbean, Alaska, and Europe itineraries in 3Q21 achieved a load factor of 44%.

Total revenues per passenger cruise day (APCD) in the third quarter was 12% higher versus record 2019 levels, driven mainly by strong on board revenue performance. Ships in core itineraries in 3Q21 were cash flow accretive, excluding start-up costs.

“On 25th October, 2021, the US CDC issued a temporary extension of the Conditional Sail Order through 15th January, 2022. Thereafter, the CDC has expressed its intention to transition to a voluntary programme, in co-ordination with interested cruise ship operators.

“We are very pleased with the continued and constructive partnership with the CDC and the US Government’s COVID-19 interagency group. This is a great example of how close collaboration between the cruise industry and the CDC results in health and safety protocols that have demonstrated cruising can be one of the safest forms of vacation,” Fain added.

RCI anticipated load factors on core itineraries to ramp up to 65-70% during the fourth quarter of this year and forecast 6.9 mill APCDs with overall load factors of 60-65%.

The Group also expected all ships on core itineraries in 4Q21 to be cash flow accretive even when including the start-up costs.

By the end of this year, RCI forecast that 50 out of 61 ships will have returned to service, representing almost 100% of core itinerary capacity and around 80% of worldwide capacity.

The remaining ships are expected to be operational by the spring next year and return to historical load factors in 3Q22.

Mainland China is expected to resume in the spring and lower load factors will be put in place, as this important long term market ramps up.

Booking volumes have improved significantly since the slowdown this summer, due to the Delta variant (the Delta Dip).  The company attracted more bookings in 3Q21, compared to the second quarter.

September was particularly strong, with new bookings for 2022 sailings more than 60% higher than the monthly average during 2Q21.

Sailings for the full year 2022 are booked within historical ranges and at higher prices than 2019. Sailings further out are experiencing more normal booking trends than sailings closer in.

However, load factors for sailings for 1Q22 are lower than historical levels; are improving but still below average in the second quarter; and are solidly within historical levels in the second half. Pricing remains strong throughout 2022, with or without FCCs.

“As cases have come down, demand has come surging back.  Consumers are showing their resilience and desire to vacation, and the growing affinity of Royal Caribbean’s leading brands, ships and crew. Although there are many uncertainties going forward regarding COVID-19, as well as cost and supply chain pressures, we continue our pathway forward and anticipate positive cash flow for the Group by spring of 2022 and generating positive earnings for the full year 2022,” said incoming President, Jason Liberty, currently Executive Vice President and CFO.

As of 30th September, 2021, the company had about $2.8 bill in customer deposits.  The comparable figure for the three brands at the same time in 2019 was $3.1 bill. This represents an improvement of about $400 mill over the past quarter, despite the $300 mill of revenue that was recognised during the quarter.

About 35% of the customer deposit balance is related to FCCs, compared to 40% in the previous quarter; a positive trend indicating new demand.  Customer deposits for 2Q22 forward sailings are higher than at the same time in 2019.

As of 30th September, 2021, RCI’s liquidity was around $4.1 bill, including $3.3 bill in cash and cash equivalents, $0.1 bill of undrawn revolving credit facility capacity, and a $0.7 bill commitment for a 364-day facility.