Royal Caribbean establishes its sites on Disney, Las Vegas, Europe

While it’s easy to see the major cruise lines battling each other for dollars spent by customers wanting to cruise, that’s not how Royal Caribbean (RLC) – Get the Royal Caribbean group report CEO Jason Liberty watches the market. Certainly, the segment of people who already like to cruise could choose between Liberty’s company or its main rivals Carnival Cruise Lines. (CCA) – Get Carnival Corporation reportor Norwegian Cruise Line (NCLH) – Get the report from Norwegian Cruise Line Holdings Ltd..

Another group of travelers – a much larger group – don’t think of cruising first when it comes to vacations. Instead, they book land vacations and this is one area where Liberty thinks Royal Caribbean can make big gains.

It’s not about driving customers away from rivals, Liberty wants to attract more customers to the cruise tent. This would be good not only for Royal Caribbean, but also for Carnival and Norwegian.

Royal Caribbean is looking to take a land vacation

Liberty answered a question about competing with land vacations from Wolfe research analyst Fred Wightman during his company’s first-quarter earnings call.

“Before COVID, the combination of things like Perfect Day, you can add things like Edge-class ships and so on, we’ve seen a pretty significant reduction in that gap with land vacations, especially in key products like in Orlando and other products that are out there. And I think we’re focusing a lot on that,” he said.

Liberty explained that many of Royal Caribbean’s investments are aimed at creating this value for vacationers.

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We’ve really managed to improve the experience, both on the ship and on land, by really listening to the customer so that we can go ahead and do that. So I think that’s why we’re seeing similar trends. But when you look at the entire fleet as a whole and compare it to a land vacation in Europe or a land vacation in Alaska or Vegas and so on, there’s always that discrepancy and there’s always that opportunity that we’re very keen on. I mean, that’s really where, if you’ve seen us pre-COVID or during COVID where we’ve focused our energy, it’s less on our cruise peers, but more on how we fill those gaps with earthly vacations.

The CEO never mentioned Walt Disney (SAY) – Get The Walt Disney Company Report or any other competitor by name, but it seems clear what he’s basically talking about. A cruise can offer considerable value over a trip to a theme park or a Las Vegas vacation due to the essentially all-inclusive nature of a cruise. It’s a value proposition that Liberty seems to want to address.

Would a recession hurt Royal Caribbean?

The cruise industry has only just begun to normalize after its long pandemic shutdown and slow return to normal. Royal Caribbean, Carnival and Norwegian have all added to their debt over this period (it’s pretty hard not to when you’re closed for over a year).

Liberty has made it clear that it isn’t overly concerned about the prospect of an economic downturn, as it believes in its company’s value proposition.

“So when a consumer — let’s just say, if they’re feeling a level of pressure and they still need and want to go on vacation and build experiences and memories. And I think that difference in value, that we do every day whatever we can close this gap, is one in which the consumer recognizes and which tends to perform well compared to other travel or consumer discretionary products in times like this ” , did he declare.

CFO Naftali Holtz also clarified that the company stands on a solid financial footing despite the events of the pandemic.

And just to add quickly. We are in a very strong liquidity position,” he said. “We are obviously in this inflection point of free cash flow – operating cash flow. And our goal is, as I said in my remarks, to continue to refinance the balance sheet.”

Mary I. Bruner