The impact of the Covid-19 omicron variant will delay Royal Caribbean Group’s return to profitability, but booking levels are back to pre-omicron levels.
“Omicron created short-term operational challenges that have unfortunately weighed on close-in bookings,” said Royal Caribbean Group CEO Jason Liberty during its fourth-quarter earnings call. “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.”
Leading up to the omicron surge, bookings had been sequentially higher than they were in the third quarter, Royal Caribbean said. Then omicron dampened demand in December.
However, as omicron has subsided, bookings have increased with each consecutive week since the beginning of 2022 and are already back to pre-omicron levels.
“The more the positivity rate drops, the more the bookings increase,” said Royal Caribbean International CEO Michael Bayley. “It’s becoming quite typical.” Bayley said the same pattern occurred in the U.K., where omicron peaked before it did in the U.S.
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Prior to omicron, bookings were strong, with record sales from Black Friday through Cyber Monday, said Naftali Holtz, Royal Caribbean Group’s CFO.
Royal now expects that the traditional Wave season — the busy booking period in first three months of the year — will be “delayed and extended,” Holtz said.
Royal Caribbean expects to be cash-flow positive in late spring and return to profitability in the second half of 2022. Bookings for the second half of 2022 are within historical ranges and at higher prices, Royal said, with and without future cruise credits (FCCs).
The executives expressed optimism that the industry is moving into what Bayley called “a much more positive environment,” one that will have fewer Covid restrictions.
“We’ll start removing many of the protocols that exist today, and it’ll become easier and simpler for our customers,” he said, adding that around 10 million customers visit the Royal Caribbean International website every month, and about 400,000 visit its Covid safety protocols page.
Bayley added that Royal Caribbean expects that the CDC will reduce its Level 4 warning for cruising (very high level of Covid-19) to Level 3 “in the not-too-distant future.”
When the CDC increased the warning to Level 4 in late December, it advised U.S. citizens to avoid cruising, even if they’re fully vaccinated.
50 ships are back in service
By the end of 2021, 50 of Royal Caribbean Group’s 61 ships across its five brands were back in operation, representing about 85% of its global capacity.
Royal Caribbean Group said that during 2021, the brands carried approximately 1.3 million guests and achieved record guest-satisfaction scores and record onboard spending per passenger.
Despite having to cancel some sailings due to omicron, the company still expects to operate approximately 95% of its planned capacity this quarter.
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