Summary & Takeaways from Q3 Earnings Reports (CCL, RCG, NCLH)

A Normalizing Environment Paving Way for Strong 2023

The theme for CCL, RCG, and NCLH on this quarter’s earning calls was each company’s focus which has fully shifted from return to service to a relentless focus on return to strong profitability.

“Our goal is to smash it in 2023… With pricing being up considerably higher on our books and all the other things indicated, we feel very good about 2023.” - Josh Weinstein, President & CEO

“The successful return of our business to full operations in the accelerating demand environment positions as well to deliver on our expectations of record yields, and record adjusted EBITDA in 2023.” - Jason Liberty, President & CEO

“On our current trajectory, each of these building blocks are expected to lead to record net yields and record adjusted EBITDA for the full-year 2023.” - Mark Kempa, CFO

A key driver and boost in bookings/demand was the removal of protocols (RCG and NCLH both confirmed; CCL’s update was pre-protocol removal). After protocols fell off (testing, vaccine mandates, etc.), each company saw a significant increase in the volume of bookings, which continues to accelerate today.

This is because protocols and requirements excluded a significant number of people from cruising. RCG estimated that with the removal of these protocols, in the American market alone, the potential cruise market expanded by about 35 million people almost overnight.

Globally, in the past few months, key countries like Canada, Bermuda, Greece, and all of South America have removed COVID testing requirements for entry, and many countries in Asia, with the exception of China, have begun reopening to cruise. In the Australian market, while some protocols remain, RCG is “pretty confident they’re going to fall away in the coming weeks and months”. These developments continue to pave the way for a very normalized environment as more ports around the world become accessible to cruising once again.

The table below summarizes some key return-to-service metrics for each brand, supporting the commentary on the slow and gradual return to normalcy.

Load Factors

Average load factors jumped significantly in Q3, though now each company is not anticipating pre-pandemic (triple digit) load factors until mid-2023 (RCG is the only brand that shifted this out, as last quarter they had reported they would be there by Q4 2022). Fourth quarter load factors should be aligned with Q3 (RCG), or slightly higher (CCL/NCLH), given Q4 historically is a seasonally lower-occupancy quarter.


RCG was the only company to break down occupancy by region for Q3: the Caribbean was at 105%, Alaska at 96%, and Europe just under 90% (a little bit better than expectations).

NCLH did confirm that starting in 2023, they will no longer have quarantine cabins out of service

Financials

With prohibitive protocols removed, full fleets back in service, and load factors steadily increasing, all three companies reported positive adjusted EBITDA since the pandemic (RCG in Q2, CCL, and NCLH this quarter, Q3).

2023 Deployment Focus 

North America is a key focus in 2023, as 80% (RCG) and 85% (NCLH) of guest sourcing is expected from North America. RCG’s deployment across markets is relatively unchanged compared to 2019 with Caribbean representing just over half of overall deployment, Europe at almost 20%, and Asia in the low single digits with no planned deployment in China market (though they did make the comment “It’s very minimal, but we expect that we will be in China before the end of 2025”).
However, NCLH believes Europe is poised for an incredible 2023 season and has increased capacity there by 6% of occupancy at the expense of the Caribbean.

Macroeconomic Environment

As we look to the future, each company is preparing for multiple scenarios given the current heightened uncertainty in the macroeconomic environment. RCG advised that they are actively managing inflationary pressures mainly relating to fuel and food costs, and that regarding fuel, they have seen fuel rates coming off the highs of earlier in the year, but they are still volatile.

NCLH said the impact of inflation and global supply chain constraints will put pressure on their margins in the near term, though they too confirmed they are starting to see some moderation of the hyperinflation in areas such as food costs and related. “Certain categories are trending down, and they’re starting to get into their historical averages. They’re not where we would like them to be or need them to be, but we are seeing continued momentum in there. But I wish it was quicker.” – Mark Kempa, Executive Vice President and Chief Financial Officer, NCLH

For CCL, due to the volatile environment, they are anticipating strong EBITDA in 2023, but not providing guidance as fuel and currency will be too much of a swing depending on how things unfold.

Despite the heightened concerns around the economy, operators are still saying that they have not seen any signs of a pullback from the consumer.

BA CRUISE BULLETINS

Summary & Takeaways from Q3 Earnings Reports (CCL, RCG, NCLH)

A Normalizing Environment Paving Way for Strong 2023. The theme for CCL, RCG, and NCLH on this quarter’s earning calls was each company’s focus which has fully shifted from return to service to a relentless focus on return to strong profitability…

BA CRUISE BULLETIN – The Industry’s Quarterly Update from the Big Three (Public) Companies

This quarter’s earnings reports from Carnival Corp. (June 24), Royal Caribbean Group (July 28), and NCLH (August 9) have sent stocks down, up, and back down again, but overall, the business seems to have taken positive turns, including each company’s operating cash flow for the quarter…

Another Global Hurdle for the Cruise Industry? An Industry on the Rise

According to the most recent World Bank’s latest Global Economic Prospects Report, compounding the damage from the pandemic, the Russian invasion of Ukraine has magnified the slowdown in the global economy, which is entering what could become a protracted period of feeble growth and elevated inflation. The U.S. inflation rate passed 8.3%, the highest in more than 40 years, accompanied by the highest nationwide gas prices ever, and amidst the need for workers in many service industries, there have been layoffs in key tech sectors.

Big Three Cruise Corporations Q1 Earnings Summary

Resounding across all the major cruise operators’ quarterly earnings calls this week (CCLs in March), was that the industry (and each of the brands) have all reached “significant milestones” in their restart process that need to be celebrated. While 2022 is undoubtedly a transition year, 2023 appears to be shaping up to reach the industry’s full potential. NCLH’s presentation included the graphic below, which shows how far the industry has come over the last two and a half years of near-complete shutdown. In this newsletter, BA compares and summarizes key performance, financials, and trends across the big three cruise corporations based on their recent quarterly earnings calls.

The Pathway Forward Anticipates Substantial Cruise Growth, Are you Ready?

It has now been more than two years since the entire worldwide cruise tourism industry ground to a halt due to the Covid-19 pandemic and the subsequent government interventions that impacted all facets of our lives. For the past year, the industry has been slowly and meticulously resetting the onboard and shoreside guest experience through the development of protocols and procedures to get back to the business of cruising and providing people worldwide with great holidays!

BA Cruise Bulletin – Future of the Cruise Industry is Bright, According to the Major Cruise Lines

Protocols are Working, and Restoring Consumer Confidence in the Sector Many people have said in recent times that…

BA CRUISE BULLETIN – 95% Berths in Operation by August; Talk to Us at Seatrade to See What That Means for You!

It has been a while since our BA team ventured forth and sent out a cruise bulletin, mostly focused on Covid-19 and the cruise industry recovery…

Summary & Takeaways from Big 3’s Q2 Earnings Reports

A Normalizing Environment Paving Way for Strong 2023

The theme for CCL, RCG, and NCLH on this quarter’s earning calls was each company’s focus which has fully shifted from return to service to a relentless focus on return to strong profitability.

“Our goal is to smash it in 2023… With pricing being up considerably higher on our books and all the other things indicated, we feel very good about 2023.” - Josh Weinstein, President & CEO

“The successful return of our business to full operations in the accelerating demand environment positions as well to deliver on our expectations of record yields, and record adjusted EBITDA in 2023.” - Jason Liberty, President & CEO

“On our current trajectory, each of these building blocks are expected to lead to record net yields and record adjusted EBITDA for the full-year 2023.” - Mark Kempa, CFO

A key driver and boost in bookings/demand was the removal of protocols (RCG and NCLH both confirmed; CCL’s update was pre-protocol removal). After protocols fell off (testing, vaccine mandates, etc.), each company saw a significant increase in the volume of bookings, which continues to accelerate today.

This is because protocols and requirements excluded a significant number of people from cruising. RCG estimated that with the removal of these protocols, in the American market alone, the potential cruise market expanded by about 35 million people almost overnight.

Globally, in the past few months, key countries like Canada, Bermuda, Greece, and all of South America have removed COVID testing requirements for entry, and many countries in Asia, with the exception of China, have begun reopening to cruise. In the Australian market, while some protocols remain, RCG is “pretty confident they’re going to fall away in the coming weeks and months”. These developments continue to pave the way for a very normalized environment as more ports around the world become accessible to cruising once again.

The table below summarizes some key return-to-service metrics for each brand, supporting the commentary on the slow and gradual return to normalcy.

Load Factors

Average load factors jumped significantly in Q3, though now each company is not anticipating pre-pandemic (triple digit) load factors until mid-2023 (RCG is the only brand that shifted this out, as last quarter they had reported they would be there by Q4 2022). Fourth quarter load factors should be aligned with Q3 (RCG), or slightly higher (CCL/NCLH), given Q4 historically is a seasonally lower-occupancy quarter.


RCG was the only company to break down occupancy by region for Q3: the Caribbean was at 105%, Alaska at 96%, and Europe just under 90% (a little bit better than expectations).

NCLH did confirm that starting in 2023, they will no longer have quarantine cabins out of service

Financials

With prohibitive protocols removed, full fleets back in service, and load factors steadily increasing, all three companies reported positive adjusted EBITDA since the pandemic (RCG in Q2, CCL, and NCLH this quarter, Q3).

2023 Deployment Focus 

North America is a key focus in 2023, as 80% (RCG) and 85% (NCLH) of guest sourcing is expected from North America. RCG’s deployment across markets is relatively unchanged compared to 2019 with Caribbean representing just over half of overall deployment, Europe at almost 20%, and Asia in the low single digits with no planned deployment in China market (though they did make the comment “It’s very minimal, but we expect that we will be in China before the end of 2025”).
However, NCLH believes Europe is poised for an incredible 2023 season and has increased capacity there by 6% of occupancy at the expense of the Caribbean.

Macroeconomic Environment

As we look to the future, each company is preparing for multiple scenarios given the current heightened uncertainty in the macroeconomic environment. RCG advised that they are actively managing inflationary pressures mainly relating to fuel and food costs, and that regarding fuel, they have seen fuel rates coming off the highs of earlier in the year, but they are still volatile.

NCLH said the impact of inflation and global supply chain constraints will put pressure on their margins in the near term, though they too confirmed they are starting to see some moderation of the hyperinflation in areas such as food costs and related. “Certain categories are trending down, and they’re starting to get into their historical averages. They’re not where we would like them to be or need them to be, but we are seeing continued momentum in there. But I wish it was quicker.” – Mark Kempa, Executive Vice President and Chief Financial Officer, NCLH

For CCL, due to the volatile environment, they are anticipating strong EBITDA in 2023, but not providing guidance as fuel and currency will be too much of a swing depending on how things unfold.

Despite the heightened concerns around the economy, operators are still saying that they have not seen any signs of a pullback from the consumer.

CRUISE BULLETINS

Summary & Takeaways from Q3 Earnings Reports (CCL, RCG, NCLH)

A Normalizing Environment Paving Way for Strong 2023. The theme for CCL, RCG, and NCLH on this quarter’s earning calls was each company’s focus which has fully shifted from return to service to a relentless focus on return to strong profitability…

BA CRUISE BULLETIN – The Industry’s Quarterly Update from the Big Three (Public) Companies

This quarter’s earnings reports from Carnival Corp. (June 24), Royal Caribbean Group (July 28), and NCLH (August 9) have sent stocks down, up, and back down again, but overall, the business seems to have taken positive turns, including each company’s operating cash flow for the quarter…

Another Global Hurdle for the Cruise Industry? An Industry on the Rise

According to the most recent World Bank’s latest Global Economic Prospects Report, compounding the damage from the pandemic, the Russian invasion of Ukraine has magnified the slowdown in the global economy, which is entering what could become a protracted period of feeble growth and elevated inflation. The U.S. inflation rate passed 8.3%, the highest in more than 40 years, accompanied by the highest nationwide gas prices ever, and amidst the need for workers in many service industries, there have been layoffs in key tech sectors.

Big Three Cruise Corporations Q1 Earnings Summary

Resounding across all the major cruise operators’ quarterly earnings calls this week (CCLs in March), was that the industry (and each of the brands) have all reached “significant milestones” in their restart process that need to be celebrated. While 2022 is undoubtedly a transition year, 2023 appears to be shaping up to reach the industry’s full potential. NCLH’s presentation included the graphic below, which shows how far the industry has come over the last two and a half years of near-complete shutdown. In this newsletter, BA compares and summarizes key performance, financials, and trends across the big three cruise corporations based on their recent quarterly earnings calls.

The Pathway Forward Anticipates Substantial Cruise Growth, Are you Ready?

It has now been more than two years since the entire worldwide cruise tourism industry ground to a halt due to the Covid-19 pandemic and the subsequent government interventions that impacted all facets of our lives. For the past year, the industry has been slowly and meticulously resetting the onboard and shoreside guest experience through the development of protocols and procedures to get back to the business of cruising and providing people worldwide with great holidays!

BA Cruise Bulletin – Future of the Cruise Industry is Bright, According to the Major Cruise Lines

Protocols are Working, and Restoring Consumer Confidence in the Sector Many people have said in recent times that…

BA CRUISE BULLETIN – 95% Berths in Operation by August; Talk to Us at Seatrade to See What That Means for You!

It has been a while since our BA team ventured forth and sent out a cruise bulletin, mostly focused on Covid-19 and the cruise industry recovery…

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