Royal Caribbean: Healthy Return to Service

Twin Royal Caribbean Call

Royal Caribbean Cruises expects to return its brands to service in phases and in what the company calls a Healthy Return to Service Program with special emphasis on safety, security and health.

On the company’s earnings call, Chairman and CEO Richard Fain said the company is working to develop a four-step program starting with upgraded screening of passengers before they come aboard; enhanced processes and procedures aboard; special focus on destinations being in compliance; and procedures for dealing with exceptions.

Fain said the company has assembled a team of experts and will only start operating when it is absolutely ready to do so. It also needs to regain the confidence of consumers by being very transparent in its actions and communicating extensively.

Comparing the COVID-19 impact on travel to 9/11, Fain said that while travel rebounded after 9/11 it was different and that traditional travel did not revert to what it had been like before, but adjusted to a new normal and grew in a different environment.

Now, the cruise industry must adjust to a new reality, he said, everything will be different from before. Travel and tourism will grow in a post-COVID world, he said, but not by reverting to what it was, but adjusting to a world where all activities, everything we do, will have changed, he said.

So far, Royal Caribbean has suspended operations for its brands through July 31, and executives expect different start ups in different geographic areas.

Michael Bayley, president of the Royal Caribbean International brand noted that the situation is different by region and by country and that it is possible that Europe and Asia could come back sooner.

Fain added that he expects a gradual start up with fewer ships in drive-to markets to begin with and that the traffic would evolve and grow from there.

According to Jason Liberty, CFO and senior vice president, the newer ships only need a 30 percent load factor to break even on an EBITDA level, compared to 50 percent for the older ships. He also noted that newbuild programs industry-wide will slow down with yards and suppliers also being impacted by COVID-19, which, he said, will weigh in on capacity growth in the foreseeable future.

Bookings are coming in for 2021, comparable to historical levels, according to Bayley. To help drive and maintain bookings, he cited two programs offered: Cruise with Confidence in which customers can cancel a cruise up to 48 hours before sailing and receive a 100 percent future cruise credit (FCC) valid until early 2022, but no cash refund, which are only offered for cruises cancelled by the brands. Alternatively customers can receive a 125 percent FCC. They can also “Lift and Shift” their bookings allowing them to change to a future cruise.

Bayley said that 55 percent of guests already booked are holding FCC’s for future cruises.

In the two months since suspending operations, Fain said the company has been working tirelessly to repatriate guests and crew to their homes. The crew comes from more than 100 countries around the world with widely different safety protocols and travel restrictions. Currently, he said, nine ships were underway with more than 10,000 crew, transporting them home.

Going forward, the priorities are clear, added Fain. The company will work to protect its guests and crew, improve its liquidity, protect the company’s brands and travel partners and prepare for a new normal.

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