Royal Caribbean CEO: We're seeing a very healthy consumer

Royal Caribbean Cruises (RCL) reported better-than-expected third quarter earnings and increased its full-year guidance. CEO Jason Liberty attributes the optimism to robust demand, stating the company sees about 130,000 guests sailing with them daily and that it has “millions of interactions with guests every day." Elevated pricing and increased onboard spending are contributing to the positive outlook, according to Liberty, who also says that cruises offer significant discounts compared to land-based vacations.

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Video transcript

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- Shares of Royal Caribbean ended the day higher after the cruise line reported better than expected third quarter earnings and raised its full year guidance. I spoke with Royal Caribbean Cruises CEO Jason Liberty on where the optimism about demand is coming from.

JASON LIBERTY: First, it's really great to be here, and I am actually on a ship. It's not just behind me. So I would say the optimism comes from a lot of different things. I think first and foremost, we have about 130,000 guests sailing with us today. And we have that each and every day. And we have millions of interactions with our guests each and every day, whether it's via web, whether it's them booking directly with us, whether it's coming through our wonderful travel agency community.

So we're seeing a very healthy consumer, especially our consumer, where the average income is at least, average household income is at least $125,000. We're seeing that consumer not only make very strong bookings today, but they're booking 6, 12, 18, 24 months out. So we have that visibility on how they're trading each day.

And they're not only are the volumes above what we have expected and what we have been seeing, but they're at better pricing. So you combine that with the incredible onboard spending behavior that we're seeing, that's what fuels that optimism. But it all feeds into our general formula. Moderate yield growth, moderate capacity growth, good cost control, leads to margin expansion, higher returns, and step changes in our earnings.

- And you mentioned pricing as well. And you also mentioned the amount that people are spending on the ships, which you mentioned, has been really increasing and has been a pleasant surprise for you guys. What do you see in terms of pricing trends not just onboard but for the trips themselves going into the next year.

JASON LIBERTY: Yeah. So, so we continue to see elevated pricing or pricing continuing to increase as we go into next year. And of course, we're also seeing increases in onboard spend. One of the things that we've gotten a lot better at is being able to get our guests to plan their activities and book their activities well in advance of them getting on the ship.

We give them a day back of their vacation and they have a very good understanding of what the broader offering is. And that's one of the things that's also boosting our onboard spend, and they're able to consider that in the total package. And when they compare that total package between ticket and onboard, to what they would be paying on land-based, it's still at a pretty significant discount to what they would pay if they were on a land-based vacation.