Royal Caribbean lifts profit view again on cruise boom, higher prices

Royal Caribbean Group raised its annual profit forecast for a second time and beat expectations for first-quarter profit and revenue last week, with half of its growth coming from higher ticket pricing.

Soaring demand for vacations at sea has given cruise operators ample room to raise ticket prices as the industry looks to close the pricing gap with land-based vacations and give their profits a lift.

“What transpired over the past three months was even better than our already elevated expectations,” Royal Caribbean Group CEO Jason Liberty said. “Our brands are stronger than ever and demand for our vacation experiences continues to accelerate.”

The company now expects annual adjusted profit between $10.70 and $10.90 per share, compared with its earlier forecast of $9.90 to $10.10. Its shares were up 2 per cent to $139.32.

“We expected to hear the tone of the business remained solid, but we were surprised to see them already pressing guidance even higher,” Ken Kuhrt, portfolio manager at Ariel Investments, said.

The Celebrity Cruises operator carried 2.05 million passengers in the first quarter, nearly 14 per cent higher year-over-year. It also reported record bookings during the “wave season” – a period marked by special cruise deals and discounts for the year.

That helped Royal Caribbean Group’s quarterly revenue of $3.73 billion surpass expectations of $3.69 billion, according to LSEG data.

Higher ticket prices have helped shield the company from slightly steeper net cruise costs expected this year due to increased dry dock days, as well as an impact from cancelled voyages to the Red Sea amid tensions in the region.

The company expects net cruise costs excluding fuel to increase about 5.5 per cent for the year, up from its earlier forecast for a rise between 3.75 per cent and 4.25 per cent.

Royal Caribbean’s adjusted earnings per share of $1.77 in the quarter beat expectations of $1.33.

“I remember owning the stock in 2022 and every client was giving me grief about it,” said Peter Ahluwalia, manager at Belinvest Global Equity Fund and chief investment officer at Swiss Partners Group. “We’re turning almost 45 per cent return on equity at the moment, which is quite incredible.”