August 24, 2023

Cruise Lines See Robust Q2 Results as a Sign of Even Better Days Ahead

Cruise lines' outsize second-quarter performance -- of record-breaking bookings and higher prices -- led two of the world's largest cruise companies to raise their earnings expectations through the end of the year.

The move comes as cruise lines progress away from a state of pandemic recovery and into a chapter defined by strong demand and consumer spending.

"What has been a surprise to us has been our ability to continue to raise price and demand continuing to come in at higher levels -- significantly higher levels -- than we have seen in previous periods," Jason Liberty, CEO of Royal Caribbean Group, said during a Q2 earnings call with investors in late July.

After increasing its earnings expectations by 40% in May, Royal Caribbean Group increased its full-year earnings guidance by another 33%. The company reported $459 million in net income.

Norwegian Cruise Line Holdings (NCLH), which reported $86 million in net income this quarter, increased its guidance for earnings per share by 14% from its initial guidance in February.

While also noting higher prices, NCLH CEO Harry Sommer said the company is enjoying a record 255-day booking window, which is 51 days longer than 2019's.

NCLH is also 60% to 65% booked for the next 12 months and is noticing the percentage of customers who sailed in 2023 are rebooking at higher levels than in 2019.

Carnival Corp., the largest of the cruise companies, reported an all-time high in total future cruise bookings, consumer deposits and revenues in its Q2, which ended March 31. The company raised its expectations for net yields after surpassing 2019 levels but ultimately reported a net loss of $407 million for the quarter.

"We are working hard to mitigate four years of inflation, maintain our industry-leading unit costs, all while reinvesting in advertising and sales support to build future demand," said Josh Weinstein, Carnival Corp. CEO.

Occupancy across the three companies has either returned to traditional load factors or were close to those levels last quarter. NCLH and Royal reported occupancy at 105%, while Carnival Corp., which has lagged at 98% load factors for the quarter, expects full-year occupancy to eclipse 100%.

What are still below prepandemic levels are the Big Three cruise lines' stock prices. While they have all climbed this year, all three companies are still trading below prepandemic highs.

Booking at higher prices

Financial analysts said the cruise industry's performance has exceeded their expectations.

Assia Georgieva, a chartered financial analyst and principal at Infinity Research, independently analyzes prices for 30,000 cruise itineraries every two weeks. Her data shows that consumers are booking cruises at higher prices than the record levels set in 2019, with both publicly traded and private cruise companies.

She said the higher prices indicate the shift from spending money on goods to experiences is still strong and that pent-up demand to travel has not waned.

"Travel agents should not take a day off, even in August, and try to make money," she said.

Ivan Feinseth, chief investment officer at Tigress Financial Partners, described the strength of the cruise industry as "on fire."

A possible concern, Feinseth said, is the slight national increase in household debt in Q2. However, it hasn't appeared to dampen demand so far, and an element working in the cruise industry's favor is the low 3.5% unemployment rate.

"As long as consumers are flush -- and they are, even with the recent concern with the record level of credit card debt -- travel demand is strong," he said. "They're booking 2024 trips."

At least one analyst expressed concern about occupancy levels, particularly at Carnival Corp.

"The trajectory of recovery is totally back," said Patrick Scholes, a travel sector analyst for Truist Securities. "Occupancies are not fully back."

However, he said, the long booking window shows consumers are comfortable booking cruises well in advance, a bright spot.

Boom time for travel advisors

Whether the cruise industry is still in pandemic recovery, or if it has surpassed it, is up for debate. While Georgieva contends the transition from recovery ended in May, Cruise Planners CEO Michelle Fee said cruising put the pandemic behind it long ago.

"The cruise industry recovery for Cruise Planners was in 2022. Once we turned the year into 2023, we were off to the races," she said. Each month this year, Cruise Planners has seen a year-over-year increase in purchases and departures over 2019, which was its best year on record. She predicts 2024 will be even stronger as booking patterns normalize.

Anthony Hamawy, president of, said that while August is normally a slow booking period as children return to school, that's not the case this year.

"This is our offseason, and it's still busy," he said, noting the first two weeks of August are on par with the first two weeks of July. And most new bookings coming in, he said, are for 2024, oftentimes with nonrefundable fares that are less likely to be canceled.

Copyright 2023 Northstar Travel Media, LLC. All rights reserved. From By Andrea Zelinski.

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