The cruise industry may have taken a huge hit as a result of the coronavirus pandemic, but it will recover and return to its strong upward growth trend, just as airlines did in the wake of 9/11, Royal Caribbean Cruises CEO Richard Fain said Wednesday during a conference call with analysts cover the company’s shares.
“I’d really like to draw an analogy to 9/11, which I think is quite apropos,” Fain said as the company revealed it is targeting August 1 as a date for the resumption of cruise operations. “I recall that in the aftermath of that horrible event, lots of people said that travel and tourism were history; people would never travel again, especially on airplanes. On the other hand, soon after I heard people refer to the exact same situation and say that ultimately 9/11 had no impact on traffic. These people argued that people were traveling more and they were traveling as though 9/11 never happened.
“My view is that both comments are simply wrong. It is demonstrably untrue that people stopped traveling as a result of 9/11. In fact, after a period of adjustment, travel took off. Sorry for the pun.”
Living with a new normal
Fain said that travel hadn’t reverted to the status quo ante after 9/11, but it had had to adjust to new circumstances and the cruise industry would have to do the same in a post-COVID 19 world, or a world living with the virus.
“What happened was that we adjusted, and all travel that took place in a post-9/11 world was really quite different from travel previously,” Fain said. “It’s hard to remember that that dynamic took place. Travel didn’t simply revert to what it had been, rather travel adjusted to the new normal, and it grew on that basis. I believe personally that the same thing is going to happen in a post-COVID-19 world. Travel and tourism will grow, but not by reverting to what it was, but by adjusting to a world where all activities, everything we do in the world will have changed.”
He added that the cruise industry was resilient and would come back strong.
“We’ll do so not by mimicking what we used to do but by innovating our product to meeting the exciting demands of the world as it is.” Fain said.
The veteran cruise executive said he was confident that bookings would return to pre-crisis levels perhaps not this year, but certainly by next.
The desire to explore persists
“Just a few weeks ago, we were set to enjoy the best year in our company’s history, fueled by a huge demand for our products. That has not suddenly vanished. We know that the basic human desire to explore and to travel will persist with the continued focus on seeking out experiences as opposed to things. Our responsibility is to be in the best position possible when travel resumes.
Royal Caribbean Cruises CFO Jason Liberty backed up that sentiment with a breakdown of booking trends. While bookings are “well behind” last year for the remainder of 2021, bookings for 2021 are well within historical ranges and prices are up in single digits from pre-crisis 2020 prices.
“Our current booking trends indicate that there is demand for cruising,” Liberty said, but noted that “guests now require more flexibility than ever.”
To provide that flexibility, he said, Royal Caribbean had introduced its Cruising with Confidence program that enables guests to cancel bookings up to 48 hours before commencement of vacation without penalties.
Liberty noted that guests booked on suspended sailings had been given the option of 125% future cruise certificate in lieu of a cash refund. He said that to-date, approximately 45% of the guests who are booked on one of these voyages had requested a refund and the remainder were holding an FCC.
He did not mention delays in providing the refunds, which the company has previously apologized for.
Liberty said approximately 20% of guests who have been issued FCC have already rebooked on future voyages.
Better prepared today than yesterday, and better yet tomorrow
Going back to the current unprecedented challenges faced by Royal Caribbean and the rest of the cruise industry, Fain said the company was having to “quickly adapt to this new and evolving environment.”
“We’re better prepared today than we were yesterday, and we will be better yet prepared tomorrow,” Fain said. “But, the one thing that won’t change is our determination that we will not start operations until we are fully ready to do so with all the hygiene and other health protocols solidly in place.
As to what those hygiene and health protocols will actually be, Fain provided only a general outline, saying the company would launch a Healthy Return to Service program that he described as “aspirational.”
“The program will have four main focuses,” he said. “upgraded screening prior to boarding, enhanced processes and procedures on board, special focus on addressing the destinations we visit, and procedures for dealing with any reports of exceptions.”