It should come as no surprise that major cruise groups reported yet another set of record interim figures, which certainly did not disappoint most people. All the key indicators suggested that their business performances would continue to improve for the rest of 2024 and beyond.
By Alan Lam
Building on the success already apparent in 2023, the financial performances of major international cruise groups seemed to go from strength to strength in the first half of 2024. Their half-year operational figures reassured the most sceptical of commentators of the solidity of their businesses.
Moreover, the best-ever forward booking numbers and firm ticket prices suggested that the industry was in the rudest of health. It continued to experience unusually robust and seemingly endless consumer demand.
Outperforming guidance
For the first half of 2024, the three major listed cruise groups reported vigorous revenue growths, outperforming the most optimistic earlier guidance. Royal Caribbean Group (RCG), in particular, reported a 22.3% rise in total revenue for the period compared to the same period in the previous year.
All three groups have achieved new half-year revenue records. In total, the trio attained a revenue of $23.6 billion, compared to $19.8 billion in the first half of 2023: an increase of almost 20%.
Source: CCL, RCG, NCLH
The momentum was continuing, prompting another enthusiastic guidance revision for the full year and beyond. Strong booking position and firm pricing were the main drivers. Norwegian Cruise Line Holdings Ltd (NCLH), for example, increased its net yield guidance by 100 basis points to a growth of approximately 8.2% (from approximately 7.2%), on a constant currency basis, compared to 2023. The increase in guidance was driven by strong demand across all three of its brands and itineraries.
“2024 continues to be an exceptional year in terms of our financial performance, as evidenced by our strong second-quarter results, which exceeded guidance across the board,” said Harry Sommer, NCLH’s president and chief executive officer. “As we raise our full-year guidance a third time, we expect our adjusted EPS to grow approximately 120% compared to 2023, driven mainly by our ability to capitalise on the robust market demand.”
Carnival Corporation & plc (CCL), for its part, reported booking levels outperforming its previous buoyant forecast, prompting the company to raise its full-year guidance, in constant currency, to approximately 10.25% on continuing strong demand.
All the signs indicated that CCL’s performance in the second half of 2024 would be equally robust, if not more so. “With less inventory remaining for sale for the remainder of 2024, the company achieved considerably higher prices (in constant currency) on bookings taken during the second quarter compared to the prior year, which is aligned with the company’s yield management strategy,” stated CCL.
RCG, arguably the best revenue performer in the recent past, shared a similar sentiment. “The demand and pricing environment remained very strong since the last earnings call,” the company stated. “Booking volumes were higher than the corresponding period in 2023 and at record pricing levels. The company continues to be in a record booked position for 2024 sailings. Consumer spending on board, as well as pre-cruise purchases, continue to significantly exceed 2023 levels, driven by greater participation at higher prices.”
Based on its strong second-quarter performance, RCG also raised its guidance. It now expects its net yields for the third quarter to increase by 6.5%–7.0%, in constant currency, and as reported. Its adjusted EPS in 2024 is now expected to be in the region of $11.35–$11.45. Based on the latest results and forecast, RCG became the first listed cruise group to reinstate dividends by declaring $0.40 per share for the second quarter.
The company was justifiably upbeat. “We have made incredible strides in improving our commercial operations, strategically reallocating our portfolio composition, and formulating growth plans, while strengthening even further our global team, the best in the business,” said Josh Weinstein, RCG’s chief executive officer. “Off the back of that effort, we closed yet another quarter delivering records, this time across revenues, operating income, customer deposits, and booking levels, exceeding our guidance on every measure.”
As always, passenger numbers and passenger cruise days were key to improved revenue performance. Both passenger numbers and passenger cruise days increased by an average of just over 10% in the first six months of 2024, compared to the same period in 2023.
Source: CCL, RCG, NCLH
Source: CCL, RCG, NCLH
CCL, RCG, and NCLH reported occupancy rates of 103%, 107.6%, and 105.3%, respectively, for the six-month period. CCL’s relatively lower percentage was probably due to its financial year ending a month earlier than that of its two smaller peers. This could only mean a bigger upside for the company in the coming quarters. RCG’s higher occupancy rate was partly thanks to the seemingly improbable 132% occupancy rate of its new ship, Icon of the Seas. Once again, newer and bigger ships were proven to be effective revenue generators.
Profitability rising
The most reassuring feature of the post-pandemic cruise industry so far was the return of profitability. Building on the already positive six-month EBITDA performances of the previous year, the trio recorded an inspiring average of 61.2% increase in half-year EBITDA for 2024, with CCL reporting an astonishing 94.5% rise.
Both RCG and NCLH reported their net results for the half-year period turning positive for the first time since the pandemic. RCG achieved a new record, beating its previous best six-month net result, recorded in 2019, by an impressive 65.8% and surpassing its 2023 figure by a massive 195%.
Source: CCL, RCG, NCLH
RCG also reported a 77% increase in operating income. “Our momentum continues,” said Jason Liberty, the group’s president and CEO. “We met our financial targets 18 months earlier than expected, have our balance sheet in a strong position, reinstated our dividend, and we are just getting started. Exceptional demand for our vacation experiences has accelerated our performance by generating significant yield growth over the past several years.”
Improved profitability enables NCLH to fine-tune its already successful financial strategy. “The momentum we are garnering from strong yield growth, disciplined cost management, and the initiatives that comprise our Charting the Course strategy further bolsters our confidence in achieving our previously announced 2026 financial and sustainability targets,” said Sommer.
Cautious notes
Despite the robust performance, a cautious note must be sounded. The first sensible question is: How long will this positive demand momentum last? Surely it cannot go on forever.
We must read the figures of the trio’s recent positive performances from a more critical perspective. In its previous four half-year reviews, for example, CCL reported an average of $3.5 billion net loss on each. Despite the current record revenue performances, the company registered a moderate $123 million net loss for the first six months of 2024. It is still a long way back from the recent deep losses. The same, more or less, can be said about RCG and NCLH when we scrutinise the net-result chart.
Moreover, despite inflation having eased, oil price hikes having moderated, and the general economic environment having improved, the operating costs were still rising. For the first six months of 2024, the trio reported an average of more than 10% increase in operating expenses, compared to the same period in 2023. However, it is comforting to note that the pace of revenue increase far outstrips that of operating expenses.
Source: CCL, RCG, NCLH
Moreworthy of caution, perhaps, was the debt situation of the sector. Despite having decreased by about 6% in the last 12 months, the collective long-term liabilities of the three major cruise groups were still nearly 150% higher than in 2019.
We may see long-term debts rising again soon, as the trio embark upon ambitious newbuilding programmes. Of course, the future debt situation also depends on the financial performance of the sector and its refinancing efforts, among other factors.
Source: CCL, RCG, NCLH
