WEBVTT - Royal Caribbean Cruises CEO Jason Liberty Talks Profit Outlook And River Cruise Launch

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Now to another stock moving big time today.

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<v Speaker 1>Yep, we are talking about Royal Caribbean Cruises shares a

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<v Speaker 1>writing quite a wave higher, up about thirteen percent, more

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<v Speaker 1>than thirteen percent at their high, almost fourteen percent, in fact,

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<v Speaker 1>hitting a record intraday, up the most in more than

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<v Speaker 1>two years. It is the top gainer in the S

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<v Speaker 1>and P five hundred, and it's lifted the entire group

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<v Speaker 1>because Norwegian and Carnival also top gainers in the S

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<v Speaker 1>and P five hundred. This is coming after Royal Caribbean

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<v Speaker 1>reported a full year profit forecast that blue past expectations

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<v Speaker 1>as cruise demand continues to ramp up. They're also talking

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<v Speaker 1>about getting into another area of the cruising world. For

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<v Speaker 1>more on the outlook and what's driving metrics, we welcome

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<v Speaker 1>the President CEO of Royal Caribbean Group. He is Jason Liberty.

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<v Speaker 1>He joins us from Miami, Florida. Jason, it's great to

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<v Speaker 1>have you here with us. How are you.

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<v Speaker 3>I'm doing great, Carol, and thank you and Tim for

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<v Speaker 3>having me today. Obviously it's a it's a great day

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<v Speaker 3>on the share price, but it's a great representation of

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<v Speaker 3>another incredible year here at the Royal Caribbean Group and

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<v Speaker 3>a really strong outlook for twenty twenty five.

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<v Speaker 1>Tell us what surprises you about the consistency in demand

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<v Speaker 1>and the optimism that you are seeing, certainly in the

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<v Speaker 1>cruising world and what comes to demand. What's surprising you

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<v Speaker 1>in how the strength the strength that you are seeing.

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<v Speaker 3>Yeah, well, I think I think there's a few things

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<v Speaker 3>that I would point to. I mean, certainly, we have

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<v Speaker 3>a lot of great demographics on our side in terms

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<v Speaker 3>of more millennials coming into the space, multi generational travel,

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<v Speaker 3>a lot of active wealth transfer, and we see that

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<v Speaker 3>more and more, which has been a surprise to me.

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<v Speaker 3>Just how much multigenerational travel where you have the patriarch

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<v Speaker 3>and matriarch of the family paying for generations. I think

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<v Speaker 3>that's been a little bit of a surprise. And there's

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<v Speaker 3>also been just a continued flight to quality. We've invested

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<v Speaker 3>so much in our ships and our brands and our

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<v Speaker 3>destinations for so many decades. We're really now seeing these

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<v Speaker 3>flowers bloom as we see consumers who are very healthy,

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<v Speaker 3>you know, they have great balance sheets, they have great jobs,

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<v Speaker 3>and they're high paying jobs. Having this flight to quality

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<v Speaker 3>for our brands and for our destinations.

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<v Speaker 2>When you talk about that flight to quality, break that

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<v Speaker 2>down for us, where there's strength in the business and

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<v Speaker 2>where you're seeing particular strength and if there are any

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<v Speaker 2>areas where you're not seeing strength.

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<v Speaker 3>Yeah, well we're really we are actually seeing strength in

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<v Speaker 3>all markets that we source from. We're also seeing strength

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<v Speaker 3>for all the different places that our ships go, whether

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<v Speaker 3>that's in the Caribbean, Alaska, the Northeast, Europe, Australia, Southeast Asia, China.

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<v Speaker 3>We're seeing strong demand kind of across the board, which

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<v Speaker 3>is I think really great. We're also you know, seeing

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<v Speaker 3>again elevated spend on our ships, and that's really across

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<v Speaker 3>the board. A lot of it is in the gaming,

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<v Speaker 3>the beverage area, on the culinary side, spa short excursions,

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<v Speaker 3>so people are really looking to make sure that they

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<v Speaker 3>grab the experiences that they want to have and there

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<v Speaker 3>and there, and they're and they're willing to not only

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<v Speaker 3>pay a little bit more money for that, but they're

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<v Speaker 3>also willing to have more repetition of that, and that's

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<v Speaker 3>how they're expanding the memories that they're building with their

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<v Speaker 3>friends and family.

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<v Speaker 1>How much is that wrapping up, Jason, that is something

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<v Speaker 1>that I've seen throughout the cruise industry that it's not

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<v Speaker 1>just about buying the ticket to get you on the ship,

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<v Speaker 1>but it's about what you do once you're on the

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<v Speaker 1>ship and possibly go off to other destinations. Those bookings, right,

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<v Speaker 1>that add to the experience, but they also add to

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<v Speaker 1>your revenue line, right, and your profit line.

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<v Speaker 3>Yeah, that's exactly right. One. I think that we we've

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<v Speaker 3>gotten a lot better, whether it's you through AI or

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<v Speaker 3>other other disruptive tech to really take friction out of

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<v Speaker 3>the experience of shopping with us, whether that's on the

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<v Speaker 3>ticket side, whether that's also on the on board side.

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<v Speaker 3>And what we're doing is we're able to enhance the

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<v Speaker 3>experience so they can do all the different things that

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<v Speaker 3>they want to do. And then in reality, while it's

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<v Speaker 3>still very frustrating to me, while there we're increasing share

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<v Speaker 3>of wallet, we're still a very significant discount to land

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<v Speaker 3>based vacation. And so for us, like we we focus

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<v Speaker 3>a little bit less on what's happening with our cruise competitors.

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<v Speaker 3>We're trying to take a larger share of the two

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<v Speaker 3>trillion dollar marketplace and travel leisure, and for us, having

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<v Speaker 3>the experiences that our guests want to do, and also

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<v Speaker 3>being able to make it easier for them to shop

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<v Speaker 3>with us is winning for us.

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<v Speaker 2>The pace of bookings this year relative to last year.

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<v Speaker 2>What does that tell you about demand where we're you know,

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<v Speaker 2>when we're a little over a month past what is

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<v Speaker 2>referred to in the industry as wave season.

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<v Speaker 3>Yeah, so you know, the past couple of years, you know,

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<v Speaker 3>wave has been elevated, not just for us, but also

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<v Speaker 3>for the entire industry, and we're seeing we're continue to

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<v Speaker 3>see those waters rise here on on on the on

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<v Speaker 3>the wave season. So we're seeing record booking weeks, we're

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<v Speaker 3>seeing elevated pricing, and we're seeing a consumer that is

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<v Speaker 3>not only willing to pay a little bit more money

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<v Speaker 3>for their vacation experience, but they're also looking to book

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<v Speaker 3>further out. So the booking window is continuing to extend,

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<v Speaker 3>and they're also doing more and more pre cruise booking

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<v Speaker 3>activities for the activities that happen on the ship and

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<v Speaker 3>off the ship to make sure they get the vacation

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<v Speaker 3>experience that them and their family and friends want to have.

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<v Speaker 1>Are you surprised by it? You've been doing this a while, Like,

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<v Speaker 1>are you surprised by the pace of demand.

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<v Speaker 3>Well, I have been doing this. I mean I've been

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<v Speaker 3>in the sea for a little over three years, and

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<v Speaker 3>of course I was the CFO before that, so I've

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<v Speaker 3>been in the industry a while. Certainly you're seeing an

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<v Speaker 3>elevated demand for experiences. So clearly, coming out of COVID,

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<v Speaker 3>you've seen a few different changes in behavior, one of

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<v Speaker 3>which is very comfortable booking and interacting through technology, so

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<v Speaker 3>we're able to take friction out of that experience. But

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<v Speaker 3>you're also seeing just a trade by a lot less stuff.

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<v Speaker 3>We want to buy experiences. We really appreciate the time

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<v Speaker 3>with our friends and family, and we want to make

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<v Speaker 3>sure that that time that we have is one that

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<v Speaker 3>is not only exceptional, but it's also with somebody who

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<v Speaker 3>we trust will deliver that for us. And I think

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<v Speaker 3>we have that trust. We value that trust with our

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<v Speaker 3>customers each and every day.

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<v Speaker 1>All Right, we want to talk a bit more about

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<v Speaker 1>the business. But you know, Jason, we've been asking everybody

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<v Speaker 1>who comes on a CEO or anybody who runs an institution,

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<v Speaker 1>a company, an organization, Uh, the dynamics and the backdrop

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<v Speaker 1>anything that could be impacted by policies out of the

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<v Speaker 1>Trump administration, anything coming out of government, and I think

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<v Speaker 1>about you know, we've talked about various policies that could

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<v Speaker 1>lead to inflation, tariffs, you know, on possible goods that

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<v Speaker 1>could increase costs, immigration, the impact on the labor force.

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<v Speaker 1>So I'm just curious. You guys are floating cities, your

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<v Speaker 1>massive ships, so you you know, the dynamics of kind

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<v Speaker 1>of the economy of the US economy certainly impact you.

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<v Speaker 1>So I'm just curious anything in particular that could come

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<v Speaker 1>out of DC that you're watching very closely.

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<v Speaker 3>Well, look, I think we're we as we always have.

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<v Speaker 3>We're going to work very closely with the administration. But

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<v Speaker 3>I think I think what we're looking for is a

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<v Speaker 3>healthy and happy consumer. And I think as long as

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<v Speaker 3>the consumer has confidence and their spending and and and

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<v Speaker 3>of course they seek great vacation experiences, which we think

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<v Speaker 3>they're going to do, I think we feel very bullish

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<v Speaker 3>about the future spending behavior of our customers. The other

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<v Speaker 3>point that I would just add, which I think also

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<v Speaker 3>brings us great comfort on whether if costs do rise

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<v Speaker 3>in some form or fashion or there is inflation, is

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<v Speaker 3>that point I made earlier that there is a significant

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<v Speaker 3>gap to land based vacation. There's a lot of value

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<v Speaker 3>for the consumer and in our different vacation products, and

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<v Speaker 3>that's a good hedge for us if there is any

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<v Speaker 3>any any type of change in the winds.

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<v Speaker 2>How are you guys doing it controlling costs right now?

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<v Speaker 2>Specifically when it comes to labor, are you are you

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<v Speaker 2>getting all the employees you need and where are you

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<v Speaker 2>getting them from?

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<v Speaker 3>Yeah? Well, most of our our employee base our international crew,

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<v Speaker 3>So we're not really that impacted by rises on the

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<v Speaker 3>wage side, you know, short side. Certainly like every other company,

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<v Speaker 3>you know, there's there's inflationary pressures that can impact your wages.

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<v Speaker 3>For our shore side and our corporate offices and so forth,

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<v Speaker 3>we actually are you know, our cost guide for this

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<v Speaker 3>year was for us to be flat to up one percent,

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<v Speaker 3>and we've been able to do that by really managing

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<v Speaker 3>our supply chain, leveraging the scale as our business grows,

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<v Speaker 3>and having a team that wakes up every day and

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<v Speaker 3>says how do we do it better? And and doing

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<v Speaker 3>all that and making sure we're enhancing the guest experience

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<v Speaker 3>and we're not cutting the guest experience because we feel

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<v Speaker 3>that it's it's you know, it's important for us to

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<v Speaker 3>live up to our marketing and our reputation each and

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<v Speaker 3>every day.

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<v Speaker 1>Jason, Could any of that supply chain be impacted by tariffs?

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<v Speaker 3>I don't think so, you know, because we source a

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<v Speaker 3>lot of the things that we source are are are

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<v Speaker 3>really from here here in the US. We're not really

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<v Speaker 3>expecting any any any tariff impact. But you know, we're

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<v Speaker 3>watching it, just like we're watching other things on more

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<v Speaker 3>and more in terms of how it would impact our

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<v Speaker 3>customer less so how it's going to impact our cost space.

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<v Speaker 2>What about when it does come to that international labor pool,

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<v Speaker 2>Are there concerns about a crackdown on immigration affecting the

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<v Speaker 2>way that employees on your ships are able to be

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<v Speaker 2>on your ships when they're docked in the US. How

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<v Speaker 2>do you handle that?

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<v Speaker 3>Yeah, well, it's obviously something that we're always looking into,

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<v Speaker 3>but I don't think that's a very high risk. We're

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<v Speaker 3>an international maritime organization. Our crew or international maritime they're

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<v Speaker 3>really focused on being on the ships. So you know,

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<v Speaker 3>obviously we watch it and we try to manage it,

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<v Speaker 3>but we don't see that as a high risk in

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<v Speaker 3>terms of any policies that can come forward. There.

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<v Speaker 1>Hey, listen, we want to talk about you guys getting

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<v Speaker 1>into the river cruise market before we do. So you

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<v Speaker 1>talked though a lot about destinations and experiences for those

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<v Speaker 1>who get on ships. You guys have had great success

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<v Speaker 1>with Cococae, private island destination that's in the Bahamas specifically,

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<v Speaker 1>how could Perfect Day Mexico, which is another such destination,

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<v Speaker 1>kind of drive some of that onboard spending that you

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<v Speaker 1>were talking about a little bit earlier and ticket prices

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<v Speaker 1>when it opens in twenty twenty seven.

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<v Speaker 3>Yeah, So I would say a few things about the

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<v Speaker 3>destination experience. So you take as you gave an example

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<v Speaker 3>of Perfect Day of Cocoka, which by the way, is

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<v Speaker 3>the highest rated, has the highest net promoter score of

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<v Speaker 3>any other destination we go to in the world. Because

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<v Speaker 3>we do an exceptional job of delivering thrill and delivering chill,

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<v Speaker 3>but we're not able to deliver that experience to all guests,

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<v Speaker 3>all all guests in the Caribbean, and so Perfect Day

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<v Speaker 3>in Mexico will allow us to not only ensure that

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<v Speaker 3>every especially on our Royal brand, has at least one

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<v Speaker 3>Perfect Day when they're in the Caribbean, but it's also

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<v Speaker 3>going to expand the catchment area of areas like Texas

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<v Speaker 3>and west of the Mississippi, which will have an easier

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<v Speaker 3>way to get to places like Galveston where they can

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<v Speaker 3>go in and have a Perfect Day. We're also adding

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<v Speaker 3>royal beach clubs which will also expand the experience in

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<v Speaker 3>places like Nasa, Bahamas and also and case them melt.

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<v Speaker 3>So what we're trying to do is gain continue to

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<v Speaker 3>enhance the experience offering. We see ourselves as as an

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<v Speaker 3>experience organization with really a vision of you know, what

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<v Speaker 3>we've always been done great is delivering delivering the best

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<v Speaker 3>vacations in the world, and we want to be able

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<v Speaker 3>to deliver a lifetime of those vacations over somebody's life.

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<v Speaker 1>And I just want to make sure I heard correctly.

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<v Speaker 1>But in terms of Perfect Day Mexico specifically driving on

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<v Speaker 1>board spending and ticket ticket prices when it opened, can

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<v Speaker 1>you give us any kind of color on that or specificity.

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<v Speaker 3>Absolutely, you know. I think one of the surprises when

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<v Speaker 3>we when we open Perfect Day at Coco Ka is

0:11:33.360 --> 0:11:36.600
<v Speaker 3>not only do we get high demand to go to

0:11:36.640 --> 0:11:38.959
<v Speaker 3>the island and people were willing to pay for things

0:11:39.040 --> 0:11:42.040
<v Speaker 3>like water parks and overwater cabanas. But we also saw

0:11:42.120 --> 0:11:45.000
<v Speaker 3>ships that touch Perfect Day in Mexico got elevated pricing,

0:11:45.640 --> 0:11:47.120
<v Speaker 3>and so we expect that's going to be the same

0:11:47.120 --> 0:11:49.760
<v Speaker 3>thing here is when you deliver the destination and the

0:11:49.840 --> 0:11:52.480
<v Speaker 3>experience mark, guests are willing to pay for that, and

0:11:52.480 --> 0:11:55.320
<v Speaker 3>that's what we expect to occur in Mexico. It's also

0:11:55.320 --> 0:11:57.000
<v Speaker 3>what we expect to occur with our Royal beach clubs

0:11:57.040 --> 0:11:59.800
<v Speaker 3>as well as well. You know, we'll deliver an experience

0:11:59.880 --> 0:12:02.760
<v Speaker 3>that far superior to what is currently being offered in

0:12:02.800 --> 0:12:04.079
<v Speaker 3>those in those different destinations.

0:12:04.120 --> 0:12:05.680
<v Speaker 1>I'm just gonna say I'd like some thrill and chill

0:12:05.760 --> 0:12:07.719
<v Speaker 1>right now, because I'm tired of cold New York. I'm

0:12:07.720 --> 0:12:08.400
<v Speaker 1>just going to put that.

0:12:08.360 --> 0:12:10.800
<v Speaker 2>Out there, all right, sign up, Carol. Speaking of.

0:12:12.600 --> 0:12:16.840
<v Speaker 3>Available, available, no no, I woud say it's available and

0:12:16.840 --> 0:12:19.160
<v Speaker 3>I'm happy. I'm happy to help you book a cruise.

0:12:19.320 --> 0:12:21.040
<v Speaker 2>Well, let's let's talk about what's going on in the

0:12:21.160 --> 0:12:23.199
<v Speaker 2>river cruise market. I mean, my in laws are back

0:12:23.200 --> 0:12:25.280
<v Speaker 2>from a river cruise this fall. My sister's back from

0:12:25.400 --> 0:12:27.960
<v Speaker 2>river cruise, both of those with different companies in Europe. Now,

0:12:28.000 --> 0:12:31.960
<v Speaker 2>you guys are getting in through the celebrity business. Why now.

0:12:34.679 --> 0:12:36.920
<v Speaker 3>Yeah, well why now is you know, we've been seeing

0:12:36.960 --> 0:12:39.120
<v Speaker 3>for some time, you know, a growing trend with our

0:12:39.160 --> 0:12:43.080
<v Speaker 3>guests that they're looking for additional vacations, not a substitute

0:12:43.080 --> 0:12:45.800
<v Speaker 3>for going on a cruise, but additional vacations. And when

0:12:45.840 --> 0:12:47.680
<v Speaker 3>we look at what are those additional vacations that they're

0:12:47.679 --> 0:12:50.160
<v Speaker 3>going on, one of the things that we've seen arise

0:12:50.200 --> 0:12:53.199
<v Speaker 3>in is on the river side. And so as we

0:12:53.280 --> 0:12:56.280
<v Speaker 3>again seek to deliver a lifetime of vacations and we

0:12:56.320 --> 0:12:58.960
<v Speaker 3>want to leverage you know, all the having a single

0:12:58.960 --> 0:13:04.079
<v Speaker 3>loyalty program, great reciprocity across our different brands, we're enhancing

0:13:04.360 --> 0:13:07.800
<v Speaker 3>the flywheel and we're investing in that flywheel so that

0:13:08.480 --> 0:13:10.800
<v Speaker 3>we can get more reps out of our guests. And

0:13:10.840 --> 0:13:12.360
<v Speaker 3>so we had to listen to what our guests are

0:13:12.400 --> 0:13:14.560
<v Speaker 3>looking to do, and we have to be focused on

0:13:14.600 --> 0:13:17.040
<v Speaker 3>how do we keep our customer in our ecosystem. And

0:13:17.080 --> 0:13:19.360
<v Speaker 3>one of the ways of doing that is is expanding

0:13:19.360 --> 0:13:22.400
<v Speaker 3>the offering. And we think River is you know, it's

0:13:22.679 --> 0:13:25.840
<v Speaker 3>it's similar, it's it's sotly not exactly the same as

0:13:25.880 --> 0:13:28.400
<v Speaker 3>as an ocean cruise, and we think we can elevate

0:13:28.840 --> 0:13:32.880
<v Speaker 3>that vacation experience significantly, not just on the ship in itself,

0:13:32.880 --> 0:13:33.800
<v Speaker 3>but also on land.

0:13:34.480 --> 0:13:36.080
<v Speaker 1>So where are you going to go with those cruises?

0:13:39.000 --> 0:13:41.680
<v Speaker 3>Well, it's gonna start off. You know, we've ordered you know,

0:13:41.760 --> 0:13:45.920
<v Speaker 3>ten ships so far and it is an initial order

0:13:46.679 --> 0:13:49.360
<v Speaker 3>and those ships will be in Europe, but our expectations

0:13:49.400 --> 0:13:51.120
<v Speaker 3>will continue. We'll grow it in Europe and we're also

0:13:51.200 --> 0:13:53.480
<v Speaker 3>going to grow it around the world. We have a

0:13:53.480 --> 0:13:56.439
<v Speaker 3>massive global footprinm We go to a thousand different destinations.

0:13:57.160 --> 0:14:00.320
<v Speaker 3>We source from all over the world, and there's a

0:14:00.320 --> 0:14:04.960
<v Speaker 3>great opportunity to match those guests also on the river side.

0:14:05.080 --> 0:14:06.840
<v Speaker 1>All right, kenn Of lead with there. Listen, Jason, thank

0:14:06.880 --> 0:14:09.599
<v Speaker 1>you so much, covered so much ground and really appreciate

0:14:09.640 --> 0:14:12.800
<v Speaker 1>it joining us to talk about the business and the outlook.

0:14:12.880 --> 0:14:16.000
<v Speaker 1>Jason Liberty folks there, he's President, chief executive officer of

0:14:16.080 --> 0:14:18.280
<v Speaker 1>Royal Caribbean Group, joining us from Miami, Florida.