What do Celebrity do to manage their financial situation

[NMTraveller]

22 minutes ago, C4HCG said:

Unless those cruisers look elsewhere and find a similar situation, the grass isn’t always greener. I would imagine all lines are facing these challenges, and land based vacations. We just looked to book London in Easter, a regular treat for us. Not a chance at those prices and that’s tough for us as London is our third favourite city.

I have not found these challenges on my land based vacations.  I have noticed an increase in pricing.  I do not choose places that have a degradation in services.  I would have to say on my last land based vacation the staffing was very good and the food was also very good.  This was for a New Years Eve vacation so very recent.

 

Quality businesses continue to deliver quality products.

 

For these quality businesses I go back again and again and again.

Edited January 8, 2023 by NMTraveller

[mahdnc]

8 minutes ago, markeb said:

Cutting executive compensation really wouldn't do much for them...

 

That is true, but it would make us feel better.

[LB_NJ]

To put things into perspective.  A really rough back of the envelope calculation (and I could be wrong) is that every day the per passenger interest cost that Celebrity and Royal have to pay out of fares, etc. is $50 on average. In other words, each passenger is paying on average $50 per person per day to cover the interest on Royal's debt.

 

Of course, suite passengers are paying more per person per day than inside cabin people.

[Ipeeinthepools]

2 hours ago, C4HCG said:

I think we all know they have huge debt, and that they need a plan to get out of it. Seems they are trying a variety of things to start to try to manage this, increasing cruise fares, new charges, reducing menu at OVC, etc.  None of these are popular here (understatement 😁) but does anyone have any suggestions. It’s easy for us to criticise. And I know people here are not highly paid Celebrity Executives but I have sympathy for them, they face an almost impossible problem not of their making, all down to Covid.

 

It's simple.  Celebrity as well as the rest of the Royal Caribbean Group need to improve their products so people accept them as a superior products.  Then they can increase prices and start to reduce the debt.

 

All of the current cuts reflect a management team focused on short term goals and not a long term plan to build the brands.

[Los_Pepes]

17 minutes ago, C4HCG said:

Unless those cruisers look elsewhere and find a similar situation, the grass isn’t always greener. I would imagine all lines are facing these challenges, and land based vacations. We just looked to book London in Easter, a regular treat for us. Not a chance at those prices and that’s tough for us as London is our third favourite city.

Sycamore Partners paid cash for Azamara. I sailed with them this past summer and apart from the atrocious wine, It appeared to be decent value. Sailing with them again in July in Greece for $2000pp in a balcony cabin with $1200 OBC and bev package. Rates on the sailing are still really good if anyone wants to join us! 

[LMaxwell]

If you owe the bank $5000, that's your problem. 

 

If you owe the bank a Few Billion, that's the banks problem. 

 

As long as revenue is coming in, bookings/deposits remain strong, and cruise lines can adequately service their debt load, lenders will be happy to allow refinancing and kicking the can down the road. They aren't looking to force any company out of business or into BK. The financial institutions want absolutely nothing to do with maintaining a fleet of ships let alone trying to ham fistedly run them. It is in their best interests, no pun intended, that they do what is necessary and reasonable to assure the viability of the cruise lines. While cruise lines situations are not ideal, I don't see any as being dire or urgent. If I did...I certainly wouldn't put a deposit with one. 

 

No lender has recently shown any tightening up or calling of loans. Yes, there was a lot of lose revenue and pain the past few years, but it seems like they are moving too aggressively to make it up RIGHT NOW. This may work in the short term, but markets are cyclical and demand always wanes. By cutting things now, cruise lines are setting themselves up for a bad time when or if the market swings and they need to compete on services and amenities to fill ships. Maybe that never happens, but that would be a brutal spot to be in. They've been there before. 

 

Why assume things need to get worse to get better? Sometimes they need to get better to get better. If I can only afford 4 cruises a year instead of 6 due to other budgeting constraints, so be it. But I don't want it to be a coin operated cruise. And cuts around the ship impact suite level cruises whether directly or indirectly; if the core product suffers it doesn't convince me to spend more trying to make up for it. I know this is not popular thinking. But premium products need to maintain their premium level to survive. 

[Guest 4-2-N-8]

2 hours ago, C4HCG said:

I think we all know they have huge debt, and that they need a plan to get out of it. Seems they are trying a variety of things to start to try to manage this, increasing cruise fares, new charges, reducing menu at OVC, etc.  None of these are popular here (understatement 😁) but does anyone have any suggestions. It’s easy for us to criticise. And I know people here are not highly paid Celebrity Executives but I have sympathy for them, they face an almost impossible problem not of their making, all down to Covid.

Celebrity should buy Cruise Critic. Then, make more obtuse cutbacks thereby causing more Gripes Per Hour (GPH), which will lead to more advertising dollars coming into CC!

 

I say they should shoot for maximum GPH (short of throwing a rod, like in the Blues Brothers chase scene).

 

It's win-win!*

 

*Celebrity, my cut is 9% of increased revenue from this brainiac idea.

 

Problem solved.

 

Happiness and daydreams.

[BermudaBound2014]

@LMaxwell I do hear what you are saying and under normal circumstances, I absolutely agree that cutting to profitability does not have a proven track record of success. However...........

 

47 minutes ago, LMaxwell said:

As long as revenue is coming in, bookings/deposits remain strong, and cruise lines can adequately service their debt load, lenders will be happy to allow refinancing and kicking the can down the road.

 

 

Unfortunately, while revenue is coming in, RCL continues to lose money each day. They do not expect to return to 2019 loads until 2nd half of 2023.  They expect further losses of $1.30-$1.50 in the 4th quarter (actual figures will be released in 2 weeks). In other words, the hole keeps getting deeper.

 

Currently RCL is paying over 1 Billion a year in interest only and only 75% of the debt is fixed (raise eyebrow). I do agree that continuing to kick the can down the road is the current plan and maybe that will work, but I foresee restructuring on the table.

 

In the best of times (2019) RCL's operating income was 2 Billion. If they return to those profit levels today (which they aren't), more than half of that will be spent making interest only payments. No ability to actually pay down the debt. At no point in the history of the cruise industry has the cost of debt been so high.

 

https://presscenter.rclcorporate.com/press-release/171/royal-caribbean-group-reports-third-quarter-results-provides-forward-guidance-and-introduces-the-trifecta-performance-initiativenbsp/

 

 

 

For those asking about the future plan, RCL calls it the "Trifecta program." You can read about it in detail the above link. I suspect we are currently seeing the 'strong cost control' part of the plan being implemented and IMO, it's highly unlikely these are the last of the cuts.

[rcrabb1513]

3 hours ago, NutsAboutGolf said:

 

Companies carrying massive debts is nothing new and there isn't a NEED to get out of it quickly

 

It seems what they're trying to do is to further differentiate the Retreat as it seems to be immune from the new fees and cuts

Stock analysts ("The Street") do not see it that way.  Why else are shares of RCL are down in the mid $50's and not rebounding back to pre-pandemic levels?  We aren't seeing a strong buy recommendation from any analyst for cruise corporation stocks in general.  The managers are rewarded for strong financial performance so it becomes a priority to increase margins and reduce debt.  RCL lost $43B during the pandemic shutdown and borrowed heavily to cover it.  They have inflation woes like us for fuel and food and increased wages to lure the needed staff to resume full operations.

 

I think (IMHO) the strong pent up demand from regular cruisers like us has emboldened the cruise lines to raise revenue and cut costs knowing most will whine and cry but pay it anyway.  First time cruisers will not have the knowledge of the way it was and book cruises. 

 

This behavior is not unique and land based vacation outlets are doing the same.

 

Until the time the vacation and recreation venues reach the price point and service cuts that hurt demand we can expect more of the same.

[C4HCG]

1 hour ago, NMTraveller said:

I have not found these challenges on my land based vacations.  I have noticed an increase in pricing.  I do not choose places that have a degradation in services.  I would have to say on my last land based vacation the staffing was very good and the food was also very good.  This was for a New Years Eve vacation so very recent.

 

Quality businesses continue to deliver quality products.

 

For these quality businesses I go back again and again and again.

We on the other hand have seen the same kinds of challenges being reported here. Just spent a week in London, same hotel as usual. Saw queues at the bar (understaffing and them seemingly not knowing what to do), rooms cleaned only on request, used to be daily, public areas looking untidy and unclean, certain drinks not being available. I respect your experiences differ but I think this is is a tourist industry rather than just a cruise industry issue, although I think the latter are feeling it harder.

[NutsAboutGolf]

4 minutes ago, rcrabb1513 said:

Stock analysts ("The Street") do not see it that way.  Why else are shares of RCL are down in the mid $50's and not rebounding back to pre-pandemic levels?  We aren't seeing a strong buy recommendation from any analyst for cruise corporation stocks in general.  The managers are rewarded for strong financial performance so it becomes a priority to increase margins and reduce debt.  RCL lost $43B during the pandemic shutdown and borrowed heavily to cover it.  They have inflation woes like us for fuel and food and increased wages to lure the needed staff to resume full operations.

 

I think (IMHO) the strong pent up demand from regular cruisers like us has emboldened the cruise lines to raise revenue and cut costs knowing most will whine and cry but pay it anyway.  First time cruisers will not have the knowledge of the way it was and book cruises. 

 

This behavior is not unique and land based vacation outlets are doing the same.

 

Until the time the vacation and recreation venues reach the price point and service cuts that hurt demand we can expect more of the same.

1. Is discussing cruise stock or any investments on cruise critic a good idea?  There are dedicated investment forums

2. Many on here already own the stock and have no plans on selling so they can enjoy the OBC

[LB_NJ]

Timeshare on your favorite ship.

[weregoingcruising]

5 hours ago, NutsAboutGolf said:

 

I've expanded the conversion that a corporation like RCG being in debt is not uncommon.  What are folks wanting to hear that they don't already know?  Pricing will continue to rise, executive compensation will continue to rise and products/services for passengers will decline

If this is happening what's your plan for future cruising?

[LB_NJ]

14 minutes ago, weregoingcruising said:

If this is happening what's your plan for future cruising?

Mine is to stop cruising/making future cruise reservations (there are alternatives) until service quality levels out and I can make an informed decision about whether I think the quality justifies the price.

[irvington]

6 hours ago, C4HCG said:

We on the other hand have seen the same kinds of challenges being reported here. Just spent a week in London, same hotel as usual. Saw queues at the bar (understaffing and them seemingly not knowing what to do), rooms cleaned only on request, used to be daily, public areas looking untidy and unclean, certain drinks not being available. I respect your experiences differ but I think this is is a tourist industry rather than just a cruise industry issue, although I think the latter are feeling it harder.

I posted in another thread, but I agree I am seeing worse downgrades in hotel stays, here in the US West Coast at least. The staffing shortage in hotels and restaurants is acute - short hours in restaurants and bars, eliminating lunch service, hotels that have dirty lobbies, no staff to clean rooms even on request. An aging workforce (which problem has been gathering steam for a while) and a desire for lower wage workers to avoid public-facing, service roles (both covid related and to avoid difficult customers) has gutted availability of workers. Health care is having the same problem.

[Arizona Wildcat]

9 hours ago, LB_NJ said:

US airlines used to do this and survived (eg United Airlines).  It is not always a last-ditch effort.  Hertz has some other problems, but bankruptcy helped them.

Suggest you look at the terms of the debt RCL issued.  The bondholders would end up taking over the company and common shareholders would be wiped out.  Maybe a look at who owns their debt issues too.

[eroller]

9 hours ago, LB_NJ said:

In my opinion it is very easy, reorganization through Chapter 11 of the United States Bankruptcy Code and continue to operate as debtor in possession corporation.

 

This allows the company to shed its crushing debt and operate more freely.

 

Out of curiosity can a major cruise corporation like Royal Caribbean file Chapter 11 under the US Bankruptcy Code?   The reason I ask is that Royal and all the other majors are not US companies.  They are incorporated outside the US which saves them a bundle financially.  I honestly don’t know how the US Bankruptcy Code works for non-US companies?  I’m thinking back many years and don’t recall a cruise line ever filing for US bankruptcy. I could be wrong on that but it would be interesting to know.  
 

I also know it’s a very complicated financial structure how each ship is financially managed.  Besides flying a FOC (flag of convenience), I believe each ship is somehow its own financial entity and registered as an LLC or something to that effect. 

Edited January 9, 2023 by eroller

[NMTraveller]

8 hours ago, mahdnc said:

 

That is true, but it would make us feel better.

What would make us feel better is seeing LLP and the board eating every night from their decimated buffet 🙂 

[LB_NJ]

21 minutes ago, Arizona Wildcat said:

Suggest you look at the terms of the debt RCL issued.  The bondholders would end up taking over the company and common shareholders would be wiped out.  Maybe a look at who owns their debt issues too.

I assumed the RCL stockholders would be wiped out. Pretty standard in almost any type of bankruptcy.

[mpdog42]

10 hours ago, NorthStarStateCruiser said:

I think what they are doing with the food is actually an intentional area they are focus on. It allows them an opportunity to increase customer satisfaction while reducing costs. They can increase the quality of the individual dishes served to guests by steering the majority of guests to what they are putting the most effort into, which appears to be the MDR. Adding a room service charge or reducing OVC dinner offerings, although unfavorable to some guests, steers passengers to what Celebrity is trying to push as their better food experience for guests to enjoy. They have much better control of food quality and guest experience in the MDR or specialty restaurants than in the OVC or via room service.

 

Their biggest concern is getting ships full rather than having guests pay more. The easiest way of doing this is by focusing on guest satisfaction to increase the repeat customer business.

Yeah....And I love you...Checks in the Mail....ETC....

[sportsphotos]

9 hours ago, BazingAu said:

I work at a large corporate travel company (billions in sales). Took on a ton of debt during the pandemic, and did not nickel and dime our customers after people/companies started returning to travel. Our executives and management all took pay cuts! We are a customer-first company and the approach that RCL takes versus those of the company I work for - it’s very evident that philosophy and corporate culture is completely different.

You may want to see if your company is on the PPE list and what they revived.  Companies received millions and millions of dollars.  

[LB_NJ]

13 minutes ago, eroller said:

 

Out of curiosity can a major cruise corporation like Royal Caribbean file Chapter 11 under the US Bankruptcy Code?   The reason I ask is that Royal and all the other majors are not US companies.  They are incorporated outside the US which saves them a bundle financially.  I honestly don’t know how the US Bankruptcy Code works for non-US companies?  I’m thinking back many years and don’t recall a cruise line ever filing for US bankruptcy. I could be wrong on that but it would be interesting to know.  
 

I also know it’s a very complicated financial structure how each ship is financially managed.  Besides flying a FOC (flag of convenience), I believe each ship is somehow its own financial entity and registered as an LLC or something to that effect. 

If the debt is US based, just means more money for the bankruptcy lawyers.  Maybe a couple more hoops to jump through for US bankruptcy.

 

I don't know specifically how RCL structures the ships.  However, the ships might be put in an LLC to protect and isolate the parent company from liability if the ship causes a problem with significant potential economic liability.

[NorthStarStateCruiser]

41 minutes ago, mpdog42 said:

Yeah....And I love you...Checks in the Mail....ETC....

I can't tell if you're being passive aggressive or just can't put together a discernable message. Please try again

[Ken the cruiser]

Just curious, but I wonder what the percentage increase in fuel prices for the cruise lines has been since they shot through the roof over a year ago? I’m sure those increases have also had a huge negative impact on their bottom line. I know here in Alabama diesel is still almost $5 a gallon.

Edited January 9, 2023 by Ken the cruiser

[LGW59]

16 minutes ago, Ken the cruiser said:

Just curious, but I wonder what the percentage increase in fuel prices for the cruise lines has been since they shot through the roof over a year ago? I’m sure those increases have also had a huge negative impact on their bottom line. I know here in Alabama diesel is still almost $5 a gallon.

Still hovering there in MA as well.  I think I read someplace that it can cost upwards of $10MILLION to fill er up, as it were.  With diesel prices they way they are, it's no wonder everything is so damn expensive, especially when it has to be hauled all across the country by the truck drivers.