Can Royal Caribbean Group Avoid Hitting a Debt Iceberg?

[bnurick]

Article link below.  Debt grew from $8.4B in 2019 to $19.4B in Q1 2023. This is the core reason behind the price increases and cutbacks beyond inflation, in my opinion.

 

https://finance.yahoo.com/news/royal-caribbean-group-avoid-hitting-195317905.html

[basenji56]

5 minutes ago, bnurick said:

Article link below.  Debt grew from $8.4B in 2019 to $19.4B in Q1 2023. This is the core reason behind the price increases and cutbacks beyond inflation, in my opinion.

 

https://finance.yahoo.com/news/royal-caribbean-group-avoid-hitting-195317905.html

That and the increased pent-up demand for cruising because of Covid.  And more people cruising because of more marketing.

[ezemoney]

Stock is doing pretty well !

[bikerunner]

Its all things have gone up and being cut in many industries.  Supply chain is still messed up, inflation overall, fuel prices, employees etc.  Its not just debt driving this.  Many more people are wanting to travel so higher demand, which is I think reaching its breaking point since more and more people I think are just running things on their CC and this is just going to create a huge fiasco soon

[Saturngrl]

I've posted before and will post again, there are numerous opportunities for Royal and Celebrity to eliminate waste without eliminating jobs or quaility of service.  I was asked if I worked for the cruise line on our last Reflection cruise, because I openly observed expensive waste.  The lines won't get ahead by cutting crew, by cutting items from the buffet or raising drink prices.   

 

Oh, how I wish they had a certified Lean professional working for them, like me!  

[bnurick]

19 minutes ago, basenji56 said:

That and the increased pent-up demand for cruising because of Covid.  And more people cruising because of more marketing.

Think the article summed up the issue.

 

7 minutes ago, ezemoney said:

Stock is doing pretty well !

 

Yes, maximizing shareholder value.
 

2 minutes ago, bikerunner said:

Its all things have gone up and being cut in many industries.  Supply chain is still messed up, inflation overall, fuel prices, employees etc.  Its not just debt driving this.  Many more people are wanting to travel so higher demand, which is I think reaching its breaking point since more and more people I think are just running things on their CC and this is just going to create a huge fiasco soon

 

Agree, which is why I said debt was an issue outside inflation pressures.  Companies with less debt are in better shape.

[Mr. Click]

On a recent cruise on the Summit our captain, Nigel Smith, was making the rounds in the MDR at dinner one night and stopped to chat with us.  We were happy to tell him how much we were enjoying the ship, the food, the staff, the whole package.  That lead to a discussion of Royal overall and what they are doing.  One of the key pieces to their plan for the future is keep making money, stay profitable and use the profits to retire the current debt that they took on during the pandemic and basically refinance it with new debt at a lower cost to keep growing the brand with new ships etc.  I raised the question about re-fi now with rates way up and he said that yes, during the pandemic money in general was cheaper but the cruise lines had to go begging lenders for help and the rates they had to pay to stay afloat where well above market and even with today's higher prime etc the company could save money with the re-fi.  What does this all mean?  it means RCI is well aware of their debt problem and working to resolve it. They are not just blindly blundering along and pocketing the profits.  We also talked at length about what they had to do just to get ships moving again with passengers onboard once things began to open up..  

[basenji56]

When a Hampton Inn costs more than $300 a night in a nice area, cruising is a relative bargain.

 

[bnurick]

8 minutes ago, Mr. Click said:

On a recent cruise on the Summit our captain, Nigel Smith, was making the rounds in the MDR at dinner one night and stopped to chat with us.  We were happy to tell him how much we were enjoying the ship, the food, the staff, the whole package.  That lead to a discussion of Royal overall and what they are doing.  One of the key pieces to their plan for the future is keep making money, stay profitable and use the profits to retire the current debt that they took on during the pandemic and basically refinance it with new debt at a lower cost to keep growing the brand with new ships etc.  I raised the question about re-fi now with rates way up and he said that yes, during the pandemic money in general was cheaper but the cruise lines had to go begging lenders for help and the rates they had to pay to stay afloat where well above market and even with today's higher prime etc the company could save money with the re-fi.  What does this all mean?  it means RCI is well aware of their debt problem and working to resolve it. They are not just blindly blundering along and pocketing the profits.  We also talked at length about what they had to do just to get ships moving again with passengers onboard once things began to open up..  

 

We are feeling their debt retirement plan. Not complaining, just stating.

[basenji56]

Bottom line:  Given the current stock price and fundamentals, don't buy Royal stock just to get $100-200 of onboard credit.  Consult a professional before investing.  

[bnurick]

6 minutes ago, basenji56 said:

When a Hampton Inn costs more than $300 a night in a nice area, cruising is a relative bargain.

 

Not being snarky, but picked a Friday night at Walt Disney World.  Kinda shocked.

  

[Baron Barracuda]

CCL announced yesterday they are refinancing over $1B of debt, reducing the interest rate to 7% from over 10%.   RCL did trim it's debt load by over $2B this year but most of the cash came from higher customer deposits, not operating earnings.  2q '23 was the first time RCL posted a quarterly profit since 2019.  Getting their balance sheet back in shape will clearly be a multi-year struggle.

[NutsAboutGolf]

15 minutes ago, Saturngrl said:

I've posted before and will post again, there are numerous opportunities for Royal and Celebrity to eliminate waste without eliminating jobs or quaility of service.  I was asked if I worked for the cruise line on our last Reflection cruise, because I openly observed expensive waste.  The lines won't get ahead by cutting crew, by cutting items from the buffet or raising drink prices.   

 

Oh, how I wish they had a certified Lean professional working for them, like me!  

 

It's basically been this way for decades but in many industries, its the corporate culture that needs to change

[NutsAboutGolf]

14 minutes ago, basenji56 said:

When a Hampton Inn costs more than $300 a night in a nice area, cruising is a relative bargain.

 

 

Pretty far from an apples to apples comparison as most don't cruise to US ports of call and there are also airbnbs which can be far cheaper than hotels.  There are some very luxurious land resort AIs that are extremely affordable in Caribbean

[hcat]

just curious..

Is there a figure on how many fcc are ourstanding from Covid cancellations?

We used ours last Nov.. not sure when they all expire.

 

they paid pretty hefty salaries to CEO etc  during Covid...what does the new CEO get paid?

[jwlane]

39 minutes ago, bnurick said:

 but picked a Friday night at Walt Disney World.  

Lowest season of the year?  1 person?

[bnurick]

4 minutes ago, jwlane said:

Lowest season of the year?  1 person?

You pick the date.  Number of persons doesn’t change the rate.  My favorite time of year to go…

  

Edited August 2, 2023 by bnurick

[Ex-Airbalancer]

59 minutes ago, Saturngrl said:

I've posted before and will post again, there are numerous opportunities for Royal and Celebrity to eliminate waste without eliminating jobs or quaility of service.  I was asked if I worked for the cruise line on our last Reflection cruise, because I openly observed expensive waste.  The lines won't get ahead by cutting crew, by cutting items from the buffet or raising drink prices.   

 

Oh, how I wish they had a certified Lean professional working for them, like me!  

They probably do, look at the way they are changing the butlers in SS and CS suites 😁

[Ex-Airbalancer]

45 minutes ago, bnurick said:

Not being snarky, but picked a Friday night at Walt Disney World.  Kinda shocked.

  

He did write a nice area 🤣

[Whinenowine]

1 hour ago, Mr. Click said:

On a recent cruise on the Summit our captain, Nigel Smith, was making the rounds in the MDR at dinner one night and stopped to chat with us.  We were happy to tell him how much we were enjoying the ship, the food, the staff, the whole package.  That lead to a discussion of Royal overall and what they are doing.  One of the key pieces to their plan for the future is keep making money, stay profitable and use the profits to retire the current debt that they took on during the pandemic and basically refinance it with new debt at a lower cost to keep growing the brand with new ships etc.  I raised the question about re-fi now with rates way up and he said that yes, during the pandemic money in general was cheaper but the cruise lines had to go begging lenders for help and the rates they had to pay to stay afloat where well above market and even with today's higher prime etc the company could save money with the re-fi.  What does this all mean?  it means RCI is well aware of their debt problem and working to resolve it. They are not just blindly blundering along and pocketing the profits.  We also talked at length about what they had to do just to get ships moving again with passengers onboard once things began to open up..  

I posted a few days ago that RCL should issue a large convertible bond--$2-3billion.  This would allow them to take advantage of their super hot stock (near all time highs) while also retiring double digit debt for something more like 3-4%.  Seems like a no brainer to me.

[cw2go]

1 hour ago, bnurick said:

Not being snarky, but picked a Friday night at Walt Disney World.  Kinda shocked.

  

You can't use "snarky" that's been my defense for months!!! 😆

 

I always feel misinterpreted and feel the need to clarify! 😜

 

Patty 

[cw2go]

1 hour ago, Saturngrl said:

I've posted before and will post again, there are numerous opportunities for Royal and Celebrity to eliminate waste without eliminating jobs or quaility of service.  I was asked if I worked for the cruise line on our last Reflection cruise, because I openly observed expensive waste.  The lines won't get ahead by cutting crew, by cutting items from the buffet or raising drink prices.   

 

Oh, how I wish they had a certified Lean professional working for them, like me!  

100% 

[Jeremiah1212]

1 hour ago, hcat said:

just curious..

Is there a figure on how many fcc are ourstanding from Covid cancellations?

We used ours last Nov.. not sure when they all expire.

 

they paid pretty hefty salaries to CEO etc  during Covid...what does the new CEO get paid?

 

Outstanding FCC's are .4 billion compared to 5.67 billion in regular customer deposits. COVID FCC's no longer expire. 

[Mr. Click]

2 hours ago, bnurick said:

 

We are feeling their debt retirement plan. Not complaining, just stating.

And all I was doing was relaying a conversation that we had with Captain Smith where he made some very good points about the current path that the company is on.  

[Jeremiah1212]

47 minutes ago, Jeremiah1212 said:

 

Outstanding FCC's are .4 billion compared to 5.67 billion in regular customer deposits. COVID FCC's no longer expire. 

 

Quoting myself for context - too late to edit. Interestingly, outstanding FCC's for the same quarter were:

 

2023 .4 billion 

2022 .6 billion 

2021 1 billion

 

A lot of that FCC was eaten up after the return to service between 2021 and 2022 then hit a wall between 2022 and today.