Royal Caribbean Hints Virus Tests Could Come to Cruises (And Much More)

A COVID test before you board a cruise ship?

Given the well-documented issues with testing around the country, it seems like a pipe dream. But there was at least a mention from Royal Caribbean Group that testing could be coming to your next sailing.

Royal Caribbean's Mariner of the Seas in Nassau

Some cruise lines have returned to sailings outside of the United States and already COVID cases have been reported on board. This is obviously not what anyone — passengers, crew, cruise lines, or governments — wants to see with a return to sailing.

Short of a vaccine, however, testing passengers before and during the cruise seems to be the best method to limit any potential cases being brought on board.

While it’s by no means guaranteed, company executives at Royal Caribbean Group hinted that testing was a possibility when they provided an update on the business during a quarterly conference call with investment analysts.

In addition, the cruise company also provided insight into other interesting aspects of its business, including that demand is showing promising signs, possible ship sales in the future, and more.

Here’s everything we learned in the latest call…

Testing Could Come to Cruising

Perhaps the most interesting question posed by analysts during the call came right at the start of the question and answer session.

Robin Farley, an analyst at UBS inquired about the possibility of testing cruisers:

“Some of the protocols that cruise lines in Europe have put out, there is one cruise line saying that they will test guests before boarding and some other lines that haven’t said that. Just wanted to get your take on whether that is something that can reasonably be done for U.S. passengers before boarding.”

While executives failed to commit, they certainly made it sound possible.

“With regards to the protocols, I think certainly testing seems to be very relevant and discussions are underway,” said Michael Bayley, CEO of Royal Caribbean International.

“As Richard (Fain) had mentioned earlier, we have a degree of confidence in the panel that we’ve formed, and all of our protocols are currently under review with the panel. So testing is part of the thinking, but we have not yet reached a point in our protocols where we’re ready to publish and release for discussion. But it’s very likely that testing will occur.

“We’re also seeing in discussions with multiple destinations around the world, which is another component of the return to service, particularly as it relates to the Caribbean, that testing is very much at the forefront of how people are thinking about protocols for returning.”

Ship Sales Are On The Table

Ship sales have been big news in cruising as a few lines have scrapped or sold off ships from their fleets. We reported that one Royal Caribbean ship — Rhapsody of the Seas — is actually listed for sale, despite being available for bookings well into the future.

In a question posed by one analyst, the executives were asked directly about future ship sales. Their response certainly sounds like ship sales could happen.

“We’ve been really fortunate over the years to be able to sell ships,” said Jason Liberty, CFO of Royal Caribbean Group. “Typically our philosophy on it is if we don’t think we have a good plan for that ship for it to be generating sizable returns, or it’s difficult to make it a strategic fit to our brand by modernizing and so forth, we have looked to sell the ships.

“Certainly in this time we are evaluating opportunities to sell ships or to take other actions with ships.”

The Company Hopes to Have Its Health Recommendations Soon

Royal Caribbean made news when it partnered with Norwegian Cruise Line to create the “Healthy Sail Panel.”

This group of experts, which includes former Utah Governor and Secretary of Health and Human Services Michael Leavitt and Dr. Scott Gottlieb, the former Commissioner of the FDA, aims to create a set of policies and procedures to sail again safely in this new environment.

The panel has already been at work, and the company said it hopes to have the plan at the end of August to submit to the CDC.

One thing executives stressed, however, is that the panel’s work is not done once the plan is submitted. In fact, they expect their plan to be continually revised as the pandemic plays out and more is learned about the virus. In fact, the initial contract for the Healthy Sail Panel is two years.

Cases Are Driving Bookings

Another interesting point from the conference call seems obvious, but is interesting nonetheless. Royal Caribbean is seeing a direct link between bookings and COVID cases in a location.

“Certainly when anxiety is relatively high due to COVID, then bookings decrease in relation to how anxiety is heightening,” Bayley said. “What we see is the direct correlation between what’s occurring in the state that they (customers) live in and how optimistic they are, and that of course translates into how we see the bookings coming in.”

So who is booking those cruises?

According to the call, the company is seeing that “younger customers were more inclined to be booking” but they also saw “huge response from loyalty customers.”

In fact, this seems to coincide with a recent survey from Cruzely. There, we asked more than 1,500 past cruise passengers if they would sail again once cruises resume. More than 4 out of 5 responded with a “yes” and many more said at least “maybe.” Only one percent said they would not sail again.

Bookings for 2021 Look Solid Given the News

Several times executives mentioned that bookings for the cruise lines were strong given the circumstances, especially in the second half of next year.

In a press release, Royal Caribbean said the following:

“Although still early in the booking cycle, the booked position for 2021 is trending well and is within historical ranges. The Company has implemented various programs to best serve its booked guests providing the choice of future cruise credits (“FCCs”) or the opportunity to “Lift & Shift” their booking to the same sailing the following year in lieu of providing cash refunds.

“For the booking period since our last business update, approximately 60% of the 2021 bookings are new and the rest are due to the redemption of FCCs and the “Lift & Shift” program. Pricing for 2021 bookings is relatively flat year-over-year when including the negative yield impact of bookings made with future cruise credits; it is slightly up year-over-year when excluding them.”

In other words, whenever cruising does get back to sailing, it looks like there will be no problem filling up the ships.

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