Royal Caribbean Says Passengers Are Spending Big on Experiences

Cruise passengers are increasingly tapping into a trend that has been prevalent throughout the travel industry — the rise of experiential travel — and operators are reaping the benefits.

During a recent earnings call to discuss better-than-expected first quarter results, executives at Royal Caribbean Cruises said they are seeing passenger spending continue to shift away from merely buying things to experiences during their trip.

“What we are seeing is a switch to more experience-related revenue streams, and obviously we’re trying to leverage that,” said Michael Bayley, president and CEO of Royal Caribbean International, the company’s largest cruise line.

That includes spending on shore excursions, beverage packages, and high-speed Internet access — all the better to share those experiences on social media, of course.

Chief financial officer Jason Liberty said onboard revenue increased nearly 9 percent in the first quarter of the year; in 2016, onboard revenue was up almost 8 percent compared to the year before.

The company has been focusing on pre-cruise sales and packaging of deals, such as beverage programs, and has seen those efforts pay off, executives said.

Results were so good for the quarter — overall revenues increased 5 percent to $2 billion, and profits jumped from $99 million to nearly $215 million — that one analyst said investors were concerned “that this is as good as it gets.”

“What makes you confident that these trends can continue?” the analyst, Felicia Hendrix of Barclays, asked.

Richard Fain, chairman and CEO of Royal Caribbean Cruises, said the shifting demands of consumers were on the company’s side.

In the past, he said, asking someone what they wanted might get an answer like a flatscreen TV or better car.

“And now people really are seeming to say, this is the time I can spend with my family, this is the time I can develop memories that will last,” Fain said. “And I do think that is somewhat of a cultural shift, and I think we’re benefiting from that.

“And we’re working to supply the ships and the people and everything else that makes that happen. So I don’t think we’re seeing a sudden spike that makes this as good as it gets and we certainly will continue to do our best to take advantage of that what appears to be a cultural shift for us.”