Royal Caribbean Cruises is looking to go deeper into every market worldwide by offering passengers better holidays in an effort to drive up revenue and customer base.
Our penetration in all of these markets is much less than the potential
"Our penetration in all of these markets is much less than the potential," chairman and chief executive Richard Fain said, sitting in a suite on the company's newest cruiseship, the Symphony of the Seas. "The problem is going after the ones that are most under-penetrated."
Royal Caribbean's share of the US and Australian markets has "reached the most reasonable levels" but entry is lacking in Norway and the UK, and is "teeny" in continental Europe, South America and northern Asia.
More options
The world's second-largest cruise company hopes to win greater market share by offering more package activities and options — a strategy that Fain said has already increased revenue.
"Instead of buying every drink a la carte, you can buy a drinks package; instead of buying your air [fare] separately, we will buy it for you and package it with everything else," he said.
"People really like those packages so people are buying more things."
Royal Caribbean’s third-quarter revenue improved from $2.6bn to $2.8bn on higher year-over-year bookings, generating a $836m profit compared with $753m in the same period last year.
The company is also striving to generate greater passenger revenue by offering a "Next Cruise" booking service on the Symphony of the Seas.
“We’re seeing a huge increase in people who say, ‘I had such a great vacation, I need to plan my next one now’,” he said. “That has skyrocketed.”
Looking to China
Most cruise companies see a lot of future earnings potential in China — a country of 1.4 billion people — including Royal Caribbean.
"Today, there is still a high level of poverty numerically in the country, but you’re also seeing a very rapidly growing middle class," Fain said. "Given the sheer size of the population and the interest it has, it is very likely that it will become the biggest cruise market."
He said the fact that most of the nation's wealthy people live along the coastline provides an obvious convenience to the cruise industry.
"We think we have the best relationship with the distribution system in China, and of course it’s an enormous country," he said. "The most important thing today is getting the message out to the consumer, so we’ve been very aggressive to work with the travel agencies and the consumer in China."
Raising expectations
The push for more revenue and market presence comes at a time of great fiscal momentum as the company raised its 2018 earning-per-share forecast guidance range to $8.70 to $8.90, up from $8.55 to $8.75.
"The year’s been a little better than we expected, so we raised that level a little bit and we’re still on track to meet that heightened forecast," Fain said. "I think what’s really happening is our brands are firing on all cylinders and the economy is doing really well, which is driving all of us in a positive direction."
He said a big part of Royal Caribbean's success has been the shift in consumers wanting to spend their money on experiences rather than on things.
"Historically, people wanted a vacation for themselves and their spouse, and they wanted nice things," he said. "People’s expectations for spending their money is they want things that will enrich themselves. They want more experiences, they want more memories as opposed to five years ago, 10 years ago, [when] people wanted a flat-screen TV, a new car, new refrigerator."
