In a conference call Monday morning with financial analysts, Royal Caribbean Group's chairman Richard Fain gave an introductory talk that provided insight about the cruise marketplace, his brands' approach to the COVID-19 (coronavirus) situation and other tidbits.
This call was in response to the release of Royal Caribbean Group's second quarter 2020 financial report, which Travel Agent published separately today.
“While it definitely seems like an eternity, it’s been five months since COVID-19 upended our lives,” said Fain. “Every one of those days has been a challenge to all of us on every level—the impact on us as individuals, as families, as businesses, probably most importantly as communities, has been profound and sometimes even humbling.”
He said that during the past months, the company has worked on scenarios that were “unimaginable for us just awhile ago,” citing complex arrangements for massive crew repatriations, the raising of capital to improve corporate liquidity and the development of new health/safe protocols, all while working remotely.
“It’s been and continues to be a monumental effort,” Fain emphasized.
Fain thanked the cruise company's shipboard and shore-side employees who've worked tirelessly over the past months to repatriate some 43,000 crew members home to some 90 nations across the globe.
Today, approximately 98 percent of the company's shipboard crew have been repatriated. He also thanked those crew members, noting that the "vast bulk of these people have been supportive and understanding during a real awful time for them and everyone else."
But as the company winds down its crew repatriation efforts, “I joke that by the time we get our last crew member home, we’ll have to start all over again [bringing them back to the ships]," he said. "Frankly, I can’t wait to welcome them back onboard when the time is right."
Finance and Legal
Fain stressed that the company's finance and legal teams have been working around the clock "to get us enough liquidity to get us through these extraordinary times." Royal Caribbean Group has thus been able to access the capital markets and to negotiate with governments, lenders, shipyard operators and owners to improve financial terms.
“While accessing capital and deferred debt payments are critical, another important liquidity action we can take is cash burn. To this end, our operating teams expect to have the whole fleet in their expected level of lay-up by the end of this month.”
In releasing its second quarter financial report today, the company said that its cash burn is approximately $250 million to $290 million per month during this prolonged suspension of cruising. Fain said the company is reviewing every single expense account to improve its cash conservation goals.
“On top of that, most our our capital projects have been delayed or cancelled because we don’t know how long it will take to get beyond this epidemic,” he said. “These are painful, but these are necessary decisions."
A Return to Service?
Since the crisis began, the company has extended its suspension of operations seven times, now through October 31 on most voyages, in line with CLIA's voluntary suspension of cruises by member lines.
"It’s fair to say that there is still a lot of uncertainty," Fain noted. "Against this backdrop, we will not rush to return to service until we are confident that we have figured out the changes that we must make to offer our guests and crew strong health and safety protocols with the enjoyable experiences that they rightly expect."
He said the company believes that the company’s healthy-return-to-service program will help get it there. That new program will focus on four key aspects:
- Upgraded screening of guests and crew prior to boarding
- Enhanced health processes and protocols onboard
- A special focus on addressing the destinations visited
- Procedures for addressing any reports of exceptions
Describing the response as "extremely complex,” he said Royal Caribbean Group—in cooperation with Norwegian Cruise Line Holdings—has assembled the expert Healthy Sail Panel, tasked with helping the companies develop comprehensive and multifaceted set of enhanced health and safety protocols.
In addition, Fain said the company recently created the position of global chief public health officer who will raise the company's standards for enhancing and implementing all the protocols and recommendations fleet-wide. “We want our measures to go above and beyond what’s expected," he said.
Ships can provide real challenges, and yet also real opportunities, "so, we are all looking at our ships with an open mind and an imaginative core," Fain said, noting that the group is reviewing every step of the cruising experience. He pointed to such enhancements as the new muster technology.
He said he sees other positive signs on the horizon related to COVID-19. That includes noteworthy advances in treatments, new drugs that are doing well in critical trials, ramped-up testing and tracing and progress on vaccine development.
"Never before has so much coordinated effort, resources, focus and technology been applied to solve such a problem," Fain noted. “But while COVID-19’s impact is significant, what hasn’t changed is the people—you, our guests and our employees are at the heart of this cruise line"
Bottom line? “We have been both “humbled and surprised by the amount of bookings we’re seeing for 2021 with literally no marketing efforts and, frankly, very little good news," he told the web audience.
Restating his philosophy that the revenue management is more an art than a science, Fain also added that "the tone of our bookings, especially as we get into the second half of 2021 has been encouraging.”
A Focus on People
Throughout the introductory remarks, Fain focused on people—the human element: “This pandemic and the steps that have to be taken to control it are causing massive pain and suffering throughout … disrupting our lives and our way of life. The impact on our society and our way of life is profound."
He stressed that the impact of COVID-19 will last long after the current crisis ends, and that while the company will get through the crisis, it must focus on doing so "in a manner that preserves the amazing attributes of cruising."
Fain said his parents’ generation was imprinted with the experiences of the Great Depression “and I think our current generations will be imprinted with the many experiences that are affecting us today."
He believes that the task at hand is make sure the response is appropriate and that he is confident the company was taking the right steps.
“Cruising has take the economic impact of the acute phase of this pandemic as hard as any industry I can think of," Fain said. "But we are ready to rejoin the rest of society in the recovery.”
In fact, once the cruise industry progresses beyond the acute phase, he believes that the experience of cruising has the potential to become one of the ways that society comes back together.
“Humans are social animals, and cruising will—in the near future—be able to offer people a meaningful and enjoyable way to safely fulfill this basic human need," said Fain. “People want to be together and we will be ready to welcome them onboard. And our bookings for next year indicate that our guests feel the same.”