Royal Caribbean International CEO Richard Fain is very excited about where the brand currently sits, and what beckons in the future. With so many consumers seeking experiential memories and memorable customer experiences, Royal Caribbean is happy to assist in those departments.
At the beginning of the year, Fain sensed an intangible tone in the market that was “as good as or better than any time I could recall,” he said during Tuesday’s second-quarter earnings call. “This tone was hard to pinpoint or to define, but it gave us a very tangible sense that 2017 could be a particularly positive year. Since then, the outlook has only gotten better.”
During a normal year, there are many plusses and minuses that typically balance each other out, Fain noted.
“But this year, we are experiencing many more positive forces than negative ones,” Fain explained. “Part of this appears to be industry-wide. People have bought all the stuff that they need, and they're now looking towards gaining more experiences. Instead of buying TVs and cars, they seem to be buying memories as never before. Since we’re in an industry that specializes in providing great memories that trend plays to our sweet spot. Even better, the trend shows no respect for borders and seems to be occurring all around the world. Our sailings in the U.S., Europe, Alaska, Baltic, and Asia all demonstrate this marvelous phenomenon.”
All of Royal Caribbean’s brands are performing at a level unseen before.
“Our guest satisfaction ratings are at the highest point in our history, and they keep rising,” Fain said. “Some of this is driven by our wonderful new ships, such as Harmony of the Seas, Mein Schiff 6, Symphony of the Seas or Celebrity Edge, but much of it also comes from greater engagement by our officers and our crew. This is very much of a people business, and it is all about the people.”
What’s more, there are a few specific programs at Royal Caribbean that have proven very attractive in driving change.
“The first, of course, is our DOUBLE-DOUBLE,” Fain said. “This program has been extremely successful in galvanizing our entire workforce to a common set of goals. You all heard me say before that if we give our people focus and a clear vision, nothing stops them from achieving extraordinary results. The success of the DOUBLE-DOUBLE provides very tangible proof of that fact. For that, I extend to all of them my sincerest thanks. Remember, however, that the DOUBLE-DOUBLE was never just about 2017. It’s always been about positioning Royal Caribbean to the future.”
Royal Caribbean’s strategy to achieve a double-digit return on invested capital and double earnings per share within three years launched in 2014.
Fain said it’s clear that the program is accomplishing the company goal of rewarding those who book early while dis-incentivizing those who push for last-minute discounts. The key to this success has been consistency.
“We don’t do it only when it’s painless or convenient,” he added. “We maintain the program even when it hurts, and sometimes we have to let cabins sail empty. That goes against every one of our instincts, but the focus and the discipline have proven their value. Ironically, the program has been so successful that we’re now expecting to achieve a record load factor this year. That, in turn, causes slightly higher operating costs per lower berth, but obviously the bottom line impact is very positive.”