Royal Caribbean provides Update on COVID-19, Omicron Impact

06 January, 2022

Last week, Royal Caribbean Group—parent of Royal Caribbean International, Celebrity Cruises and Silversea Cruises—issued the following update for investors regarding the COVID-19 virus, the Omicron variant and cruise operations. Here's what the company had to say.

State of Flux

"Knowledge about COVID-19 and how to deal with it have been in a constant state of flux for the last two years. Omicronhas significantly altered the COVID-19 landscape for everyone, and the Royal Caribbean Group is no exception.

"As widely reported, the Omicron variant is significantly more infectious than its predecessors and has already become the dominant form of COVID-19 in the U.S. and elsewhere. Fortunately, Omicron also appears to cause significantly less severe symptoms than earlier variants, especially for people who are vaccinated. Cruising remains one of the few places one can vacation knowing that almost everyone you meet is fully vaccinated.

"The recent experience on Royal Caribbean Group ships is consistent with these observations. The numbers indicate an increase in people testing positive without a corresponding increase in people becoming ill."

The highlight of the Royal Caribbean statement—putting in concrete perspective the health/safety situation aboard ships was this: "Since cruising restarted in the U.S. in June 2021, the Royal Caribbean Group has carried 1.1 million guests with 1,745 people testing positive—a positivity rate of 0.02 percent."

Royal Caribbean's statement continued: "Furthermore, the vast majority of those cases had no symptoms or only mild symptoms, with only 41 people needing hospitalization. None of the Omicron cases have been severe or [no people] needed to be taken to a hospital. These figures are a result of almost everyone onboard having been vaccinated and having a negative test before boarding.

Moving Toward Endemic Not Epidemic

"Omicron is having a big short-term impact on everyone, but many observers see this as a major step towards COVID-19 becoming endemic rather than epidemic," said Richard Fain, chairman and CEO, Royal Caribbean Group. "We don't like to see even one case, but our experience is a fraction of the comparable statistics of virtually any other comparable location or industry."

The statement said that "few businesses are subject to such intense scrutiny, regulation and disclosure requirements by so many authorities, and we welcome that scrutiny because of our commitment to safety. We intend to maintain our goal of delivering the safest vacation on land or sea and will constantly adjust our procedures to accomplish this even in the face of Omicron's amazing transmissibility."

Dr. Calvin Johnson, chief medical officer for Royal Caribbean Group, emphasized: "The company is navigating through the ever-evolving information on the Omicron variant. Our case count has spiked, but the level of severity is significantly milder. We will remain nimble and in constant contact with health authorities."

Dr. Johnson noted that even before Omicron, the company had been giving all its crew members booster shots as they became eligible.

Load Factor Update

Following what it characterized as a recent "very strong 'Cyber' weekend," the company said that it had "experienced a decline in bookings and increased cancellations for near-term sailings but to a lesser degree than that experienced with the Delta variant." Load factors for sailings in the first half of 2022 remain below historical levels, as it had expected.

"However, sailings for the second half of 2022 continue to be booked within historical ranges, at higher prices with and without Future Cruise Credits(FCCs), with strong demand from the critical U.S. market," the statement revealed. 

The statement acknowledged that the travel industry is experiencing significant disruptions by air transport and other service providers due to the spread of Omicron. "Such disruptions are particularly impactful during the holiday season as the need increases and the labor supply is impacted by the current spike in cases," it said, acknowledging that similar issues were impacting the company's onboard service capabilities. 

In addition, at the time of this announcement, December 30, Royal Caribbean Group said it was experiencing service disruptions at select destinations. At that point to date, it had canceled or significantly modified 16 destination calls out of 331.

The company indicated that it expects these disruptions "to continue in the near term, but then decline as the world adjusts to the current trends."

Long Term Optimism

Fain concluded, "We are constantly learning and adjusting as Omicron appears to be ushering in a new phase in the fight against COVID-19. We expect these factors to have a negative impact in the short term but are optimistic they will lead us to a more pervasive but less severe health environment."

Bottom line? "Taken together, this should enable us to produce a strong transitional year in 2022 and a very strong 2023," he said.