The Sunshine Economy: Royal Caribbean International CEO on Cruising, Customers and Cuba

Nov 21, 2016

During the Great Recession, the cruise industry canceled or postponed building and introducing new cruise liners trying to conserve cash as passenger traffic was hurt by the sour economy. Now, those ships are entering the oceans and many of them have South Florida ports of call.

 

Royal Caribbean International's Harmony of the Seas is the biggest of the new fleet. It docks at Terminal 18 at Port Everglades. Holland America Line’s biggest and newest ship, the MS Koningsdam also will call Port Everglades home. The Vista from Carnival and Regent’s Seven Seas Explorer are scheduled to dock in a few weeks at PortMiami.

 

It is a lot of activity for what already are the world’s leading cruise ports.

 

 

The Harmony of the Seas cost Royal Caribbean more than $1 billion. And while it conducted a few preview cruises in Europe – where it was built -- it sailed into South Florida in early November and has just arrived to its home port in Ft. Lauderdale.

 

That's where WLRN spoke with Royal Caribbean International CEO Michael Bayley. He describes business as "great" as he sits inside his company's biggest bet yet on the American cruise market. It sets sail as the American economy prepares for a new president, the Latin American economy has seen tough times and the Chinese economy, an important new market for cruise operators, is uncertain.

 

Here are excepts of the interview:

 

Royal Caribbean International CEO Michael Bayley onboard his brand's newest and largest ship, the Harmony of the Seas. In the background is the ship's 10-story dual waterslide.
Credit Tom Hudson

Where is business best?

This year we're seeing a upswing from the Latin markets. And bookings for 2017 are quite promising.

Is the worst over for Latin America?

Who knows? I don't have a crystal ball. The signs that we see are quite promising. We're seeing better bookings coming from from a lot of markets. Now, of course, recently after the election results the Mexican currency dropped (in value against the U.S. dollar). So that means that the price of our cruises to our Mexican customers increases.

Your European business?

We see it being quite good this year and looks like it will be quite good for next year.

China?

I think everybody will have to wait and see what really occurs. We have a good business in China. We've been in China for nearly a decade. We have been voted the best cruise line in China for eight consecutive years. We're quite committed to the market. We've been investing. So our hope is is that we'll continue on that path.

Royal Caribbean has been successful in raising ticket prices. Is that a trend you think the U.S. market can continue to sustain?

It's really about the relationship between supply and demand. During the summertime when everybody wants to go on vacation sometimes certain destinations become very popular and we've seen that this year. For example, a lot of our customers wanted to go to the Caribbean. We see Alaska has been very popular and we hope to see that continue. I think everything's really connected to a larger macroeconomic picture. If the economy's doing okay, if people feel good about how they're doing at work our their businesses, then they're more likely to say, "Hey, come on, let's go take a cruise and let's book a suite instead of a balcony." When the economy's good, business is typically good.

Any business impact from Zika?

We track in our call centers the reasons for calls that come in from customers and travel partners. We saw a spike up in a minimal way the calls that came in for Zika during that period where there was a lot of coverage. Then subsequently we've seen nothing significant. We've seen a few cancelations and I mean really a handful of cancelations. But, no, really no impact.

Does Royal Caribbean still want to sail from the U.S. to Cuba?

Yeah we would love to go. We actually brought a ship back from one of our sister brands last year called Empress of the Seas. We took the ship and revitalized it in preparation. But we're waiting. We have to receive (government) approvals. So we're waiting. 

If given the okay, will you sail from PortMiami?

Miami is certainly an option. We've also looked at Tampa and, of course, Ft. Lauderdale. It would be a Florida-based ship.

What is the business inspiration for making a $1.5 billion investment to build Harmony of the Seas?

How can we build something that really is the next generation of innovation? How can we create something that we say has the wow factor (so) when people come and experience it they say, "Wow, that's good." Then we start working backwards through the math of it all to see exactly what that's going to cost. Then we have to work through the economic model to make sure it's going to provide the kind of returns to our shareholders they

More than two dozen new vessels have hit the cruising market globally this year. What about the demand you're seen to absorb that kind of that kind of capacity?

I think it speaks to the quality of the experience and the value of the experience. We couldn't build these ships and we couldn't invest in these types of ships if there wasn't demand. We see that across all of the markets around the world.