Jason T. Liberty
President Chief Executive Officer and Director at Royal Caribbean Cruises
Thank you, Michael, and good morning, everyone. Before we begin today, I would like to first acknowledge the devastating events taking place in the Middle East. The horrific terrorist attacks on Israel over two weeks ago have no place in a civilized society. Scale and the barbarity of those attacks should shock us all and brings a situation in the Middle East to a very dangerous low. We are heart broken at the loss of so many innocent lives then and in the war that continues to this day. Our thoughts are with all who have been impacted, including many members of our own team.
I would also like to recognize the incredible effort from our shoreside teams and crew on board Rhapsody of the Seas who have been working tirelessly with the US Department of State to help safely evacuate Americans from Israel. My heartfelt gratitude goes out to all involved. As it relates to the impact of these events on our business, about 1.5% of our capacity in the fourth quarter had planned to visit Israel.
Most of the impacted deployment was quickly adjusted including a few sailings that were home porting and Haifa. The evacuation services Rhapsody of the Seas were provided pro bono to the US government, and these costs are included in our financial forecasts, combined with canceled and adjusted itineraries in the region for the remainder of the year, the impact amounts to about $0.05 in earnings per share.
Now moving on to the business. Our teams have done an outstanding job delivering on another strong quarter as we delivered a yield improvement of close to 17% and beat the midpoint of our EPS guidance by 12%. This beat is further solidifying 2023 as a banner year in positioning us extremely well for 2024 and beyond. I want to thank the entire Royal Caribbean Group team whose enthusiasm and dedication enables us to deliver the very best vacation experiences responsibly, while generating strong financial results.
During the third quarter, all key itineraries exceeded our already elevated expectations as we delivered a record 2 million memorable vacation at exceptional guest satisfaction scores. As you can see on slide three, we had record yields for the quarter driven by new hardware, record pricing in the Caribbean and Europe as well as onboard revenue rates that were up about 30%.
While the performance of our Caribbean itineraries has been excellent throughout the year, we were particularly pleased with the double-digit yield growth achieved on our European itineraries in the third quarter.
As we look to the full year, the strong performance in the third quarter and continued
Acceleration in the booking environment is positioning us well to deliver over
13% yield growth for the year and earnings per share that is twice our original guidance for the year.
The unprecedented acceleration in demand and pricing for our leading brands, combined with stronger demand for onboard experiences were certainly the main drivers of our outperformance. Adding to that, our strong focus on cost has been an important contributing factor to our elevated 2023 results.
Healthy demand environment is very encouraging as we continue to build the business for
2024 and beyond. A year ago, we announced a three-year financial performance program, Trifecta. Our teams have rallied around the Trifecta targets, focusing on generating strong
Quality demand, enhancing margins building for the future and most of all, delivering the best vacations in the world.
As you can see from our results, we are well on our way to achieving Trifecta. Our proven formula for success remains unchanged moderate capacity growth, moderate yield growth, although I would not describe this year as moderate and strong cost controls lead to enhanced
Margins, profitability and superior financial performance.
As I've said in the past, Trifecta creates a pathway back to what we internally describe as base
Camp. However, base camp is not our final destination, and our ambitions go well beyond it. As we think about 2024 for the Royal Caribbean Group from a consumer demand standpoint, we look to both macro trends and data points from the millions of daily customer interactions.
On a macro level, some of the economic indicators continue to provide some conflicting signals. However, when we look closer at these trends and indicators related to our customers and their related behaviors and strong propensity to cruise, we see that many of these macro indicators are less relevant to our business.
We have more than 130,000 guests sailing on our ships every day and millions more who
Book or engage with us throughout our commercial platforms where we continue to see across all markets, brands and products is an exceptionally engaged consumer that is looking to book their dream vacations with us.
The position of our brands attract guests across broad demographics, psychographics and had a median household income of at least $125,000. Our customers' sentiment is bolstered by strong labor markets, high wages, surplus savings and elevated wealth levels. Even better for us is the fact that overall spend on experiences continue to grow and is currently up 25% compared to 2019, with twice the amount spent on goods.
Cruising remains an exceptional value proposition with strong demographics and secular tailwinds, allowing us to outperform the broader leisure travel industry. Our goal is to further narrow the gap to land-based vacations as we attract even more satisfied customers to our vacation ecosystem. I believe that is why when people are raising concerns in other industries like hotel, airline, real-estate.
Our commercial apparatus is firing on all cylinders with visits to our websites in the third quarter, doubling that of 2019.
Our travel partners are also delivering meaningfully more bookings than 2019 levels and even beating our elevated expectations. Our brand's global appeal and nimble sourcing model allows us to attract the highest yielding guests and partially mitigate the impact from the stronger dollar.
Now I'll focus on 2024, which is shaping up to be another incredible year for the Royal Caribbean Group. Our capacity is growing by 8% and our deployment across markets is relatively consistent with 2023 with slightly more Caribbean, slightly less Europe and a return to China for the first time in four years.
Demand for 2024 has continued to accelerate with bookings consistently outpacing 2019 levels by a wide margin. This has resulted in a book position that is ahead of all prior years at higher rates further positioning us for another year of strong yield and earnings growth.
While still early, we anticipate making significant progress towards our trifecta goals in 2024. And based on current fuel FX and interest rates, we anticipate earnings that will start with at least a $9 handle.
Our operating platform is larger and stronger than it has ever been with the best brands, the most innovative fleet and destinations and the best people. Each of our brand is the leader within their category. World Caribbean International dominates the contemporary market, Celebrity Cruises has redefined the premium travel space and no one delivers ultra-luxury and expedition etsy like Silversea.
By combining their unique strengths, we have created an attractive vacation ecosystem in which the sum is greater than the parts. Essentially, we are turning our delivery with vacation of a lifetime into a lifetime of vacations.
We will continue to ensure that each brand has what it needs to continue doing what it does best, leveraging our enhanced commercial capabilities to capture and keep customers in our ecosystem from young families to empty nesters and they seek to return to us time and time again for the best vacation experiences.
Our innovative new ships and onboard experiences allow us to continue to differentiate our offerings as well as deliver superior yields and margins. In August, we welcome Silver Nova the first of the new evolution class for our Silversea brand.
In the next few weeks, Celebrity Cruises will take delivery of Celebrity Ascent. And Royal Caribbean International will take delivery of the game-changing Icon of the Seas later this quarter with revenue sailings beginning at the end of January.
In 2024 we plan to take delivery of Utopia of the Seas for Royal Caribbean International and Silver Ray for Silver Sea. With each new ship, we raised the bar in the travel industry while enhancing what our guests already know and love.
Also debuting in January 2024, just in time for the arrival of Icon of the Seas is Hideaway Beach. Hideaway Beach is our newest adult-only ultimate Beachfront Paradise at perfect Day at CocoCay. Pre-crew sales for Hideaway Beach and premium offerings are exceeding our expectations.
We are further enhancing our commerce capabilities to optimize our distribution channels, build even more customer loyalty and lower our acquisition costs. We have seen a significant increase in new to brand and new-to-cruise customers this year.
In fact, in the third quarter, approximately two-third of our guests were new to cruise or new to brand, all while also doubling the repeat booking rate, indicating strong loyalty and satisfaction.
We have continued to remove friction and make it easier than ever for guests to pre-book their activities with about one-third of those purchases now coming through the mobile app. In the third quarter, about 70% of guests made pre-cruise purchases at much higher APDs than in prior years. In the third quarter, customers who purchase onboard experiences before their crews spend 2.5 times more in those who only bought one on board.
As we look into 2024, we have booked over double the amount of pre-cruise revenue compared to this year with more guests engaging before their crews and at higher prices. We will continue to excel in the core and drive business excellence in order to increase yield and capture efficiencies across our platform.
I said it before, but it's worth mentioning again, our formula for success remain unchanged. Moderate capacity growth, moderate yield growth and strong cost controls will lead to enhanced margins, profitability and superior financial performance.
Our sustainability ambitions help inform our strategic and financial decisions on a daily basis, ensuring that we always act responsibly while achieving our long-term profitability goals. We are making progress on our SEA the Future commitments to sustain the planet, energize communities and accelerate innovation.
We are also progressing toward a double-digit reduction in carbon intensity versus 2019 by 2025 and are exploring multiple options for low carbon-based solutions for our existing fleet, while design the fleet of the future with flexibility in mind.
This past quarter, we concluded a 12-week biofuel trial program in Europe, a first in the industry to cover multiple fuel types in multiple operating areas. The trials resulted in a 20% carbon reduction while also helping to better understand supply chain dynamics. The decision that we are making now will help position us to deliver a net-zero ship by 2035 and achieve our climate strategy of Destination Net Zero.
Our business is performing exceptionally well, and we are making significant progress towards achieving Trifecta goals. The future of the Royal Caribbean Group is bright with our strong platform and proven strategies, we are creating a lifetime of vacation experiences for our customers, while also delivering long-term shareholder value that allows us to reach new financial records.
With that, I will turn it over to Naftali. Naf?