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Royal Caribbean CFO details ‘record-breaking season’ for cruises

Royal Caribbean Group CFO Naftali Holtz joins Yahoo Finance Live to discuss company earnings, record-breaking consumer demand, profit growth, and the outlook for cruise line travel.

Video transcript

[AUDIO LOGO]

RACHELLE AKUFFO: Royal Caribbean reported a fourth quarter beat before the bell this morning with smaller than expected losses. The company noted that since the middle of November, it's recorded its seven strongest weeks of bookings in its history, and that's despite higher prices.

For more on Royal Caribbean's Q4 results, let's get to the company's chief financial officer Naftali Holtz. Thank you for joining me in this morning there. So talk about this quarterly report here. Clearly, investors, from what we saw what happened with the stock price reaction, very, very bullish on this forward guidance and what they've seen during that wave season in terms of what you've seen in those bookings since November.

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NAFTALI HOLTZ: Yes, good morning. First, it's great to be with you here on our beautiful Anthem of the Sea. And people are here. The ship is full. They're going to go on an eight amazing day vacation, including our Coco Cay private destination.

And you can see, everybody here is ready to go, very engaged. And it's really what-- a reflection of what we are seeing in the book of business. We're seeing very high demand, very robust pricing, and people just really engaged and wanting to consume those vacations and seek those with us.

So our bookings are accelerating at higher prices, as you said. We're continuing to close the gap to our revenue in 2019. And we're really excited about what's ahead for 2023.

RACHELLE AKUFFO: I mean, you're making us all quite jealous there. You're out there in the fresh air, enjoying yourself on that cruise ship, where I'm sure a lot of people want to be. In fact, you actually expect 2023 demand to outpace prepandemic levels. Now, is that still from pent-up demand or from people looking for, perhaps, more value in their travel? What do you attribute that to?

NAFTALI HOLTZ: Yeah, so since a few quarters ago, we really saw an acceleration in demand. It's a combination of people just shifting their preferences for purchasing things to seeking experiences. Well, that's good for us. We're clearly in the experience business.

Our value proposition remains very, very strong and very attractive, we think too attractive. So we're working to close that gap. And to just want to explore and get out there and seek the world-- and we're here to make those dreams happen.

RACHELLE AKUFFO: I also want to look at this forward-- the guidance you have for full-year earnings per share of $3 to $3.60 in 2023, so still some upside definitely to go there. Where do you think that growth is going to come from after this wave season, which wraps up in March?

NAFTALI HOLTZ: Yeah, so we had a very strong-- has been experiencing very strong wave season. It's an important booking window for us. We can't describe it anything other than a record-breaking season for us. So our bookings are significantly higher than 2029-- or 2019. We are getting back to our normalized occupancy levels at higher prices. So that obviously carries through to the revenue line.

And we have more ships in the water. So we can offer better vacations. They're newer ships. We have significantly more activities on board. In the same time, we are very actively managing costs in what is a very challenging operating environment.

So the combination of us growing our yields, growing our revenue, and controlling costs get us to a place where we are continuing to grow and increase our earnings. This was, we're expecting, the first profitable year since 2019. So it's a big milestone for us. And we're working really, really hard to get back to what we had in 2019 in terms of earnings. And we're very excited about what's ahead.

RACHELLE AKUFFO: And we knew that margins was really going to be the theme of the earnings season. How has your team been able to manage costs in this environment?

NAFTALI HOLTZ: Yeah, so the culture of our-- and the cost outlook that you see is just a reflection of our culture. It is continuous innovation and continuous improvement. We've been working for over two years to basically reshape our cost structure because we knew that when we are coming back into service, we will need to be leaner and making sure that we're more efficient because we obviously had to raise debt and capital.

And we need to make sure that we're generating more cash flow and more margin. So we've been working at it for two years, really across all the categories, really finding ways to be more efficient and better manage the cost while really focusing on making sure that we are delivering on the guests' expectations. And the reflection of what you see is that hard work of our teams for a very, very long time.

And we will continue to do that. And we're finding ways every day to try to do a little bit better and a little bit better. And that's really what we're focused on.

RACHELLE AKUFFO: It certainly has been a tough time, obviously, for the cruise industry. So good to see that route to profitability ahead. A big thank you there, Royal Caribbean's Chief Financial Officer Naftali Holtz. Thank you for joining me in this morning.