Key Takeaways

  • Royal Caribbean missed its earnings and revenue forecasts.
  • The company did not report on its occupancy rate, a measure of the amount of available passenger capacity, or cabins, being utilized.
  • Royal Caribbean expects to have 80% of its capacity back in service by the end of 2021.
Royal Caribbean Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Miss -$5.06 -$4.34
Revenue Miss $50.9M $149.5M
Occupancy Rate N/A Not reported 49.0%

Source: Predictions based on analysts' consensus from Visible Alpha

Royal Caribbean (RCL) Financial Results: Analysis

Royal Caribbean Group (RCL) reported Q2 FY 2021 earnings that missed analyst expectations. The company posted a bigger adjusted loss per share than expected by analysts. It marked the sixth straight quarter of adjusted losses per share. Revenue for the quarter fell well below analyst estimates, plunging 71.0% year over year (YOY). Unlike in the first quarter, Royal Caribbean did not report its occupancy rate in its Q2 earnings press release. The company's shares were relatively flat in pre-market trading. Over the past year, Royal Caribbean's shares have provided a total return of 57.2%, above the S&P 500's total return of 34.3%.

RCL Occupancy Rate

While Royal Caribbean did not provide data on its occupancy rate for the most recent quarter, the rate was 37.7% in Q1, which was down significantly from the rate of 103.0% in the first quarter of FY 2020. Analysts expected the most recent quarter's occupancy rate to be 49.0%.

Royal Caribbean's occupancy rate, which it refers to simply as "occupancy," is calculated by taking the number of passengers carried during the measurement period, multiplying that by the number of days of the passengers' respective cruises, then dividing by the available passenger capacity, as measured by available passenger cruise days (APCD). The measure of capacity assumes double occupancy per cabin, which is why occupancy rates greater than 100% are possible—sometimes cabins are occupied by more than two passengers.

The onset of the COVID-19 pandemic last year brought the cruise industry to a near halt. The number of passengers taking cruise vacations fell dramatically, but so did the available capacity of cruise ship operators. Thus, Royal Caribbean was able to maintain relatively high occupancy rates despite the severe drop in the number of passengers aboard its ships. However, as cruise operations have begun to resume this year, consumer demand appears to be lagging the company's capacity that is being made available. Royal Caribbean said that it expects to have 80% of its capacity in service by the end of 2021.

Royal Caribbean noted that it received about 50% more new bookings during the second quarter compared to the first. As of the end of Q2, the company had approximately $2.4 billion in customer deposits, an increase of $530 million from the end of Q1. One of the biggest risks going forward is the faster-spreading Delta variant of the coronavirus.

Royal Caribbean said that, due to the significant impact of the pandemic, it could not make reasonable estimates about future financial or operational results. It does, however, expect to report a net loss in the third quarter as well as for the full 2021 fiscal year. Royal Caribbean's next earnings report (for Q3 FY 2021) is estimated to be released on Oct. 22, 2021.