Royal Caribbean outgoing CEO Richard Fain told CNBC on Wednesday the company is seeing historically strong bookings for next summer and plans to use the cash flow to pay down debt and reinvest.
“[The cruise business] has always been a cash flow business. It’s a highly capital intensive business, but once you have the ships, they become cash cows,” Fain said in an interview with “Squawk on the Street,” one day after Royal Caribbean announced that he’s stepping down as CEO on Jan. 3, after more than 30 years at the helm.
Fain told CNBC he’s confident he’s leaving the top job at a time when the cruise industry is picking back up after having been hit hard during the height of the Covid pandemic. Royal Caribbean’s chief financial officer, Jason Liberty, will take over as CEO, while Fain will remain as chairman of the board of directors.
Last month, Miami-based Royal Caribbean reported lower-than-expected revenue of about $457 million for the third quarter and a wider-than-expected adjusted loss of $4.91 per share. However, booking volumes improved significantly in the quarter since the slowdown this summer due to the delta variant. The company said sailings for full-year 2022 are booked within historical ranges and at higher prices than 2019.
“That will generate the cash flow that we need to pay down the debt, to reinvest in our technology, reinvest in our sustainability efforts, reinvest in our new ships,” Fain told CNBC on Wednesday as shares of Royal Caribbean were sliding roughly 1.5%. For the year, the stock has gained more than 20%. “We have a huge chasm to get over,” he added. “But now, it looks like we’re well on the way towards getting back to the way we were before [Covid] and even better.”
In its third-quarter release, Royal Caribbean reported having nearly $19.9 billion in long-term debt, a 10% increase since the end of 2020.
With international borders reopening after pandemic closures, business from Europe is expected to give the cruise industry a bump. “The U.S. is the dominant market, but the international markets are growing even faster,” Fain said. “One of the things we’ve been very successful at is attracting Europeans to come on our ships in the Caribbean and attracting Americans to go on our ships in the Mediterranean.”
Fain said the cruise industry is clearly coming back and the pathway forward is very clear. “We’re about to be starting our new growth phase,” he said. “As borders begin to open up, as we begin to live life again, all that works in our favor.”