Royal Caribbean outgoing CEO Richard Fain told CNBC on Wednesday that 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 treasury business. It’s a capital intensive business, but once you have the ships they become cash cows, ”Fain said in an interview with“ Squawk on the Street, ”a day after Royal Caribbean announced. that he would resign as CEO on January 3. after more than 30 years at the helm.
Fain told CNBC he is convinced he is leaving the top post at a time when the cruise industry is picking up after being hit hard during the height of the Covid pandemic. Royal Caribbean CFO Jason Liberty will take over as CEO, while Fain will remain chairman of the board.
Miami-based Royal Caribbean last month reported lower than expected third-quarter revenue of about $ 457 million and a larger-than-expected adjusted loss of $ 4.91 per share. However, booking volumes have improved significantly in the quarter since this summer’s slowdown due to the delta variant. The company said departures for the year 2022 are booked within historical ranges and at higher prices than in 2019.
“This will generate the cash flow we need to pay down debt, reinvest in our technology, reinvest in our sustainability efforts, reinvest in our new ships,” Fain told CNBC on Wednesday as shares of Royal Caribbean slid about 1.5%. . For the year, the title gained more than 20%. “We have a huge chasm to cross,” he added. “But now it looks like we’re on the right track to get back to what we were before [Covid] and even better. “
In its third quarter press release, Royal Caribbean said it has long-term debt of nearly $ 19.9 billion, a 10% increase since the end of 2020.
With the reopening of international borders after the pandemic closures, European companies are expected to give the cruise industry a boost. “The United States is the dominant market, but international markets are growing even faster,” Fain said. “One of the things we’ve been very successful at is attracting Europeans to our ships in the Caribbean and attracting Americans to our ships in the Mediterranean.”
Fain said the cruise industry is clearly coming back and the way forward is very clear. “We are about to begin our new phase of growth,” he said. “As the borders begin to open, as we begin to relive, all of this is working in our favor.”