Covid-19 has placed Royal Caribbean Cruises under severe financial strain

14 May 2020 (Last Updated May 14th, 2020 16:18)

Covid-19 has placed Royal Caribbean Cruises under severe financial strain

Royal Caribbean Cruises has announced that the company is losing approximately $150m to $170m a month. Unsurprisingly, the company expects to incur a net loss for the 2020 financial year.

These figures highlight the financial strain that Covid-19 is putting cruise companies under and reinforces the need for cruises to get back up and running as soon as it is safe to do so. If Royal Caribbean continues to lose money at its current rate, it may be difficult for the company to survive the months ahead with little to no revenue.

Royal Caribbean Cruises also revealed that just under half of its customers have requested cash refunds for cancelled cruises with its operations currently suspended until 11 June. The company was holding $2.4bn in customer deposits at the end of March and on 30 April said that ‘approximately 45% of guests have requested cash refunds’.

A large number of customers asking for refunds is another economic blow to Royal Caribbean. In a time when any cash is of vital importance, having to return 45% of booking fees will put the cruise liner under additional financial pressure.

Reduced operating costs are leading the way in cost-cutting measures

Royal Caribbean has taken significant actions to reduce operating expenses during the suspension of its global cruise operations. Among other changes to streamline its business, the company has also significantly reduced marketing and selling expenses for the remainder of 2020, reduced workforce by approximately 26%, suspended travel for shore-side employees and instituted a hiring freeze across the organisation.

Scaling back operations is critical for Royal Caribbean in the current situation. It allows the company to save on costs that would otherwise be adding to its current predicament. However, the company needs to ensure that it is able to start operating efficiently as soon as travel restrictions are lifted.

River cruise operator A-ROSA has announced the resumption of sailings this month after German and Austrian authorities eased lockdown restrictions. The operator said sailings are likely to restart on selected departures on the Rhine and Danube on 31 May. This gives some hope to Royal Caribbean and the rest of the industry that cruises might make a widespread return earlier than expected. However, there are still many obstacles in the way that are preventing this.