Cruise bookings are soaring — and that means higher prices are on the way

Remember those $26-a-day cruise deals we saw a few months ago? They might not be coming back anytime soon.

Cruise line executives say bookings have been soaring since the start of "wave season" — the period beginning in January when large numbers of cruisers book trips for the year — and that means cruise brands will likely be able to raise prices in the coming months.

In fact, pricing for cruises is already on the rise, chipping away at what executives say is a large differential between the cost of a cruise and the cost of a land vacation when comparing like-for-like experiences.

"I'm encouraged by the ability now for us to increase our pricing even more, which I think will give us the opportunity to close that gap," Royal Caribbean Group CEO Jason Liberty said Tuesday during a conference call with Wall Street analysts.

Liberty said Royal Caribbean Group had experienced the seven biggest booking weeks in its history in recent weeks. This should contribute to occupancy on ships returning to normal levels by the spring and allow the company to raise the amount of revenue it brings in per passenger.

Royal Caribbean Group is the parent company of the world's largest cruise line, Royal Caribbean, as well as Celebrity Cruises and Silversea Cruises. It also owns a partial interest in German lines TUI Cruises and Hapag-Lloyd Cruises.

"We expected a strong wave season, but what we are currently experiencing has exceeded all expectations," Liberty shared.

Liberty and many other cruise industry leaders believe cruise vacations are currently priced at about a 30% discount or more to land-based resorts, the highest differential in the history of the business.

The differential, which executives for years said ran around 20%, widened during the COVID-19 pandemic as cruise lines weren't able to raise prices nearly as much as hotels, resorts and airlines, in part because they remained shut down for a large chunk of the pandemic.

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Related: Bookings for Icon of the Seas are on fire

In a research note in late September, Truist lodging and leisure analyst Patrick Scholes said his firm's proprietary data analysis showed that cruise fares at the six biggest cruise brands were down in the "low single digits" as compared to pricing levels in 2019, the last normal year before the pandemic.

Room rates at U.S. land-based resorts, by contrast, were up more than 25% from pre-pandemic levels at the time, he said.

Now that differential may be starting to reverse. In a research report released Wednesday, Bank of America Securities said pricing for Royal Caribbean Group sailings had increases 3.1% on average in just the month since its last pricing analysis. Pricing at other cruise companies was up, too, the firm said.

In addition to higher ticket prices, Liberty noted Royal Caribbean Group is seeing big gains in how much it makes from passengers once they're on board ships.

The company said the amount it's taking in per passenger from onboard spending was up 30% from 2019.

"I'm excited about what we're seeing on the onboard side, which also helps us close that gap," he said.

Royal Caribbean on Tuesday was the first of the three big publicly traded cruise companies to hold a quarterly conference call with Wall Street analysts since the start of wave season —and thus the first to officially comment on recent bookings trends in a major way.

Related: A line-by-line look at wave season offers

But some other cruise lines have signaled that wave season bookings are running strong, too.

Holland America recently said bookings in the third week of January were the highest on record for any January week in its history, which is notable considering the line downsized significantly during the pandemic. P&O Cruises and Aida Cruises also reported record booking weeks.

"Seeing this level of booking is a great sign for Holland America Line and for the industry," Holland America president Gus Antorcha said at the time in a statement. "Travelers are clearly excited to get back to cruising."

Holland America, P&O Cruises and Aida Cruises are three of nine brands owned by Carnival Corporation, which won't report quarterly earnings and discuss booking trends until March. The company also owns Carnival Cruise Line, Princess Cruises, Seabourn and Cunard Line.

Royal Caribbean Group's Liberty said the company was seeing particularly strong booking trends for North American-based sailings, which account for nearly 70% of its capacity for 2023.

"From a cumulative standpoint, these itineraries are now booked at the same load factor as they were in 2019 and at higher prices," he noted.

For the fourth quarter of 2022, Royal Caribbean Group reported occupancy levels across all its ships at 95%, which still is below normal. Cruise lines typically report fleetwide occupancies above 100%, something that is possible when more than two people stay in a cabin.

However, Royal Caribbean Group said Caribbean sailings in the fourth quarter ran at 100% occupancy, with holiday sailings at 110% occupancy.

Liberty suggested sailings in Europe also had begun booking at a more normal pace and at better rates than in the past — a notable development as bookings for Europe cruises were hurt in 2022 due to the effects of the war in Ukraine.

Related: The ultimate guide to picking a cruise line

While the recent strength in bookings initially was for North American itineraries, "we have been very happy to see over the past two or three weeks that elevated demand now move into Europe as well," Liberty said.

That's led to the company's brands raising prices for Europe sailings and, so far, consumers aren't flinching at the higher prices, Liberty suggested.

He noted the removal of COVID-19-related cruising restrictions in the fall of 2022 as a big factor in boosting Europe bookings and allowing for price increases, and he said the surge in bookings was coming from both veteran cruisers and newcomers.

"We're able to raise price across these different products and really [are] not seeing a pullback from the consumer as we continue to do so," he said. "And that is really a reflection of what we've seen since our last earnings call, or really since the announcement of the [COVID-19] protocol being dropped — just acceleration [in bookings] and the propensity to cruise ... has returned."

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