SS/RCCL Finances: Improving, Options, Questions??!!

[brimary]

            UK CruiseJeff ........Agree with your excellent summary of the uncertainties surrounding the future of cruising.This together with the lack of cash flow coming in to support the vast amounts being paid out as refunds together with the fact that the Cruising industry deals with differing regulations of countries throughout the world all with different policies can only have one result sadly for the cruise business.Hope this proves to be incorrect but at the moment cannot see how an industry reliant upon cash flow can survive without it.

[TLCOhio]

6 minutes ago, brimary said:

UK CruiseJeff ........Agree with your excellent summary of the uncertainties surrounding the future of cruising.This together with the lack of cash flow coming in to support the vast amounts being paid out as refunds together with the fact that the Cruising industry deals with differing regulations of countries throughout the world all with different policies can only have one result sadly for the cruise business.Hope this proves to be incorrect but at the moment cannot see how an industry reliant upon cash flow can survive without it.

 

Excellent comments, insights and follow-ups from UK Jeff and brimary including "Cruising industry deals with differing regulations of countries throughout the world all with different policies".  Yes, very good point about the many different countries and their varied rules and requirements.  We experienced some of that in late February and early March when sailing from New Zealand to Tahiti in the South Pacific.  Some of those islands closed up and/or imposed tighter requirements during our sailing. 

 

From CNBC cable commentator Jim Cramer, he had this headline: “The Buoyancy of Cruise Ships” with these opinion highlights: “We keep hearing the market's overvalued and doesn't deserve to be here. We've got only sporadic bankruptcies, mostly companies that have done ill-fated private equity deals, but for the most part the nightmares haven't come true and that's a huge part of this market's buoyancy.  At the heart of this market's Lazarus-like style is none other than the cruise ships, those alleged Covid-19 petri dishes that should have been "Exhibit A" of Great Depression II.  Today Royal Caribbean announced a $3.3 billion offering of senior notes. It's a private deal. We don't know who the buyers are.  Given the Royal Caribbean is burning $250 to $275 million a month, this paper seems like a fool's game to buy.  But that's wrong. Why? Because people love cruises. We are seeing bookings for next year surge, they are ahead versus where they were at this time. Some reports show a 600% increase in near-term bookings, because the companies are giving away great deals to woo people back. It's obviously working.  CEO Richard Fain must thrilled; his line lives to sail again. Norwegian Cruise Lines CEO Frank Del Rio told us on Mad Money that bookings were nicely ahead of last year at this time.”

 

Interesting viewpoint and comments by Jim Cramer.  But, how true, for how long with this supposed flood of new bookings?  From my range of feed-back, including in my "mature" category of experienced sailing veterans, that "love to sail" viewpoint is not that optimistic.  Had a key retired Cleveland newspaper editor tell me a couple weeks ago that although he had done ninety cruises, he was blunt in saying "There will not be a 91st cruise!"   Last night a very good friend made clear last night that there will not be any more cruises for him.  We had done long cruises with that friend for Norway, plus Australia/New Zealand. Maybe there is more optimism with those younger who have not traveled as much, but those two friends I cited seem to be very iron-clad in their "not sailing again" positions. I am open to sailing again, but there are many questions and conditions, especially with my wife.   

 

Full story at:

https://realmoney.thestreet.com/jim-cramer/jim-cramer-the-buoyancy-of-cruise-ships-15320041

 

THANKS!  Enjoy!  Terry in Ohio

 

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[alexandria]

To some extent what we may possibly see in the cruise industry is a self-fulfilling prophecy.  Those experienced and previously dedicated cruise passengers who are unwilling to book, predicting that cruise lines will not survive this crisis, and then we watch as the cruise lines do not survive this crisis.

 

Now I recognize that some are unwilling to book as they are fearful of the virus and lack the confidence or optimism that cruising will be a safe way to vacation when it resumes (as safe as any travel, recreation or social activity can be).

 

However, there are many others who have indicated that they do wish to cruise again but are unwilling to book because they lack the confidence or optimism that the cruise lines have the financial strength to resume sailing and therefore are fearful of suffering a financial loss.  And the more people who are fearful they will suffer a financial loss and refrain from booking, the more likely it is that cruise lines will not survive this crisis as a result of financial failure.

 

So to a large extent, whether or not the cruise industry survives will be a result of the confidence, or lack thereof, of those who have enjoyed cruising in the past.  While I respect the viewpoints of those who choose not to sail again or who want to "sit this one out" and wait to see what happens, I personally have the confidence that when Silversea resumes cruising, it will be as enjoyable as before and will be as safe as any other activity where one is interacting in society with others.  I don't have that same optimism about CCL branded ships (based upon my view of past bad behavior on the part of CCL).  Nor do I have that same optimism about the megaships of any of the cruise lines, including NCL and RCCL, unless some financially feasible strategy is employed to avoid the crowding of passengers and to maintain high standards of cleaning, sanitizing and hygiene.  But as far as Silversea and other brands with small ships, high space to passenger ratios and high crew to passenger ratios, I believe that cruising can and will resume.

 

Just my opinion, others may (and I'm sure will) differ.

[UKCruiseJeff]

Alexandria,

 

You are correct to start your theory with the phrase "To some extent what we may possibly see in the cruise industry is a self-fulfilling prophecy" because "To some extent what we may possibly see " is a great  mechanism to ensure that what is said cannot be possibly ever contradicted and cannot be anything other than true.  But that is where the wishful thinking should stop because to do anything other than project that forward as being anything more than an extremely minor influence on the survival of an industry would be an error because it might falsely reassure that all one needs to do is to reverse those that are negative about this and then all will be well.  In other simplistic words  if enough of the wishful thinkers carry on wishfully thinking then all will be well.  Cashflow is much more unforgiving than wishful thinking.  😉

 

The only thing you need to understand is what cash-flow is and how fragile it is in a highly-fixed cost industry that bleeds cash when last years spent revenue is being refunded.  But for the removal of any doubt, we agree so let's be clear about this.  There will be a lot of pent up demand for many who wish to cruise again.  But even if every existing customer all wished to do so, the capapcity that they will be will be able to select from when the industry "closed" sign is turned over to "open" will be substantially less each month because the opening capacity is increasingly compromised each month that more FCC paper is issued.  That is unless the cruiselines invoke the totally unfair but fairly obvious and sttractive mechanism of capacity controlling the amount of FCC and then cancelling  FCC paper when they are "expired" because customers failed to use them.   There is currently nothing preventing a cruiseline from doing it and nothing to stop them expiring FCC if the holder fails to find a cruise before the FCC expires.  And even those who agreed to take FCC rather than refunds in geographics with robust banking consumer protection ie UK, EU etc have absolutely no protection if that were to happen.  The banks will say "you bought a voucher and you got a voucher - tough".

 

In very simple terms if the industry locks down for just a few more months before revenue cruises actually start, then they will build up so much FCC liability that they will not be able to populate future cruises with enough new real cash revenue to give them any hope whatsoever of surviving the cash-flow challenfge unless they contort to cheat FCC holders.  And even that won't work if the closedown goes on much longer than just a few months.  Anyone who has felt rather than read about what cashflow means will "get this."

 

It is that algorithm that decides whether a cruiseline and/or industry will survive or fail rather than the self-fullfuiling prophecy of a few existing cruise customers.

 

[UKCruiseJeff]

Hi Terry,

 

I notice you haven't asked what might Jim Cramer's motives be considering his history ...... 😉

 

Jeff 🙂

[TLCOhio]

8 minutes ago, UKCruiseJeff said:

Hi Terry,   I notice you haven't asked what might Jim Cramer's motives be considering his history ...... Jeff 🙂

 

Excellent follow-up points and perspectives from both UK Jeff and Alexandria.  There are many "details" and aspects to consider as the "FUTURE" is attempted and played out.  Personally, I want to sail again and have some places in the world that I want to experience.  BUT, my wife, an RN, will not be shy as she raises legitimate questions and concerns as to where, when and how we explore.  

 

As to Jim Cramer, YES, he has had a long and somewhat checkered career with his various ups and downs.  As often happens with Wall Street types, there are always legitimate questions as to their motives, connections, conflicts, etc.  I just shared his viewpoint, not saying I believe it all.  It is impressive that he has two degrees from Harvard, including a law degree.  Cramer is very spirited and never seemingly in doubt. However, I would be very careful about betting too much on his tips, hunches and hopes.    

 

As alexandria wisely noted, not all cruise lines and ship are equally ready to adjust to the upcoming form of "new normal".  Silversea with its smaller ships and better space ratios could be better positioned for the future.  Maybe?  If and if??!!

 

THANKS!  Enjoy!  Terry in Ohio

 

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[UKCruiseJeff]

Terry

 

Jim theorises like someone who would like some safety in his 11% stock ..... 😉

 

Presumably if Mr Terry wants to cruise and Mrs Terry doesn’t then Mr and Mrs Terry do not cruise?!  That’s how things work in our gaff. 

 

The way of thinking about the smaller ships of Silversea is that each month that Silversea issues more and more FCC then when they open for cruising then from  a spend perspective they remain the same full expenses spend size as they are but from a revenue perspective each months delay makes them smaller and smaller and smaller from a revenue viewpoint. 

Edited May 17, 2020 by UKCruiseJeff

[Daveywavey70]

Observer, I would disagree. There are many “bargains” beginning to appear for next year. The industry has a huge task ahead to convince the unconvinced that it will soon  be safe to cruise again.  I Believe that we need to wait and see what happens. If cruise lines are forced to operate at reduced capacity (eg not using inside cabins) with social distancing in place then filling cabins won’t be as much of an issue as trying to fill ships whilst much of the population is reluctant to cruise for the fear of being confined/ stranded at sea. As difficult as this balance is between making up for lost revenue and encouraging people to return to cruising, many would not be willing to take the perceived risk and pay a premium to do so.

[TLCOhio]

On 5/17/2020 at 12:12 PM, UKCruiseJeff said:

Terry   Presumably if Mr Terry wants to cruise and Mrs Terry doesn’t then Mr and Mrs Terry do not cruise?!  That’s how things work in our gaff.  

 

Good question.  In our household, I am more "liberal" in wanting, being ready to go and seeking to travel.  My wife is more "conservative" and cautious, raising various legitimate questions, concerns, etc..  BUT, we mutually discuss these potentials and options.  She makes me "PROVE" the value and need.  She has been reasonably "tolerant" as WE make these decisions.  AND, things have worked out well and been very enjoyable in doing our various major adventures.  We have two other very good friends in different parts of the country where the female partners are much more like me in being "ready to go" and decide quickly. However, their husbands are both rather like more "stuck in mud" and slower to "get with it".  Different strokes for different folks??!!   

 

From the respected Bloomberg News source as shared by MSN.com today, they had this headline: “Behind Royal Caribbean’s Lifeline, a Shrewd Bond Market Maneuver” with these highlights: “Royal Caribbean Cruises Ltd. was in a quandary.  The company needed to raise money while its ships were docked and the bond market was open if Royal Caribbean was willing to mortgage ships as collateral. Royal Caribbean had plenty of ships to offer. The problem? S&P Global Ratings had slashed its credit grade to junk, and the cruise company was expecting Moody’s Investors Service to follow. With those downgrades came steep restrictions on how much of its assets could be pledged to bondholders.  Royal Caribbean ultimately found a new structure that would let it sell more than $3 billion of debt linked to ships without running afoul of restrictions known as covenants embedded in its existing debt documents. It sold half of the debt as a traditional secured offering, and gave investors priority guarantees in the form of ship stock pledges for the rest.”

 

Interesting details are provided by this Bloomberg story.  Clearly the Silversea owner now has cash.  What none of us know for certainty is as to how long this funding will last until service can be resumed.  And, as SS works off many of these credits given out, they might needed added chunks of cash.   This story includes these additional background details: "When Royal Caribbean began marketing its $3.32 billion offering last Wednesday, it said the deal was secured. But there was a catch laid out to investors as a footnote in deal documents: Only half of the bonds were actually backed by assets including 28 of the cruise liner’s ships worth around $12 billion."

 

Full story at:

https://www.msn.com/en-us/finance/companies/behind-royal-caribbean-e2-80-99s-lifeline-a-shrewd-bond-market-maneuver/ar-BB14duJD

 

THANKS!  Enjoy!  Terry in Ohio

 

 

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[UKCruiseJeff]

Hi Terry,

 

Yes, our method is much along the same lines although both of us hold the power of veto over stuff not fancied. The exception to that is if she really wants to do something and I don't we do it. Future trips to Singapore are an example. I hate 14 hours in the air even in F it is terrible. I fancy trying out the Singapore Airline suites so that might be the next trip if we ever make any.

 

With respect to the fund-raising stuff an idea I pondered was that instead of just offering customers refunds or FCC why not also offer them the chance to become “owners” by having a special ring-fenced issue. So my thoughts were that if you had say $10k credit it could be a refund, or FCC with the added loading, or you take shares to the value of $10k but you are also given say 4 coupons to the value of $10k.Say coupon 1 to 3 might be for $2k each and coupon 4 would be $4k. The benefit of this is that you would keep the cash in the company without any of the very heavy loaded FCC fuuture liability but you now also had a super loyal customer who is now an owner who has coupons to spend and who are looking forward to coupon 4. So you have some hope of selling 4 suites over the next few years for real cash rather than FCC - and you have the cash you got for their shares.  So it sort of feels as a customer like you get your cash back ie you have your cake and eat it. And now your an owner with benefits.

 

You'd form this into a Venetian type club – say “The Patrons Club” and you'd offer them a named concierge service. The added plus of that would be the saving of TA commission and your ability to really own your customer and keep really good personalised one-to-one marketing. You could offer them a two-week pre-release window for all cruises so they get to have the pick of all the suites. 

 

People overlook how expensive the agent route to market is. It isn't just the commission but you have a specialist trade sales and marketing force and management, trade point of sale material and incentives and expensive events amd you might be paying for expensive advertising to push potential customers to agents who switch sell to someone else because they happen to have a special incentive that month. I think this approach has a lot going for it. Instant owner loyalty, retaining the bookings funds as shares, coupons dragging along with it real incremental cash etc. I have always felt that luxury brands reap so many advantages when you use direct channels rather than agents.

 

What I also pondered was  I'd also think about is offering a programme for your competitors customers to buy in. Getting your compeitors bookings refunds to your own account would be really ironic and sweet and make their customers your new owners even if it did hack off and irritate  your competitors.  Survival of the fittest.  .  So you invite your competitors customers to take refunds and become RCI shareholders with the incentive coupons to make the shareholding feel like it's free. There would be some value dilution for existing shareholders but it's my sense that they might be relieved to have the holdings protected. 

 

I have always felt that really serious crisis sometimes often offers truly exceptional recalibration opportunities and this crisis approached this way might be a way of getting a whole lot of new bookings and also the chance to win a lot of cash that had been with your competitors bookings ledgers once the doors are open for business again.  So you've kept the cash, got some forward bookings more likely, you've got a heap of your competitors cash,  and you have a direct relationship without the agents involved. Wouldn't that be sweet.

 

Anyway … that was just some disjointed free-flow thoughts. 

 

Today has been really hot ..... and we were able to take our second ride out since lock-down loosened.  And tonight has been bears on Transalvanian bear-cam!

 

 

 

Edited May 18, 2020 by UKCruiseJeff

[Observer]

17 minutes ago, UKCruiseJeff said:

 

People overlook how expensive the agent route to market is. It isn't just the commission but you have a specialist trade sales and marketing force and management, trade point of sale material and incentives and expensive events amd you might be paying for expensive advertising to push potential customers to agents who switch sell to someone else because they happen to have a special incentive that month. I think this approach has a lot going for it. Instant owner loyalty, retaining the bookings funds as shares, coupons dragging along with it real incremental cash etc. I have always felt that luxury brands reap so many advantages when you use direct channels rather than agents.

 

Renaissance -- not quite a luxury line -- had the same idea some years ago:  cut out the agent and sell direct.  The agent community rebelled, this initiative bit them in the tail, and the line failed.

[tgh]

One factor in the FCC situation may encourage regular readers of this list.

Assuming they attempt to restart , they will  need to generate hard cash to function and service the debt load.

This leads to load management of  fcc redemptions.

Logically Venetian society members  at different levels would receive varying preference.

 

Exec summary : The loyal base of high value customers will be  (relatively) protected and the plebs join the queue.

 

[UKCruiseJeff]

12 minutes ago, Observer said:

 

Renaissance -- not quite a luxury line -- had the same idea some years ago:  cut out the agent and sell direct.  The agent community rebelled, this initiative bit them in the tail, and the line failed.

 

 

SS and RCI already sell direct.  The suggestion wasn’t to shut the TA line but just offer The Patrons Club members a more personalised concierge service.  In other words simply divert as much revenue as you can to direct in stages.  

Edited May 19, 2020 by UKCruiseJeff

[Observer]

30 minutes ago, UKCruiseJeff said:

SS and RCI already sell direct.  The suggestion wasn’t to shut the TA line but just offer The Patrons Club members a more personalised concierge service.  In other words simply divert as much revenue as you can to direct in stages.  

 

I take your point.  

 

The cost of selling through agents must be very high for the cruise line, and it's not at all clear to me in the internet/social media environment what value an agent adds for a knowledgable traveler loyal to a given line. I now (very happily!) book directly with SS.  

 

A few years ago, I booked a cruise on a luxury line other than SS.  The agent -- highly recommended by others on social media -- offered little more than sharing of commission and a tour sponsored by the agent's consortium.  The agent did, however, carelessly include with the cruise ticket/documents a copy of the agent's invoice from the cruise line.  It specified the commission the agent was earning (not including any incentives for booking lots on that line.)  I was astonished by the high amount of the commission.

 

Having said this, I think an independent (pre RCI) SS could have more easily pushed direct sales than can the current RCI/SS line.  If SS went more aggressively to direct sales, one can imagine the agent community retaliating by directing passengers away from RC ships.

[UKCruiseJeff]

8 hours ago, Observer said:

 

I take your point.  

 

The cost of selling through agents must be very high for the cruise line, and it's not at all clear to me in the internet/social media environment what value an agent adds for a knowledgable traveler loyal to a given line. I now (very happily!) book directly with SS.  

 

A few years ago, I booked a cruise on a luxury line other than SS.  The agent -- highly recommended by others on social media -- offered little more than sharing of commission and a tour sponsored by the agent's consortium.  The agent did, however, carelessly include with the cruise ticket/documents a copy of the agent's invoice from the cruise line.  It specified the commission the agent was earning (not including any incentives for booking lots on that line.)  I was astonished by the high amount of the commission.

 

Having said this, I think an independent (pre RCI) SS could have more easily pushed direct sales than can the current RCI/SS line.  If SS went more aggressively to direct sales, one can imagine the agent community retaliating by directing passengers away from RC ships.

 

Hi,

 

The way that the process of moving gradually from an indirect or mixed channels market to a direct one has been well trod in other industries.  I have experience of this when setting up a dealer channel for the PC industry in 1982.

 

The agent community always threaten because they are being faced with an existential crisis of their own.  But there will still be a large community of customers who will buy SS and expect to do so via the agent they have been using.  As an agent you are not going to risk that revenue and also being an SS agent brings with it "prestige".  They get other sales because being an SS agent gives them kudos. And if an agent doesn't sell any of your product for say six months then you can if you wish publicly delist them.  That in iteself become a "free" incentive.

 

However there are other very positive mechanisms you can employ to counter it for new SS sales through agents.  For example, by reducing the amount of blanket resource directed to pushing your new or competitor sales from agent sales to direct sales you free-up a lot of cash.  Some can be used ironically to "increase" agent reward but on a contingency basis.  They must work to find you new customers or convert them from other lines.  What you can do is provide them ringfenced investment commission alongside their standard commission.  So, you might for example offer say 10% direct commision but an additional 5% investment commission which must be spent on material or initiatives that only sell SS product through them.  You might use it to pay rather than receive free staff training on the SS product ie TA salings.  You may offer an additioanl incentive for a new name first-time SS customer.  You pay the extra ring-fenced commission from an account you hold in the TAs name on pre-approved projects and against proof and receipts.  So SS might for example be helping the agent actually add value and improve their business to find and provide new SS customers rather than simply mop up and capture easy SS cash.  The extra rates against real effort actually becomes an additional extremely attractive and competitive incentive alongside ensuring you remain an accredited SS agent.

 

Jeff 🙂

 

Edited May 19, 2020 by UKCruiseJeff

[TLCOhio]

11 hours ago, Observer said:

The cost of selling through agents must be very high for the cruise line, and it's not at all clear to me in the internet/social media environment what value an agent adds for a knowledgable traveler loyal to a given line. I now (very happily!) book directly with SS.  If SS went more aggressively to direct sales, one can imagine the agent community retaliating by directing passengers away from RC ships.

 

YES, there are some major pro/con factors to debate and consider for booking through a travel agent . . . versus . . . just placing your order directly with the cruise line.  More and more consumers are Internet-savvy and can do much of the research and planning on your own.  I'm in that general category.  

 

BUT, over the years, we have found success in using a TA who has traveled widely and been able to share key experiences, especially for what and how we do for both pre- and post-cruise arrangements.  In doing complex trips in Southern Asia, Africa, the Amazon, etc., that depth of knowledge is highly valued.   Sadly, many TA's these days are just "order-takers" with little "VALUE-ADDED" to benefit the consumer.  If just doing a lower-cost, mass-market cruise from southern Florida for sailing around the Caribbean, most do not need that much TA skill and expertise.  However, as the below article details, the higher-end cruise lines probably depend more than average on TA's to attract and service certain types of customers who might not have the time and interest to put together these more complex travel packages/plans that we completed in recent years. 

 

From the Travel Weekly trade publication yesterday, they had this headline: “It's costly to pay advisors twice, but luxe lines say it's the right policy”.  During this recent period, certain TA's have had to do "double-work" in setting up arrangements and then needing to cancel complex trips, but getting no commissions/payments.  However, this article indicates that some cruise lines have compensated the TA's for handling these cancelled trips.

 

Here are some of these story highlights: “For the luxury lines, paying commissions twice on canceled sailings is particularly costly because their cabins are priced higher than contemporary brands, and a higher percentage of those cruises are booked through advisors. But Jack Anderson, a luxury cruise consultant and former sales executive with Crystal Cruises, Seabourn and Holland America Line, said that for the upscale brands, keeping agencies afloat is considered a matter of survival”.  

 

In a video message from Silversea Cruises last week from CEO Roberto Martinoli, it was said:  "the line would begin paying commissions on canceled cruises that were paid in full, retroactive to the line's first cancellations in March, as well as on FCCs."

 

Just as has been happening with the insurance industry in the U.S., many firms seek to cut out the "middle-man" and become more price competitive.  Much depends on your customer base and the type of products you are selling.  My speculation right now is that Silversea and certain major cruise lines do not need, now, to pick a fight with TA's. Long-term, however, the future for certain of the less-skilled TA's would be in serious question.   

 

Full story at:

https://www.travelweekly.com/Cruise-Travel/Insights/Cruise-lines-shower-advisors-with-praise-and-revised-commission-plans

 

THANKS!  Enjoy!  Terry in Ohio

 

 

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[60straveling]

Happy they look to have their finances in order, but then want to know WHY we cannot seem to get our refund for our cancelled Sept. cruise?  Sick of being told it will be a couple of weeks, only to have that pass, and be told the same again!  Would have been our first time on SS, now do not expect we will ever consider them again!

   To pay for such an expensive cruise 9 months prior to departure, then to wait 2 months for a refund is ridiculous.  They process the payment the day they get our cc number...and yet the time to do the reverse transaction is so lengthy.

   Knowing they are staying afloat with the funds of passengers awaiting refunds makes me less inclined to ever consider SS again!

[Observer]

53 minutes ago, 60straveling said:

Happy they look to have their finances in order, but then want to know WHY we cannot seem to get our refund for our cancelled Sept. cruise?  Sick of being told it will be a couple of weeks, only to have that pass, and be told the same again!  Would have been our first time on SS, now do not expect we will ever consider them again!

   To pay for such an expensive cruise 9 months prior to departure, then to wait 2 months for a refund is ridiculous.  They process the payment the day they get our cc number...and yet the time to do the reverse transaction is so lengthy.

   Knowing they are staying afloat with the funds of passengers awaiting refunds makes me less inclined to ever consider SS again!

 

Cash flow doubtless is a factor in the delay in processing refunds.  But other factors come into play.

 

In another thread, I quoted an explanation from BWI Vince of factors impacting refunds. His career has been in this territory.  If you want to see his explanation (as quoted by me), you might check out post #20 in a thread titled "An Apology" on the Silversea board.

 

I hope you do not give up on Silversea.  I think you will be missing something wonderful if you do. 

[mrlevin]

Operation update to be provided at tomorrow's earnings call; any thoughts regarding future of Silversea?  At a minimum Cloud and Explorer parked until Antarctica season (maybe by then luggage will be shipped off Explorer).  Could RCL try to divest all of Silversea?  I am planning on connecting to the call; should be real interesting.

 

Marc

[Stumblefoot]

12 minutes ago, mrlevin said:

Could RCL try to divest all of Silversea.

As of right now, the chances are slim to none.

[cruiseej]

6 hours ago, 60straveling said:

Would have been our first time on SS, now do not expect we will ever consider them again!... Knowing they are staying afloat with the funds of passengers awaiting refunds makes me less inclined to ever consider SS again!

 

I've been jumping around reading threads on other lines line Seabourn and Regent; the delays are similar, the lack of good customer communication is similar, and no one's particularly happy. I don't think Silversea is doing appreciably differently from the other luxury lines, and I don't think this is (at least currently) a differentiator in choosing among the various cruise lines for the future. Just my 2¢…

[TLCOhio]

On 5/20/2020 at 12:22 AM, cruiseej said:

I've been jumping around reading threads on other lines line Seabourn and Regent; the delays are similar, the lack of good customer communication is similar, and no one's particularly happy. I don't think Silversea is doing appreciably differently from the other luxury lines, and I don't think this is (at least currently) a differentiator in choosing among the various cruise lines for the future. Just my 2¢…

 

Agree with above that ALL of the top three major cruise ship operators have been facing serious challenges in dealing with the large number of refund requests and their desires to hold on to OUR cash in order to give them more "flexibility" to figure out their future options and re-open plans.  Our March 12 Silversea cancellation taking until April 28 to be posted on our credit card was slow and long.  Part of me understands why.  Part of me is unhappy and distrusting of their reasons/excuses.   Your "2¢" is worth much more!!

 

As to the comment by Stumblefoot, agree that parent Royal Caribbean will not be selling back Silversea.  During yesterday's briefing by the CEO and CFO of RCCL, nothing came up about Silversea.  The finances to undo such a deal would be very complicated and the timing now makes it almost impossible to happen.  For good and bad reasons, Silversea is "married" and a key part of the RCCL future. 

 

From the stock/Wall Street publication called "Mottley Fool" yesterday, they had this headline: “Is Royal Caribbean Still the Best Cruise Line Stock to Own?” with this sub-headline: "The country's second-largest cruise line continues to show why it's the most seaworthy of the three troubled players in this market." 

 

This media source is a little different with its journalistic style and approach, but these highlights detailed might be of interest: “It's been a rough ride for cruise line stocks this year, but I've argued in the past that Royal Caribbean is the best stock to own in this volatile industry. It has held up better than Carnival  and Norwegian Cruise Line Holdings these days, even if the victory is only relative. Royal Caribbean stock is the only one of the three players that has more than doubled off of its mid-March lows. It's also the only cruise line that isn't trading 70% below its 52-week highs, but you won't find Royal Caribbean shareholders high-fiving one another about a nearly 69% drop from its January peak as of Tuesday's close.  Royal Caribbean reported its fiscal first-quarter results on Wednesday morning, giving investors fresh info to decide whether it continues to be the best bet in this hammered travel specialty sector. There was some good, bad, and ugly news in the report, but ultimately the company continues to show signs of being the best player to weather this fierce storm.”

 

Having listened to yesterday RCCL conference call yesterday morning, I would agree that this current situation is rather "MIXED", but there are tangible signs for a path forward that will take time and patience.  It will not all happen and come together in just two or three months.   But, it could work out in a positive manner for customers, investors and staff.   If and if??!! 

 

Full story at:

https://www.fool.com/investing/2020/05/20/is-royal-caribbean-still-the-best-cruise-line-stoc.aspx

 

THANKS!  Enjoy!  Terry in Ohio

 

Completed last summer Calgary, Jasper/Banff National Parks, Western Canada Rocky Mountaineer rail adventure, Vancouver, sailing up to Alaska, post-cruise excursion to Denali, etc.  Many visuals and details from our first in these scenic areas!  Live/blog at: 

https://boards.cruisecritic.com/topic/2682584-live-terryohio-silver-muse-alaska-canadarockies-pix’s/

[UKCruiseJeff]

Good afternoon Terry,

 

I think your position on this is spot on.  For what it's worth, if it had been anyone other than you writing the precis I might have bothered to listen to the original, but what may be widely unknown around here is your operating level in US politics  over a long time and as a result the media.  So you understand evasion and nuance. That is why I didn't listen to what you listened to because I think you probably captured it accurately! 🙂

 

When a corporation calls an investor meeting, investors generally speaking are not experts in the industries they invest in.  The best are opportunistic generalists.  They put their cash where they punt it might earn them most.  So when they ask a question at an investor meeting there's at least two things they're looking for.  The two things is both the answer and the way it is answered.  So if they get a precise answer to the question they answered, then that is reassuring.  If the answer is also honestly presented without evasion that means you might be able to trust the answer you're given.  In the UK, our barristers and judges are given training about "questions" and how they can be used to understand and demonstrate the reliability of witnesses.  The best thing a witness can do is to give an honest answer that may be seen as self-incriminiating because it is evidence of their reliability. People like reliability above the detail because they can make a valued judgement on the detail knowing it has been provided in "good faith" If you get my drift. 

 

It seems to me that an investor asked a simple question that he'd/she'd prepared with respect to cashflow safety milestones.  The question from what you've said is "As a non-specialist investor what milestone should I lookout  for with respect to when cashflow inputs equals cashflow outputs with the number of ships operating.  In other words - when has the corporation steadied.  So, when can I start too relax a little and feel out of high risk exposure".  That cashflow question wasn't seemingly answered.  Either the answer was known but not answered, or it was unknown which is much more concerning.  Even if an answer was provided with caveats ie "I do not know the precise answer but it's my instinct that if half of the fleet was operating at 80% occupancy - half being FCC and the other fresh bookings - then withe the overhead actions we've taken then in good faith  I think that we have turned the cashflow corner".  That would indicate candour and knowledge and respect for the question.  Instead it seems to have been ignored amd converted from a cashflow question to a really simplistic answer about the profit breakeven point of a lean ship without any fixed overheads at all.  As an investor that doesn't show respect for the question, competence and credibility.  What has the answer to do with the question.  The question is about cashflow saefty points and the answer is about .... well it'd difficult to know what question it answers because a ships profit break-even point includes the mortgage.  We both know that most people do not understand that profitable companies go bankrupt. 

 

Anyway ... this all might be about the ability of one senior exec and may be the square root of nothing at all. 

 

Thanks agin for the trouble you have taken to explain what was said as it is all fascinating. 

 

Jeff 🙂

[TLCOhio]

35 minutes ago, UKCruiseJeff said:

Good afternoon Terry,  I think your position on this is spot on.  So you understand evasion and nuance. That is why I didn't listen to what you listened to because I think you probably captured it accurately!  Thanks agin for the trouble you have taken to explain what was said as it is all fascinating.  Jeff 🙂

 

Appreciate UK Jeff's kind comments and nice follow-up.  Yes, sorting out the B.S. and "Spin" can be challenging.  But, it can be fun in trying to "cut through the crap"!!!   Just got done this morning listening in to the Wall Street analysts call-in conference for a major Central Ohio firm called LBrands.  They own Victoria's Secret, Bath and Body Works, etc.  Especially for their lady's sexy wear brand, they have been seriously challenged and investors have beaten up their stock value.  That's another interesting conversation and history. If you do not listening to your customers and sense changing market trends, you can suffer major business set-backs.   

 

From the Miami Herald this morning, they had this headline: “Royal Caribbean reports $1.4 billion in losses and cancels cruises through July” that detailed many of the comments and quotes from RCCL Chairman/CEO Richard Fain, etc.  

 

Here are some of their story highlights from this major newspaper covering from where all three of these major cruise operators are based: “Competitors Carnival Corporation and Norwegian Cruise Line Holdings have reported similar first quarter losses. Carnival Corp. reported a loss of $781 million, or $1.14 per share, with an adjusted per share loss of $0.22. Norwegian Cruise Line Holdings reported a loss of $1.9 billion, or $8.80 per share, with an adjusted per share loss of $0.99.  Fain said he doesn’t know when the company will resume cruises. When Royal Caribbean does relaunch, it will likely begin with just a few ships operating at a lower capacity at first, and traveling on short cruises, mostly to the company’s private island destinations. 'I would imagine social distancing will be an issue that would suggest you would not fill the ships,' Fain said. He suggested the cruise company would take cues from the reopening of land-based businesses. 'We will learn a lot seeing society come back.' "

 

This Miami Herald story details much of what I had shared on another thread on this CC Board for Silversea. 

 

Full story at:

https://www.miamiherald.com/news/business/tourism-cruises/article242863706.html

 

THANKS!  Enjoy!  Terry in Ohio

 

Barcelona/Med: June 2011, with stops in Villefranche, ports near Pisa and Rome, Naples, Kotor, Venice and Dubrovnik. Great visuals with key highlights, tips, etc. Live/blog now at 251,298 views.

www.boards.cruisecritic.com/showthread.php?t=1426474

[TLCOhio]

From Yahoo.com and a key financial review source, they had this headline: “2 Top Cruise Line Stocks to Buy and 1 to Avoid During the Coronavirus Crisis” with these highlights: “It has been anything but smooth sailing for the cruise industry. The COVID-19 pandemic and the widespread travel restrictions have caused sailings to be suspended, sending shares to record lows. To survive, cruise operators have gone into cash preservation mode. Against this backdrop, investors are hardly lining up to pull the trigger on names within this area of the market. However, five-star analyst Benjamin Chaiken, of Credit Suisse, has a more optimistic view of the industry. He acknowledges that 'COVID -19 may be the toughest challenge the industry has ever faced', with it potentially taking several years to regain pricing parity. Highlighting the resiliency of the industry, Chaiken said, 'The cruise industry has bounced back before from deadly accidents, sudden regulatory changes and storms.'  He added, 'Additionally, we think the cruise demographic is favorable for a recovery in demand, and could be why 55% of cruise customers, according to our checks, are opting for a cruise credit vs. cash. We think this is a very powerful data point.'  Taking all of this into consideration, Chaiken points to two cruise line stocks with especially strong long-term growth narratives. The analyst does remind clients that not all cruise industry players are set to outperform, recommending that investors avoid one in particular.”

 

In the view of this one analyst, Royal Caribbean and Norwegian Cruise Line are in better position than Carnival.  Here are some of his reasons/details behind his viewpoint: "With 63 ships carrying approximately 6 million passengers every year, the Credit Suisse analyst argues that RCCL’s strength is derived from the location in which it operates cruises. 'We think the Caribbean –where RCL is best positioned in terms of capacity allocation and product--could be a bright spot when demand does return. Many Caribbean itineraries require little or no air travel to embarkation.'  It also doesn’t hurt that 'RCL has the ability to market to guests with a shorter booking window.'   Credit Suisse recommends that investors go in on Norwegian Cruise Line based on its solid event path and positioning in an expanding segment. 'We think NCLH offers a differentiated vacation, within an oligopoly, at a significant discount to other land-based alternatives and as such we believe we will see demand for the product come back,'  Chaiken concluded."

 

BUT . . . "When it comes to Carnival, the largest publicly traded cruise line, the company has found itself in choppy waters, with Chaiken not expecting smooth sailing anytime soon. Looking at the near-term, Chaiken points to its high levels of cash burn as setting the company up for trouble. Also problematic, CCL had less momentum going into the year than both RCL and NCLH as its net yields were flat. The most significant issue for CCL, though, is that passengers from Europe make up a substantial portion of its customer base, and Chaiken has less confidence in certain European economies, namely Italy." 

 

Full story at:

https://finance.yahoo.com/news/2-top-cruise-line-stocks-110238376.html

 

THANKS!  Enjoy!  Terry in Ohio

 

Norway Coast/Fjords/Arctic Circle cruise from Copenhagen, July 2010, to the top of Europe. Wonderful scenic visuals with key tips. Live/blog at 239,422

www.boards.cruisecritic.com/showthread.php?t=1227923