With a market share of around 25%, Royal Caribbean is the second-largest cruise company in the world. The company operates a fleet of ships under different brands, including Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises.
In the follow-up Covid, Royal Caribbean saw its operating performance improve dramatically. On the back of high occupancy, strong pricing, and record onboard spending, Royal showcased excellent operating results. We believe demand will remain resilient in the near term, given forward booking volumes ahead of historical levels and at record prices, which should drive further growth in EBITDA and free cash flow to new record highs For FY24.
The company is expected to continue deleveraging for the foreseeable future in light of management’s stated objective of returning to IG status. While this is still years away, in our view, we do see scope for multi-notch upgrades over the medium term. Given, its issuer credit outlook should remain positive for a given period ahead.
With the management strategy largely expected to be successful, Royal Caribbean’s bonds already trade with the rating upgrades priced-in. Royal Caribbean bonds are opportune for buy-and-hold investors.