Royal Caribbean Has a Secret Getaway That Leads to Profit

Thank goodness for outbreak amnesia. 

Three years after an unprecedented nadir for the cruise ship industry, Royal Caribbean has the wind in its sails — and they’re blowing especially strong in one particular direction. The seafaring getaway giant raised its annual profit forecast for the fourth time this year on Tuesday. Driving the optimism is an actual secret getaway: a wildly profitable private island in the Bahamas that has other cruise ship operators going flank speed to get their own wonderland up and running.

Paved Paradise and Put Up an Amusement Park

In 2019, Royal Caribbean opened CocoCay, a tiny Bahamian island just under one mile long and only 480 yards wide that doubles as a beach resort complete with an amusement park, bars, and restaurants. The timing — one year before the world went into lockdown and the hospitality industry nearly shut down — wasn’t great, but, five years on, the payoff has been.

Net income at the world’s second-largest cruise operator rose to $1.1 billion in the third quarter from $1 billion a year ago, and analysts at investment bank William Blair expect the firm to notch a 20% increase in profit next year. One reason, they noted, is that owning your own island means no passenger fees like at regular ports, and no taxes. That’s turned CocoCay into an asset where revenues have grown more 48% — versus a 41% jump in expenses — since its 2019 debut. Competitors want their own private getaways:

• To that end, Carnival has marked $600 million to develop a private island on Grand Bahama, dubbed Celebration Key. Norwegian Cruise Line is putting $150 million into a new pier for its own Bahamian island, Great Stirrup Cay.
• Not to be outdone, Royal Caribbean plans to open three more private destinations by the end of 2027, including a $650 million private resort in Mexico and a $165 million second resort in the Bahamas. Royal Caribbean has spent $250 million on CocoCay since it opened.

Above Board: Two years of unleashed desire for post-COVID travel have filled the pockets of the cruise ship industry with enough coin to weld a new hull. On the NYSE, Royal Caribbean shares are up 62% this year, Carnival 19%, and Norwegian 20%.