Las Vegas and the cruise industry have an overlapping customer base. Many of the people who visit Sin City and many people who take cruises like to gamble.
This is likely why Caesars Entertainment (CZR) – Get the Caesars Entertainment Inc. Report there are often promotions where guests who have reached some of the higher levels of their loyalty program can get a free Norwegian Cruise Line (NCLH) – Get the Norway Cruise Line Holdings Ltd Report cruise just to stay in Las Vegas for a few days. Royal Caribbean International (RCL) – Get the Royal Caribbean Group Report also has an agreement with a casino chain such as MGM Resorts International (MGM) – Get the MGM Resorts International Report matches cruise line loyalty program status.
It’s easy to see why cruise lines and Las Vegas casinos would work together. Both are vacation options where gambling, dining, and entertainment play a big role in people’s travels. If you like one of Caesars or MGM’s massive resort casinos, there’s a pretty good chance you’d also like one of the Royal Caribbean, Carnival, or Norwegian cruise ships, which are essentially floating versions of Las Vegas resorts.
However, since the Covid-19 pandemic hit, two segments that are important to both the cruise industry and Las Vegas have stayed away. Now, those customers seem to be returning to Las Vegas, and that should be welcome news for the cruise industry.
Image source: Palms Casino
Longtime international visitors return to Las Vegas
Longtime customers have generally been a core part of the audience for both Las Vegas lines and cruise lines. However, that 55 and older population has been slower to return to pre-COVID activities due to their greater vulnerability to the virus.
Even as vaccinations became commonplace, the 55+ segment of the audience has been more cautious about travel than younger customers. This makes sense as many people in that age group have underlying conditions or other concerns that make contracting Covid more dangerous than it would be for a younger person.
International travelers, until recently, faced Covid testing both entering and exiting the United States. This was an added hassle that encouraged many of those customers to choose not to travel abroad. Additionally, cruise lines required Covid tests to board their ships.
Now, those protocols have been lifted on some cruises and travel rules are generally back to what they were in 2019. In a broad sense, Covid has become less of a concern based on fewer people being hospitalized or getting really sick. This has led to good news in Las Vegas, which also bodes well for the cruise industry.
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Caesar CEO Tom Reeg detailed the changes during his company’s second-quarter earnings call.
“And finally, results in our 55 plus segment, Las Vegas grew for the first time during 2019 since the onset of COVID, and we’re starting to see a significant return to the market from international travelers,” Reeg said.
That’s a sentiment that CFO Anthony Carano echoed later in the call.
“We remain encouraged about the improving trends for groups and conventions in Las Vegas, the return of the international consumer as well as the potential for the full recovery of our older consumer demographic, which has been most affected by Covid-19” , he added.
Cruise lines are well positioned for a rough economy
When the economy goes through a downturn, many people are more careful with their vacation dollars. This is actually a positive for the cruise industry as cruises are a largely immersive experience. Royal Caribbean, for example, provides all your meals, basic drinks and almost all entertainment for the price of your ticket.
That, along with other factors, has fueled a strong recovery for Royal Caribbean, CEO Jason Liberty said during the cruise line’s second-quarter earnings call.
“The combination of consumers’ strong propensity to experience travel, accelerating demographic trends that are attracting more bucket list and multi-generational travel, a very compelling value proposition and a strong preference for our brand is translating into stronger of demand,” he said.
And, if the company sells cabins at lower prices to get people on board, it has more than made up for it in on-board revenue.
“This strong performance in the second quarter against our expectations was driven by continued strength in our onboard revenue and accelerating load factors, which reached nearly 90% in June and delivered 82% for the quarter,” he said. “This combination led us to achieve higher total revenue per guest compared to 2019 levels.”
