Royal Caribbean Food Costs Have Started to Decline From Peak, CEO Says

(Bloomberg) -- Royal Caribbean Cruises Ltd. is seeing signs of a peak in food and beverage costs, a potentially optimistic sign for a key component of inflation and one of the cruise industry's biggest expenses.

“We've already seen those costs begin to go back down,” compared with quotes the company was getting just two to three months ago, Chief Executive Officer Jason Liberty said in an interview Friday. Earlier, Royal Caribbean reported its eighth-straight quarterly loss as the omicron variant hampered demand for cruise travel.

Consumers and investors are looking for signs that red-hot inflation may be close to easing. Whirlpool Corp. projected last week that cost increases would ease by the second quarter, while 3M Co. said it was seeing the pace of inflation slow.

The U.S. Department of Agriculture expects food-at-home inflation this year to moderate to an annual pace of 1.5% to 2.5%, in line with the 20-year average of 2%. In December, food-at-home prices among urban consumers rose 6.5%, the steepest increase since December 2008.

The cruise industry is a massive buyer of food and drinks for its voyages, and it tends to negotiate on the basis of longer-term fixed contracts. Food and beverages are among its biggest expenses, along with fuel.

“The availability of labor is what was causing some of those spikes, and we've now seen that move the other way,” Liberty said.

He was more circumspect about fuel, except to note that the futures curve suggested a general expectation in markets that prices would decline.

The company has not adjusted shipboard wages, but shoreside it is finding the hiring market more competitive.

“There is a true war on talent,” he said. “I wouldn't call it inflation as much as I would call it, the need to retain and attract the best talent in the world now comes at a higher price than it did pre-Covid.”