The Royal Caribbean Blog reported on June 10 that Royal Caribbean (NYSE:RCL) had sent a letter to the U.S. Federal Communications Commission (FCC) asking it to approve Royal Caribbean’s use of Starlink on its ships. While the use of Starlink’s satellite internet system will most likely spread to the other big cruise ship operators in time, being first-in is good news for RCL stock.
It might not be as newsworthy a story as the pandemic completely disappearing, but if you’ve ever taken a cruise, you’ll understand why this is still a big deal.
Royal Caribbean’s share price trades around its 52-week low. Any news is good news at this point. However, if you’re an aggressive investor, the Starlink news ought to be enough to nudge you closer to buying its stock despite all the current headwinds.
RCL Stock and March 2020
If you bought RCL stock during the market correction of March 2020, you’re sitting on a 27% gain despite 28 months of pandemic-induced pure hell ever since.
It’s possible some of you who bought at the beginning of the pandemic sold in November when RCL stock traded dollars from triple digits. If so, I congratulate you on perfectly timing the market. Odds are you’ll never do it again in your lifetime. But I digress.
Aggressive investors should look at Starlink’s satellite internet service soon being available to Royal Caribbean customers as a difference-maker. All three big cruise ship operators have massive boats with all kinds of crazy stuff on them – the Norwegian Viva launches summer of 2023. It will have an outdoor go-kart track – but none of them can provide decent internet.
I remember my wife and me sailing on Royal Caribbean’s Majesty of the Seas back in 2005 – we got married in the ship’s chapel before our 7-day Caribbean cruise – and even back then, I would pull my hair out while using the internet on the computers provided. I haven’t been on a cruise since, but it sounds like things haven’t gotten much better.
That’s scary for an industry that prides itself on the latest and the greatest in travel hospitality.
Royal Caribbean Could Charge More
In Royal Caribbean’s letter to the FCC, the company’s group vice president of operational excellence, John Maya, makes an excellent point about getting the agency’s approval to use Starlink.
“Working with SpaceX Services, Inc. [owns Starlink], we believe we have identified a true next generation solution for our vessels that meets the rigorous technical and operational requirements commensurate with our growth plans,” the Royal Caribbean Blog reported.
“We believe our work with SpaceX, the first of its kind in the cruise industry will set the standard for other cruise operators and will mean a leap in terms of guest experience and business operations while at sea.”
Everything about the cruise industry is centered around the guest experience. Having outdated technology in the smartphone generation makes absolutely no sense.
More importantly, provide uninterrupted, free Wi-Fi service on your ships, and you’ll be able to charge more for the entire trip. Or, conversely, you can charge an arm and a leg for those willing to pay daily, weekly, or whatever basis you want to.
Once the world returns to some semblance of normal, that will help drive higher revenues.
The Future Is Bright Despite the Headwinds
Impossibly high oil prices, an ongoing war between Ukraine and Russia, the end of cheap money, an ongoing Covid-19 crisis, food inflation, supply-chain problems, collapsing stock and crypto prices; the list goes on.
Consumers and CEOs are getting grumpier by the day. Even the wealthiest Americans understand we are not in a good place. So, it’s natural that many investors would be cautious about buying stocks, let alone consumer discretionary ones like Royal Caribbean.
However, suppose you are an aggressive investor. In that case, this news from Royal Caribbean is absolutely a reason to consider dabbling in RCL stock at current prices because it will add revenue to the top line.
That’s good news, indeed.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.