Jason T. Liberty
President, Chief Executive Officer and Director at Royal Caribbean Cruises
Thank you, Michael. Good morning, everyone, and thank you for joining us today. Before jumping in and talking about the exciting things happening in our business, I would like to express our deep thoughts and prayers to our 2,000-plus Ukrainian Royal Caribbean Group family members and to the citizens of Ukraine, who continue to be affected by this tragic war. We, as always, remain focused on the safety and well-being of our employees and continue to provide them with support services and financial assistance during this time of incredible hardship. We are all praying and hoping for a peaceful resolution soonest.
Now moving on to the business. Our teams have done an exceptional job getting our fleet back into service so that we can continue our mission of delivering the best vacation experiences in a responsible way. As of today, 95% of our fleet capacity has returned to service. It's incredible to think that our journey to full fleet operations will be complete in less than eight weeks when our 63rd ship, Celebrity Infinity, welcomes guests for the first time since March of 2020. Since we resumed operations, we have delivered memorable vacation experiences to over two million guests worldwide, while earning record high guest satisfaction scores. Additionally, outside of China, the vast majority of our destinations and markets are back online. I want to thank our teams, both ship and shore, for delivering on our mission so successfully.
During the first quarter, we managed through the challenges brought on by the Omicron variant that resulted in the cancellation of 57 sailings in Q1. We moderated our load factors in January and February and softened demand for future voyages. We have now sailed through these operational and short-term demand challenges caused by the variants. Over the past 60 days, demand has materially surpassed both pre-Omicron and 2019 levels. Load factors improved throughout the first quarter and we finished the month of March at a load factor of 68%. We expect our load factors to continue to build, averaging between 75% and 80% in the second quarter, and reaching triple digits by the end of the year. We continue to be thoughtful about the build of our business, being mindful of maintaining price integrity, taking advantage of high onboard spenders and, as always, focusing on the health and safety of our guests and crew. Now moving to the demand and operating environment.
We continue to see strong demand for leisure travel and cruising. The robust secular trend of experiences over things that propelled our business in the past years is now recovering towards pre-COVID levels. Consumers are now reengaging with the world, and as a result, spending on travel in 2022 is set to outpace pre-pandemic levels with consumers planning to travel more frequently. Cruise consideration is the highest it has been in two years and nearing pre-pandemic levels with the most significant recovery among those new to cruising. Consumers are in a healthy financial position strong labor markets, wage growth, and record cash savings, $4 trillion in the U.S., support spend on vacation experiences.
We are watching the high inflationary environment but so far we had not seen an impact on consumer behaviors or willingness to spend on travel in cruise vacations. Strong demand for cruise experiences continue to translate into robust onboard revenue performance for us across all categories from casino, beverage and shore excursions to Internet, retail and spa. As we mentioned in recent quarters, our investment in a new pre-cruise planning system allows guests to better plan and book their onboard experiences. As a result, we continue to see increased penetration of pre-cruise purchases, which is leading to significantly higher total spend per guest. We remain focused on continuing to innovate the vacation experience we offer. We are strategically investing in our future to maintain our strong competitive advantage, setting the foundation for a strong recovery and long-term profitable growth.
On our last earnings call, we discussed our expectations for a delayed wave period. And while it started a few weeks later than we originally expected, it is what we are seeing now. Bookings improved each week during the first quarter as the impact from Omicron faded. For the past eight weeks, bookings have been meaningfully higher than 2019 with particular strength in North American itineraries. Our largest brand, Royal Caribbean International, set two new records in March with the largest single booking day and the highest booking week in the brand's 53-year history.
We have also experienced some headwinds related to the impact from the ongoing conflict in Ukraine. Itineraries initially planned to visit Russia represent only 2% of our overall capacity and close to 10% of our European capacity. In early March, we decided to cancel calls to Russian ports, including St. Petersburg, and substituted those itineraries with other highly desirable destinations. Naturally, we saw a short-term increase in cancellations and booking hesitancy put for Baltic Sea itineraries combined with some softness in overall European demand. After several weeks of softer trends, booking volumes improved and are now above 2019 levels. However, the impact from the slowdown during a key booking period is definitely weighing on our load factors for our European sailings. While there are some headwinds in Europe, our North American-based itineraries, which account for over 70% of our capacity this year, have been trending much better with recent bookings more than 40% ahead of 2019 levels. We are also seeing an increased volume of close-in bookings as consumers seem to be making their vacation decisions closer to their sailing date.
This contributed to better-than-expected load factors in March despite the impact of the Omicron variant earlier this year. We continue to build on the demand environment for the rest of this year and into 2023. Inflation is impacting businesses across the globe, and we are no exception. As we mentioned in the last few quarters, fuel and food are categories that are most susceptible to inflation for us. The war in the Ukraine and continued supply chain constraints have further heightened those pressures. Our teams have become increasingly adept at navigating these challenges, and we have implemented several strategies to manage cost pressures while delivering the incredible product expected by our guests.
On the fuel side, we continue to optimize consumption and have partially hedged rate below market prices, which is mitigating the impact on our fuel costs. We have taken and continue to take numerous actions to reshape our cost structure with a focus on further improving our leading pre-pandemic margins. While these actions are intended to enhance our cost structure and margin profile, we do anticipate that inflationary pressures mainly attributable to fuel and food as well as transitory costs related to our health and safety protocols will weigh on our costs this year. I will now touch upon environmental stewardship. Creating a more sustainable cruise industry is a journey and every day is an opportunity to innovate and improve. Back in 2016, we announced our partnership with the World Wildlife Fund to advance our sustainability performance. This partnership pushed us to set ambitious sustainability goals in three areas: greenhouse gas emissions, sustainable food supply, and destination stewardship.
I am proud of the fantastic work achieved by our teams since we first signed the agreement with the WWF and I am pleased to announce that the Royal Caribbean Group has recently signed a new five year agreement to take our advancements to the next level. I'm also pleased that in the first quarter, we were named one of the world's most ethical companies by Ethisphere. This is the seventh consecutive year our company has been recognized, the only one in the leisure and recreational category. Furthermore, we also earned 100% rating on the Human Rights Campaign Foundation's Corporate Equality Index, which rates corporate policies and practices that relate to LGBTQ+ workplace equality. We are immensely proud of these recognitions that reflect our deep commitment to our employees and our purpose and values.
As we continue to focus on completing our return to service, we are charting our course for future growth. Combination of strong secular demand tailwinds, our leading brands, the best cruise ships in the world, our global platform, and the very best people position us exceptionally well for long-term success. It is no secret that our innovative and industry-leading ships are the foundation for creating a great vacation experience. Year-to-date, we welcomed two new ships to our fleet, Wonder of the Seas, which is the newest, largest and most innovative Oasis class vessel joined Royal Caribbean International; and Celebrity Beyond, the newest -- the revolutionary edge-class joined Celebrity Cruises just a few weeks ago. We have a long track record on delivering new and exciting experiences through new ships while achieving premium yields and profits. These ships, along with others that are set to join the fleet in the next few years, will drive differentiated vacation experiences and financial performance. We have more exciting new ships currently on order.
Construction is now underway on Royal Caribbean International's sixth Oasis class ship, which will be named Utopia of the Seas. This ship is expected to debut in the spring of 2024. We are excited that Utopia will be the first Oasis-class ship powered by LNG when she launches. Finally, the building of Royal Caribbean International's highly anticipated Icon of the Seas has reached a pivotal milestone of physical construction ahead of its fall 2023 debut. Icon will set sail next year with the latest innovations and with signature features that were reimagined by our teams in bold new ways. Stay tuned for more on that. On the destination front, we continue to make progress on the expansion of Perfect Day at CocoCay with the addition of Hideaway Beach. Hideaway Beach will make Perfect Day at CocoCay even more perfect with an entirely new experience expanding capacity to the island.
On the technology front, the team has made tremendous strides modernizing our digital infrastructure and capabilities to enhance our commercial engines and the guest experience. Our business model is incredibly strong, and we have a long track record of growing revenue, earnings and cash flow. The pandemic has taught us new ways to operate with agility, but our formula for success remains unchanged. We have the best brands, each of their segments, the most innovative fleet in the industry, exclusive destination experiences like Perfect Day at CocoCay, a nimble and effective global sourcing footprint, a leading technology platform and most of all, the very best team, both at sea and on land. Despite these challenges at the start of the year and the complex operating environment, we still expect 2022 will be a strong transitional year as we bring the rest of our fleet back up into operations and approach historical occupancy levels and return to a profit in the back half of the year.
This will set a strong foundation for our success in 2023 and beyond. With these tools at hand, I'm confident about the recovery trajectory and the future of the Royal Caribbean Group. Our people will always be our most important competitive advantage, and I'd like to thank all of them for everything they do each and every day to deliver on our mission.
With that, I will turn the call over to Naftali. Naf?
