Royal Caribbean Cruises (NYSE:RCL) is enjoying smooth sailing this year, buoyed by a resurgence of leisure travel by Americans and by the company's fleet upgrades and amenity-laden new ships. One of the new features that has Royal Caribbean forecasting fair weather is the high-speed Internet service set to debut this summer on its Oasis of the Seas and Allure of the Seas.
The new service, run by U.K.-based satellite communications company O3b, delivers "bandwidth at unprecedented levels," said Richard Fain, Royal Caribbean chairman and CEO, in an interview with The Motley Fool. The expectation is that fast Internet will draw more young passengers, help retain employees, and streamline operations.
"O3b provides Internet access to harder-to-reach regions, and that describes us to a T as an industry," Fain said.
The company, whose name references the "other 3 billion" people on the planet without reliable or high-speed connectivity, has been launching medium-Earth orbit satellites and installing special antennas on the ships to deliver Internet access at speeds comparable to or faster than broadband on land.
Keeping the always-on generation connected
The early response has been good, Fain said, especially from 18-to-35-year-old cruisers who are now the biggest-spending travel demographic -- and who are leading a sea change in what cruisers expect while they're hundreds or thousands of nautical miles from the nearest cell tower.
"Five or 10 years ago, you would have welcomed being away from your computer," Fain said. "Now you're suffering withdrawal symptoms, and we don't want that. We already have what we think is an industry standard for bandwidth, but that's not enough, especially for the Millennials, and furthermore, that demand is only going to grow." To meet it, the O3b service will be on a new order of magnitude. "One of those ships will have more bandwidth than the rest of the industry combined," Fain said.
The official rollout is still to come, but Fain said beta testers this summer have been happy to use the service and provide Royal Caribbean some social media exposure into the bargain.
"We've been giving it to the young people on board, and they have been real-time tweeting photographs, videos, etcetera," he said. "We think that from a marketing point of view, that's one thing that will move us to a different level."
Courting the Millennial market is key for the entire travel industry, because they take more trips and spend more money than older travelers, even the Baby Boomers. A majority of them also say they'd rather spend their money on experiences instead of stuff, making them an ideal market for premium amenities.
Better Internet access for employees and management
The bandwidth expansion has benefits for employees as well – Fain said he expects the upgrade to help with Royal Caribbean's goal of being the "employer of choice" in the cruise industry. Employees who can easily stay connected "will be happier and provide better service."
Real-time connectivity with ships at sea should also help management operate more efficiently, he added. The faster Internet service is slated for the new Quantum of the Seas ship as well when it launches in November.
While being better plugged in while on vacation may seem at odds with the notion of getting away from it all, it's a nod to the reality that younger travelers want to connect with their friends and show off their vacation photos on the go, rather than waiting for their ship to come in to port to upload their adventures. If the new service works as expected, it will give Royal Caribbean a major competitive advantage with the Millennial market.
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