carol: in early 2020, as covid triggered a global public health crisis, the travel and tourism

industry cut back services and slowed down. the cruise industry went further. it completely shut down. as ships sat idle, operators scrambled to survive, with no financial precedent to guide them. jason: all of a sudden, you know, the revenue just turns off. carol: right. jason: they did not teach this in business school, by the way. it turns off and you have to figure out how you are going to ensure the company has liquidity needs to get to the other side of it. carol: no revenue at all. zero. but you have costs and expenses. jason: that's right. what you learned in the pandemic is leadership matters. carol: for royal caribbean cruises, the message was stark and clear. after generating almost $2 billion in annual profit before covid, the company lost more than $5 billion in 2020 and 2021. at the end of 2021, longtime ceo richard fain stepped down after 33 years, handing the reins to cfo jason liberty. what was it like, that transition from cfo to ceo?

jason: we were coming out of the pandemic, ramping up our fleet, ramping up our occupancy. we had to keep our eye on the ball because, historically, we would bring about three ships up a year. carol: yeah. jason: here we brought up 64 ships. carol: that is a big change. jason: that is a big change. a herculean effort. carol: helping the new ceo meet those challenges was new cfo naftali holtz, who moved up from vp of finance. jason: i hired him, i think, about six months before the pandemic. i was looking for someone with a really strong work ethic, who was strategic. somebody who understood how to get things done inside an organization. i saw those qualities in naftali. he has done an exceptional job coming into the role. he has hit the ground running. carol: that dynamic in the c-suite has helped royal caribbean's comeback maintain momentum. what has it been like working for the individual who was once cfo and is now ceo? what is that like?

naftali: i feel very fortunate because we have someone who has been in the job many years, still with the company, obviously he has much more responsibility, but he understands what it means to be in my job. carol: what was that like for you having been in the cfo role for so long? what did you expect of him? jason: i rely on him very much to be my eyes and ears, my strategic partner, and i am transparent to him in terms of what i am thinking about and what i am doing. sometimes he will say, "do we need to spend money on that?" and i will say, "yeah, we do." [laughter] naftali: i am a direct person, and i care. that is important for me. if i feel differently, at least we have a conversation and many times i would think one way and then he would point his point of view and it would make sense. and i would say, "you know what? you are right." and i would get behind him. carol: advancing the company's long-term mission through honest conversation, that is how naftali holtz takes the cfo role forward.

naftali: maybe, many years ago, it was about making sure the numbers are correct and everything is on time and we report correctly. and i think it evolved today to much more than that. you know, what is the strategy we are going to embark on? what does that mean to the financial performance of the company, and how do investors view that? that is one aspect of it, and the other is just making sure we are always on the pulse. ♪ carol: with its full fleet returning to the seas in 2022, royal caribbean has enjoyed a financial rebound. bookings for 2023 are robust, and they have been accelerating every quarter. in november, the company announced the trifecta program, a three-year initiative designed to exceed 2019 key financial metrics by the end of 2025. jukka: they are confident

because there is pent-up demand. people want to travel. jason: we have 130,000 people sailing with us right now as we talk. carol: amazing. jason: they are spending more than they did a month ago, they are spending more than they did a year ago, they are spending more than they did pre-covid on travel experience. we know the ships coming in. carol: right. jason: the ships are huge moneymakers, very high yield because of the inventory mix. there is more space for onboard revenue. they are fuel-efficient. lindsey: intent to cruise is climbing. whether or not that can be sustained is a question to be answered and there are a couple of different elements of that. the first being the economy. carol: do you get a little nervous with all of the recession talk? or another black swan? who would have thought what happened the last couple of years? naftali: it is hard to plan for. right? what we are focused on is to make sure we have the best business. right? so, the business is run well. we are, obviously, we are

focused on liquidity and our financial metrics, and we want to fix the balance sheet, you know, to get back to where we were. carol: fixing the balance sheet, that is a heavy lift. royal caribbean is carrying nearly $24 billion in debt. though it has paid down most of its short-term obligations, the debt still looms large. it is a dark cloud over the cruise industry. jukka: the valuations for the major cruise lines have gone down, and the debt levels are very high. so, they will have difficulties to receive more debt and it might be very high interest rates. jason: the debt we took on, half of it was in order for us to deal with not operating for those 18 months and ramping our business back up. carol: staying alive. jason: staying alive. that's right. the other half was because we were growing and taking on new ships. those new ships we get incredible export credit financing for. we have done a lot of re-financing and we believe over the coming years, we are going

to be in a better place to do two things. one is de-leverage, and the other is improve our rating. that will lower our capital cost. carol: are you comfortable with that level of debt and being able to service it? naftali: well, we are not happy with it. we want -- our goal is to get back to the balance sheet we had, which is an investment grade profile. we are back, you know, sailing 96% occupancy. we are generating cash flow from operations. so, you know, our goal is now to continue to grow ebitda, continue to grow the cash flow so we can pay down the debt, and bring the balance sheet back. this business is very resilient. jason: we always said we wanted to have a balance sheet that could take a punch and we proved that we had a balance sheet that could actually take a meteor. so, i think that is why naf and i are very focused on getting back to an investment grade balance sheet, on getting back to getting back to an unencumbered balance sheet. that sets us up for events as they come forward.

carol: can royal caribbean perform its way back to unencumbered financial stability? the cruise line generates about 60% revenue from sales of tickets. most of the rest comes from onboard spending. at the moment, higher prices are not holding down demand in either category. jason: on the ticket pricing side as well as on onboard spend, pricing is up compared to 2019. we use 2019 as the reference point. naftali: onboard experiences have really become a much more integral part of the experience. what we have seen in the past couple of years is that we have a much more penetration of onboard experiences for our guests. people just want to consume more. they're willing to spend more, and that is obviously -- it helps the yields and the revenues as well as the margin. carol: pre-pandemic, analysts were impressed by royal caribbean's margin expansion. operating margins doubled during jason liberty's first seven years as cfo. the voyage ahead may not be as smooth, especially if inflated costs eat into revenue gains.

jason: we have seen huge inflation costs on the food. carol: right. jason: however, our supply chain teams have done an exceptional job. we do believe, which is the basis of our trifecta program, moderate yields and good cost control. for us, good cost control is low single-digit change year-over-year. jukka: if you think about the cruise industry, there is a cost advantage for labor because they do not have to pay minimum wages. there is also cost advantage in supplies like food and beverage supplies because they buy in quantity. carol: jason, what are the conversations you have with naftali about costs? because it is such a big component of, you know, when you are looking at your financial statements. jason: where i focus naf on is, where can we be more efficient? where can we use more technology for us to become more efficient? naftali: on the food side, we want to make sure the experience we offer to the guests is great, because that is our mission. maybe we can source more locally.

maybe we need some of it to source more globally. just re-imagine how do we deliver on the surface? on the fuel side, we are active and focused for the environment. minimize and reduce the consumption of fuel. and that is one of the things we can control the most. carol: what royal caribbean cannot control, headwinds caused by world events that threaten growth. covid-zero has meant zero cruising in china since the start of 2020. war in ukraine and recession signals are also concerns in europe. all of this is putting strain on the supply chain that provides royal caribbean's most important commodity -- passengers. jason: sourcing for our guests comes from 100 different locations around the world and we created a platform for it to be nimble. so, we are always sourcing the highest yielding guests from anywhere in the world. but our assets, our business

, moves, it is fluid. so, when events do happen around the world, we have the ability to move our deployment or sourcing around to help mitigate that. you know, like we always are, we are nimble, and our sourcing and our deployment is going to be different in 2023. and we will see what 2024 brings. carol: uncertainty about travel stocks has weighed on cruise stocks over the last two years. despite signs of a rebound, investors remain cautious. what is it going to take for wall street to be like, we are more comfortable with this? jason: i think they are getting more comfortable, and i think once they start seeing 2023 guidance and the level of profitability, the level of cash flow, i think at that point we will start to see the overall crystallization of where we are and begin to think about where we are going to be going. carol: coming up, naftali holtz reveals some of the magic royal caribbean promises its passengers, such as the magic carpet. naftali: then we looked at it

and said, "why don't we just make it a really cool feature spot where people can enjoy it beyond the functional space?" carol: this is bloomberg. ♪ carol: jason liberty took over as chief executive of royal caribbean cruises in january 2022, replacing richard fain, who had been ceo since 1988 and remains chairman of the company's board. liberty's promotion fits with the trend.

according to an annual survey, more new ceo's are coming to the job directly from a cfo chair than ever before. jason: the role of the cfo i think has changed over time. carol: i agree. jason: they have become more strategic and, of course, this world has become more data driven. being able to think in that way and of course being brought up that way and putting people in the cfo position that think that way, versus maybe just doing accounting or treasury related activities, i think that is why you are starting to see more cfo's rise into the ceo spot. because there is a lot of that kind of commonality that comes with the day-to-day of the ceo job. carol: royal caribbean cfo naftali holtz brings a strategic and data-driven background to the cfo role, and he is mission driven as well. naftali: i was born and raised in israel, and like everybody else, i enlisted into the israeli air force. i had four very meaningful years serving my country and giving back. and then, i always wanted to

move to the united states. i had some family here. i was just aspiring to the country, the opportunity, and i thought the best way for me to do that is going through business school. you know, i was fortunate to get into chicago booth and learn from the best and get some of those finance skills and knowledge. and then i started on wall street. it was just a natural transition. i really felt compelled and interested about investments and the markets and companies and their stories. and i really learned a lot. and, you know, through transactions, interacting with ceo's and cfo's. carol: so how do you think having a career on wall street, finance background, maybe makes you a better cfo? naftali: obviously, all of the skills that i had, you know, in my career on wall street, understanding how to raise capital, what investors are looking for, it helped us in the beginning of the pandemic, when we had to raise capital, to make

sure that we get to the other side. so, just understanding the different instruments, the different ways to raise the capital, understanding capital allocation and how we prioritize investments, how we would prioritize the cash flow. this business generates a lot of cash flow. carol: right. naftali: it is something i am focused on and obviously a lot , i have seen a lot in my career on wall street. carol: a cruise ship is more than a flotilla of financials and numbers. naftali holtz showed me around the "celebrity beyond", royal caribbean's newest ship, rolling out not the red carpet but instead the magic carpet. an example of investment that is yielding returns in several different ways. naftali: originally, we designed it because we wanted to have a really nice platform for tendering. carol: so, functional. naftali: exactly, it's functional, and then we looked at it and said, "why don't we just make it a really cool

feature spot where people can enjoy it beyond the functional space?" then we created this bar that went up and down. can you imagine the instagram moment? carol: i can imagine. naftali: this instagram moment with the sunset, having a drink with your friends and family, that is amazing. carol: what does it take to do something like this? i'm thinking cost, engineering, time. naftali: yeah, a lot of effort from a lot of people. so, it starts from just the design and the conceptual aspect of it, then we need to figure out a lot of technical factors, the weight, the wind. so, lots and lots of hours of really hard work. and every time we up the game, we see the customer willing to spend more. carol: is there like a bunch of other innovative ideas that you guys are working on? are there other things that are in the hopper that might be like this that we might see in future ships? naftali: yes, obviously, the ships are core to how we deliver the best vacations in the world. and a couple of years ago, we saw an opportunity to extend to land, so we built a private islands and exclusive destinations. cococay is one example of it,

and we have a lot of great ideas and projects in the hopper. and we are very focused on being disciplined. you know, we deploy millions of dollars on behalf of shareholders, so we have, for ourselves and for them, return expectations. so, we just make sure that as we invest the money, it is getting the returns that we want. carol: in every corner of "celebrity beyond," there is evidence of careful investment designed to give customers every opportunity to spend money. and for passengers who want to spend a little more money, there is ample opportunity to upgrade. naftali: this is our exclusive retreat area. and guests can upgrade, right? and buy a room, a state room here, and enjoy the exclusive access to the facilities. and you can see there are pools, cabanas, obviously, lots of opportunities for food and beverage. carol: the segmentation of, you know, giving passengers an opportunity to have a different

experience, maybe pay up for a more premium experience, is this kind of where it is all going? naftali: yes. i think it is about everyone has maybe a little bit different, you know, desire of what their ultimate vacation is. some people want to go and meet people. some people just want to -- because they came with their family -- just want to go and spend their time alone. so, it is really designed to be like the ultimate vacation, depending on what you want. carol: coming up, the future of cruising. royal caribbean is about to launch the biggest ship out on the high seas and make it greener as well. naftali: when the ship is in port, we can plug into their green grid or power the ship with a fuel cell. carol: this is bloomberg. ♪ if your business kept on employees through the pandemic, getrefunds.com

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carol: royal caribbean is one of three companies that together control about three quarters of the global cruising market. in 2021, its capacity share was second only to carnival, and more than twice that of third-place norwegian cruise line. royal caribbean operates its ships under three brands with three distinct profiles. jason: the royal caribbean brand is more family focused, multigenerational. our celebrity brand is more of a premium luxury, and then we have silver sea, which is ultra-luxury and expedition. carol: so, it is not a one-size-fits-all business. and as passengers demand more choices, one way to fulfill them is bigger ships. in october, royal caribbean unveiled plans to launch what will be the largest ship in the world, "icon of the seas." it will carry over 7,000 passengers. its first cruise, set for january 2024, sold out within hours. jason: if you are going on a seven-day voyage, you are going to be able to do anything and

everything that you could possibly dream of and, you know, it might be what you want to do, it might be what your daughter want to do, and it might be what your parents want to do. and everybody can have different experiences. we describe it as "the thrill and the chill." naftali: we offer a lot more on the ship. we become much more profitable, because there is so much more to do. there are economies of scale, and there are efficiencies in operations, so each ship that we deliver is actually much more profitable. carol: royal caribbean is also investing in technology to drive profits. jukka: to say that cruise business is actually one of the leaders when it comes to digital transformation, i see that accelerating in the future. naftali: we want to make sure we create a frictionless experience. the expectations today from the consumer is that the experience is frictionless. jason: especially during the pandemic, people got very comfortable with on-demand services. they wanted groceries, they went to instacart. and so forth. carol: i do it all through here. jason: right. all through your phone, that is exactly right. people want to organize

themselves in advance of getting on our ships, so they want to be able to book spa appointments and shore excursions, well in advance of them ever getting onto the ship. and of course, when they do that, they tend to spend more money, which is also a good thing. so, we have taken friction out of that experience. carol: so, is there some application where there is the app and kind of a metaverse, where i can walk through the ship before i get on and decide what i want to do or where i want to go? jason: i think it's even greater than that. i think in the metaverse what we will be able to do is help people begin to dream what their vacation is going to be. to be able to put on your oculus or using their phones to really understand what they are going to expect location by location. carol: are you working on this already? jason: we are working on this already. carol: wow. jason: i think it is going to change how people book cruises. and then, that content helps us understand how we need to modify and change our products. isn't that a beautiful scene? >> that is awesome.

carol: royal caribbean understands the need to make its operations greener. the company just opened a state-of-the-art zero energy cruise terminal in galveston, texas, at a cost of $125 million. even the behemoth "icon of the seas" is being built with sustainability in mind. jason: that ship will have lng as the base fuel for that ship. lng is not perfect to transitional fuel, it will produce 20% to 30% less carbon. we are putting a 1200-megawatt fuel cell onto the ship and we are looking at tri-fuel engines, so that we will be prepared for things, whether it is methanol or hydrogen or whatever comes into place. carol: wherever it goes. lindsey: sustainability is table stakes going forward. six in 10 consumers in the u.s. are concerned about the travel industry's impact on climate change. and when we ask consumers who is responsible for fixing it, a plurality say it is the responsibility of companies in the industry. jukka: the cruise line has to go green. there is no other option. because millennials are the biggest group of consumers today

already and in the future, even more. and they are choosing those cruise lines that are sustainable. and there is no room for greenwashing in this area. naftali: it is one of our goals, right? to reduce our carbon intensity by double digits by 2025. and innovation around the environment is something that the company has done for many, many years. i will give you a quick example. in the last couple years, we wanted to reduce the waste of food on the ship. it is good for business and the environment. we have used technology for that. really understand how much is it that we have wasted on food, and we have implemented technology to help us reduce that waste. we are working really closely with ports around the world, because when the ship is in port, we can maybe plug into their green grid or power the ship with the fuel-cell. and part of it is really the fuel of the future, which we

continue to have a lot of partnerships in r&d, you know, as we continue that journey. so, we are focused on it. carol: there is so much to focus on as a cfo engaged in a company's restart following a complete shutdown. i asked naftali holtz what he sees when he looks ahead. what is the opportunity for royal caribbean in the next 10 years that most excites you? naftali: continue to grow our market share in the leisure space. just even beyond cruising. carol: so, what is the challenge for the company in the next 10 years that keeps you up at night? naftali: first of all, i sleep quite ok at night. [laughter] but i think, you know, what we really want to focus on today is to continue to innovate, continue to be retaining the best talent and the culture of innovation and dna, and making sure that we continue to evolve with the world and the consumer. carol: what is the best advice for the future that you would give to someone who was promoted to cfo today? naftali: listen a lot, really

get into the business and what is it that is really driving it to be really impactful and influential. carol: with two thoughtful and experienced financial leaders at the helm, royal caribbean is setting a course for its next chapter. jason liberty and naftali holtz feel prepared for whatever the future brings. i am carol massar. this is bloomberg. ♪ and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects. and when you book and pay throug you're covered by our happiness it's easy to make your home an a check out angi.com today. angi... and done.

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