Royal Caribbean Cruises Q2 2025 Earnings Report

Royal Caribbean Cruises EPS Results

• Actual EPS: $4.38
• Consensus EPS: $4.04
• Beat/Miss: Beat by +$0.34
• One Year Ago EPS: $3.21

Royal Caribbean Cruises Revenue Results

• Actual Revenue: $4.54 billion
• Expected Revenue: $4.54 billion
• Beat/Miss: Beat by +$1.01 million
• YoY Revenue Growth: +10.40%

Royal Caribbean Cruises Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 10:00AM ET

Royal Caribbean Group (NYSE: RCL) is a leading global cruise vacation company that develops, markets and operates a diversified portfolio of cruise brands. Its primary business includes operating passenger ships for leisure travel, offering itineraries that span the Caribbean, Europe, Alaska, Asia and Australia. The company designs, constructs and outfits its fleet with a range of amenities—from onboard entertainment venues and specialty dining to family-friendly activities and wellness facilities—tailored to mass-market, premium and luxury cruise segments.

Founded in 1968, the company launched its first vessel, Song of Norway, in 1970 and has since introduced several innovative ship classes, including the Voyager, Radiance and Oasis series. Royal Caribbean has grown through both organic fleet expansion and key acquisitions, such as Celebrity Cruises in 1997 and a majority stake in Silversea Cruises in 2018. These strategic moves have broadened the company’s service offerings and strengthened its presence across multiple market segments.

Today, Royal Caribbean’s brand portfolio includes Royal Caribbean International, Celebrity Cruises, Silversea Cruises and other specialty lines. Guests can choose from a variety of voyage durations and itineraries that visit more than 300 destinations worldwide, complemented by shore excursions, beverage and dining packages, and curated onboard experiences. The company also invests in technology and sustainability, with initiatives aimed at reducing emissions, improving energy efficiency and enhancing guest experiences.

Headquartered in Miami, Florida, Royal Caribbean Group operates offices throughout North America, Europe, Asia and Australia. As of early 2023, Jason T. Liberty serves as President and Chief Executive Officer, succeeding long-time leader Richard D. Fain. Under this leadership, the company continues to pursue strategic fleet modernization and environmental stewardship while expanding its global footprint.

Royal Caribbean Cruises Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Second quarter adjusted EPS of $4.38 was up 36% year‐over‐year and topped guidance by $0.33, leading to a raised full‐year forecast of $15.41–$15.55 per share for a 31% growth outlook.
• Positive Sentiment: Strong demand drove a 6% capacity increase delivering over 2 million vacations (up 10%), net yield growth of 5.2%, load factor of 110%, and elevated onboard and pre‐cruise spending supported by digital channels.
• Positive Sentiment: Operational leverage and cost discipline resulted in net cruise costs excluding fuel rising just 2.1% (180 bps below guidance) and full‐year cost growth slashed to 0.3%, bolstering margin expansion.
• Positive Sentiment: Management emphasized a robust growth pipeline with seven new ships (including Star of the Seas and Celebrity XL), a growing portfolio of private destinations, entry into river cruising, and digital/AI investments to enhance the guest experience.
• Negative Sentiment: The late‐quarter delivery of Star of the Seas is expected to create a third‐quarter yield headwind of ~150 bps and a fourth‐quarter drag of ~90 bps due to timing and lower dry dock days.

Presentation

[Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group]

Good morning, everyone, and thank you for joining us today for our second quarter twenty twenty five earnings call. Joining me here in Miami are Jason Liberty, our Chief Executive Officer Naftali Holtz, our Chief Financial Officer and Michael Bailey, President and CEO of the Royal Caribbean brand. Before we get started, I'd like to note that we will be making forward looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward looking statements as circumstances change. Also, we will be discussing certain non GAAP financial measures, which are adjusted as defined, and a reconciliation of all non GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency adjusted basis. Jason will begin the call by providing a strategic overview and update on the business.

[Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group]

Naftali will follow with a recap of our second quarter, the current booking environment and our outlook for 2025. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Thank you, Blake, and good morning, everyone. I am thrilled to share our strong second quarter results and updated outlook for the year. Our world class brands and the exceptional experiences they offer continue to resonate deeply with consumers driving both strong demand and excellent financial results. Our second quarter results exceeded expectations, mainly driven by stronger than expected close in demand, a shift in the timing of some expenses and favorability below the line that was mainly driven by the outperformance of our Tuohy Cruises joint venture and lower interest costs. We are also increasing our earnings guidance for the year and now expect adjusted earnings per share to grow 31% year over year.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We are delivering exceptional value to our guests, while continuously raising the bar with a powerful pipeline of industry and segment leading new ships, a growing portfolio of meaningfully differentiated land based private destinations, adding new experiences to our ecosystem like river cruising and deploying unmatched digital and AI innovation to enhance the guest experience and maximize margins. These key differentiators and accelerators are resulting in another significant increase to this year's earnings estimates and accelerating our path to achieving our perfective financial targets by 2027 as we continue to win share on the rapidly growing $2,000,000,000,000 global vacation market. Like we have said before, our ambitions go well beyond Perfecta as our strategic initiatives are designed to drive significant growth for years to come. In 2028 alone, we expect significant benefits from our current strategies, which among many others include the launches of Oasis seven and Edge six as well as full year benefit of ICON four, the full year operation of Perfect Day Mexico, Royal Beach Club La Lapa at full capacity and the first complete operational year of Celebrity River. As we advance our journey to help our guests turn the vacation of a lifetime into a lifetime of vacations, we're already creating lasting memories for our growing guest base and significant long term value for our shareholders.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

I want to thank the entire team here at the Royal Caribbean Group for their passion, dedication and commitment who continue to deliver the best vacation experiences responsibly every single day. Turning to our results and outlook. In the second quarter, our capacity increased 6% as we delivered over 2,000,000 incredible vacations, a 10% increase year over year at high guest satisfaction scores. Net yield grew 5.2%, 70 basis points higher than our guidance that was driven by better than expected close in demand across all key itineraries. Yield growth was split evenly between new hardware and the existing fleet.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Load factor was 110%, two percentage points higher than last year, driven by contributions from new ships and improvements on like for like basis across our itineraries, highlighting the continued strength in demand for our brands. We delivered adjusted earnings per share of $4.38 for the second quarter, which was 36% higher than last year and exceeded our guidance by $0.33 The outperformance was driven by better revenue, a shift in the timing of some expenses and better below the line performance. Naftali will elaborate more on Q2 results in a few minutes. Now I'll provide some insight into the demand environment. Bookings have accelerated since the last earnings call, particularly for close in sailings.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We continue to see engaged and excited consumers with roughly 75% intending to spend the same or more on leisure travel over the next twelve months. At the same time, more than half of consumers tell us they are booking closer to their departure date than they used to. And for the people who intend to travel over the next twelve months, the majority have not yet booked. Our booked position is in line with prior years at higher EPDs for both 2025 and 2026. In addition, onboard spend and precruise purchases continue to exceed prior years.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

These trends are supported by the exceptional strength in our digital channels in terms of both cruise bookings and pre cruise purchases. Our spectacular new ships continue to generate strong quality demand. Earlier this month, we took delivery of Star of the Seas, and I can say that she is just as impressive as we had intended. We look forward to her star studded launch in just a few weeks. Bookings for Star of the Seas and Celebrity XL, which is coming in the fourth quarter, are strong in both pricing and load factor.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We also recently opened the Royal Beach Club Paradise Island for sale, and early demand has been incredibly strong, reinforcing our strategy of delivering exclusive destination led experiences that elevate the vacation value proposition within our ecosystem. We conduct independent research and leverage data points for millions of daily interactions with our customers. We continue to see very positive sentiment from our customers bolstered by strong labor markets, high wages, surplus savings and elevated wealth levels. Overall, consumers remain financially confident with three out of four indicating that they feel financially secure. Leisure and travel spend continues to grow and leisure travel continues to be the number one category when consumers plan to increase spending over the next twelve months.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

That's outpacing dining, live entertainment, shopping and even self care. We are also seeing strong intent across demographics, particularly among millennials and younger, who continue to represent half of our customer base. They not only express a desire to travel more, but are increasingly choosing cruise vacations as their preferred way to celebrate meaningful life moments. Roughly seven in 10 consumers in these younger generations are also more likely to book closer to departure, reflecting a desire for spontaneity and flexibility. In addition, more than half of the millennials tell us they are more likely to consider cruising today compared to two years ago, driven mainly by the attractive value proposition of cruise.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Value continues to be a critical driver. Consumers consistently cite cruises as offering excellent value for money, thanks to our all inclusive pricing, high quality products and the unique opportunity to experience multiple destinations in a single trip. And among those who were once skeptical of cruising, a growing share now say they are more likely to consider it than they were two years ago. Meanwhile, repeat cruisers continue to rate cruising as the best value for their vacation spend. With brands that consistently lead in guest satisfaction and vacation options that range from weekend getaways to bucket list adventures on ocean and on land, we continue to deliver on consumers' evolving expectations.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Moving to our outlook for 2025. The year is on track to be another record expected to grow in the range of 3.5 to 4%, supported by new ships, like for like increases and the continued success of our private destinations. Our yield guidance does not factor in a further acceleration of closing demand within the quarter like we have recently seen. If current trends continue, it could lead to further yield growth above our guidance for the second half of the year. Full year adjusted earnings per share is now expected to grow 31% and be in the range of $15.41 to $15.55 The improved guidance reflects our better than expected second quarter performance, lower than expected spend and continued favorability below the line for the remainder of the year.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

In the third quarter, we expect to grow yields 2% to 2.5% on top of almost 8% yield increase in the same quarter last year. Our expected yield growth for the quarter is driven almost entirely by like for like hardware as Star of the Seas launches very late in the quarter after the peak summer season. This timing, along with the operational ramp up period where we purposely limit load factor to ensure an exceptional experience, impacts its contributions and creates a headwind to yield for the quarter of approximately 150 basis points. Our proven formula is working, moderate capacity growth, moderate yield growth and strong cost discipline and is driving significant earnings growth, continued margin expansion and robust cash flow generation. We remain on track to achieve our perfected targets, a 20% compound annual growth rate and adjusted earnings per share through 2027 and a return on invested capital in the high teens.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

But our ambitions, as we said before, go well beyond. We are well positioned for our most ambitious chapter yet. It will reshape the vacation landscape and expand our leadership in leisure travel. It all begins with our world class portfolio of brands, each leading and being the champion of their respective categories, both in trust and satisfaction, while meeting the evolving needs of our guests. We amplify that strength with the most innovative ships, exclusive private destinations and a connected ecosystem that makes planning and enjoying a vacation seamless and rewarding.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Over the next few years, we plan to introduce seven new ships, including Star of the Seas, Celebrity XL later this year, followed by Legend of the Seas in 2026, Icon four and our first Celebrity River in 2027. In 2028, we'll deliver Oasis seven and Edge six, the next shift in the Celebrity Edge class. This steady lineup will support our moderate capacity growth, enhance our global reach and further differentiate our collection of vacation brands. On land, we're expanding our destination portfolio with Royal Beach Club Paradise Island opening in The Bahamas later this year, Royal Beach Club Cozumel at the 2026, then in late twenty twenty seven Perfect Day in Mexico, which is approximately the size of the Magic Kingdom in Orlando, will debut. Earlier this month, we officially closed on our acquisition of the Port Of Costa Maya and are now well underway in bringing this exciting destination to life.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

In 2027, we'll expand the reach of our Royal Beach Club collection to the South Pacific with Royal Beach Club La Lapa. These experiences are located across key strategic markets and are engineered to generate premium yields and returns for years to come. Central to our destination strategy is a commitment to the economic development of these communities, generating thousands of jobs, championing environmental restoration, improving wastewater treatment, conserving local native plants and species and supporting robust recycling programs as well as providing educational and training programs and infrastructure investment in roads and community centers. Our commercial flywheel is accelerating as we deepen relationships with our customers through digital innovation to remove friction, drive commercial opportunities and lower acquisition costs. Repeat bookings are meaningfully rising and cross brand loyalty is accelerating with nearly 40% of all bookings coming from our loyalty members who spend 25% more per trip.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Nearly 50% of onboard purchases are now coming through the mobile app compared to onethree at the 2023. As a reminder, customers who purchase onboard experiences before their cruise spend about 2.5x more than those who do not buy precruise. We are investing in a modern digital travel platform, infusing AI into almost everything we do and investing in enriched data to make it easier than ever for guests to book and design their dream vacations while allowing us to expand wallet share. App downloads have now surpassed 30,000,000 and long term adoption is increasing. We continue to invest in more commercial and experience capabilities, increasing interactions and enhancing commercial features.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Looking ahead, we are incredibly energized by the momentum we are building. These ambitious initiatives reinforce our flywheel, strengthen our ecosystem and unlock powerful new pathways for long term growth as we continue turning the vacation of a lifetime into a lifetime of vacations. I am incredibly proud of our teams at Royal Caribbean Group for their dedication and strong execution. The opportunity ahead is significant, and we're well positioned to lead the next era of leisure travel. And with that, I will turn the call over to Naftali. Naft?

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Thank you, Jason, and good morning, everyone. I will start by reviewing second quarter results. Net yields grew 5.2% in constant currency compared to the second quarter of last year, 70 basis points above the midpoint of our guidance. Yields grew across all key products and were evenly split between new and existing hardware. The yield outperformance was driven by stronger than expected closing demand.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Onboard revenue was higher than last year across all key categories as we continue to see very engaged consumer. In the second quarter, approximately half of our onboard spend was booked before the sailing, with three out of four guests making pre cruise purchases to reserve onboard experiences. In the second quarter, we delivered 2,300,000 incredible vacations. New to cruise or new to brand accounted for approximately 60% of our guests, of which more than half were millennials or younger. Net cruise costs, excluding fuel, increased 2.1% in constant currency, 180 basis points lower than our initial guidance, driven by shifting of timing of spend that will roll into the second half of the year.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Adjusted EBITDA margin was 41%, 300 basis points better than last year and operating cash flow was $1,700,000,000 Adjusted earnings per share were $4.38 36% higher than last year and 8% higher than the midpoint of our guidance. Earnings outperformance was driven by the strong close in demand, shifting timing of spend and favorability below the line. Zero one zero per share of favorable timing of spend is expected to roll into the 2025. As Jason mentioned, demand for our portfolio of brands and industry leading experiences continue to be very strong. Bookings have accelerated since the last earnings call, particularly for closing sailings, leading to the second quarter outperformance.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Our book load factor is in line with prior years and higher APDs. Capacity is expected to grow 6% for the full year and 3% in the third quarter. As expected, capacity in the third quarter is the lowest throughout the year and is impacted by the delivery timing of start of the seas in late August. Looking ahead, fourth quarter capacity growth is expected to be 10%, benefiting from a full quarter of Star of the Seas, the launch of Celeb D XL and additional APCDs due to lower dry dock days compared to '24. The Caribbean represents 57% of our deployment this year and 42% of capacity in the third quarter.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Our leading hardware and private destinations strengthen our competitive position in this market with the introduction of Star of the Seas, Celebrity XL and the opening of Royal Beach Club Paradise Island by the end of the year. Europe will account for 15% of capacity for the year and 28% in the third quarter. Alaska is expected to account for 6% of total capacity and 13% in the third quarter. Now let me talk about our revised guidance for 2025. Our proven formula for success, moderate capacity growth, moderate yield growth and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation this year.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

We are increasing our yield guidance for the year and now expect net yield growth of 3.5% to 4% driven by second quarter outperformance. As Jason mentioned, our yield guidance does not factor in further acceleration in close in demand like we have seen recently, which could lead to more upside if these trends continue. The cadence of yield growth throughout the year as expected is driven by the timing of new ship deliveries and lower dry dock days in the fourth quarter. The impact on yield growth is approximately 150 basis points in the third quarter and approximately 90 basis points in the fourth quarter. Full year net cruise costs excluding fuel are expected to be approximately 0.3%, 10 basis points lower than our prior guidance as we remain focused on efficiency, enhancing margins and maximizing cash flow.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

While we manage our costs more on a yearly basis, the cadence of our cost growth varies throughout the year. This is driven by timing of dry docks, ship deliveries and the ramp up of costs related to our acquisition of the Costa Maya Port and other new private destinations. We anticipate a fuel expense of $1,140,000,000 for the year and we are 66% hedged at below market rates. Based on our current fuel prices, currency exchange rates and interest rates, we expect adjusted earnings per share between $15.41 and $15.55 The $0.43 increase compared to our prior guidance is driven by Q2 outperformance of $0.23 taking into account €0.10 of timing shift of spend and €0.20 benefit from lower spend and below the line favorability for the remainder of the year. We also expect 17% growth in adjusted EBITDA and two sixty basis point growth in adjusted EBITDA margin.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

This positions us to accelerate our cash flow generation, which allows us to continue investing in our strategic initiatives, maintaining investment grade balance sheet metrics and and expanding capital return to shareholders. Now let me comment on third quarter guidance. In the third quarter, we expect capacity will be up 3% year over year and a net yield growth of 2% to 2.5% driven almost entirely by like for like hardware at Star of the Seas launches very late in the quarter. Net cruise costs excluding fuel are expected to be up 6% to 6.5%. Approximately two thirty basis points of cost growth is attributable to the timing of delivery of Star of the Seas and the cost timing shift from the second quarter.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Taking all this into account, we expect adjusted earnings per share for the quarter to be $5.55 to $5.65 Turning to our balance sheet. We ended the quarter with a strong $7,100,000,000 in liquidity. We are in a very strong financial position and will continue to further strengthen the balance sheet. During the first half of the year, we received investment grade ratings by all three major credit agencies, reflecting the strength of our financial position, consistent performance and disciplined capital allocation strategy. We are proud of the hard work that has brought us here and remain committed to maintaining the strong momentum.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

In addition, we amended and upsized our two unsecured revolving credit facilities during the quarter, bringing the combined revolving credit facilities commitments to $6,400,000,000 and extending the maturity of one facility to October 2030. With a strong balance sheet, we are committed to investing in our growth strategies, delivering a competitive dividend yield and opportunistically buying back shares. We have very limited maturities left for this year, all related to ship amortization payments that we plan to repay with cash flow. We also expect leverage to be at mid-two turns by the 2025. In closing, we remain committed and focused on our mission to deliver the base vacation experiences responsibly as we work to deliver another year of strong performance.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

With that, I will ask the operator to open the

[Operator]

Our first question will come from the line of Matthew Boss with JPMorgan. Please go ahead.

[Matt Boss, Equity Research Analyst at JP Morgan]

Thanks and congrats on another great quarter.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Thank you.

[Matt Boss, Equity Research Analyst at JP Morgan]

So Jason, could you elaborate on the continued acceleration in demand that you cited for your brands and experiences? Have you seen any change in July booking trends? And maybe could you speak to the playbook for offense that it seems like you're laying out with investments and initiatives to stay ahead of where demand is going in that $2,000,000,000,000 growing global vacation market?

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Sure. Well, thanks, Matt, and I hope you're doing well. I think just to first start off, one of the things that we have seen of Wade is just this kind of overall acceleration in closing demand, which is a little bit different. We've seen closing demand acceleration, but we have seen that kind of further shift in behavior, which I I commented is not something we typically contemplate in our forward looking guidance. And that's it's not just on the ticket side, it's also what we're seeing on onboard spend.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We holistically as we get to see millions of spending activities per day, we're we we see a very healthy customer. And when we dig into that customer, they have strong they have great jobs, they have strong balance sheets, and they're confident in spending and making sure that they're receiving vacation experience that they're looking for. So again, I think all turns are green on the customer at this point in time. And they're traveling all over the world. We're seeing that not just in North America, but we're also seeing that in European travel activity.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

I think as we think about going on the offense, I think first, just grounding that, ultimately, what we're trying to do and what we always do is we orbit ourselves around our guests, around our customer. You know, we focused on this. I know it's a it's a the tagline of going from a vacation a a a a vacation of a lifetime to a lifetime of vacations. But it's very important for us as we think about how do we increase our repetition with our customers. And you're already starting to see signs of that offense coming forward here with an increase in the number of loyalty members that are sailing with us that has now inched up to 40%.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

So we're trying to increase repetition, which ultimately will lead to an increase in lifetime value of the customer, lowers our acquisition costs and positions us to close the gap further to land based vacation. So we are chasing closing that gap to of the industry is probably around $80,000,000,000 $85,000,000,000 on the $2,000,000,000,000 leisure market that is out there. We're doing that in several ways. Obviously, when you look at it on a on structural items like ships, like, we're excelling in the core. So we're investing in growing our fleet.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

You know, we have, I think, a very clear reputation of designing and building the most innovative ships and not just the industry, but also in our respective segments. We're continuing to grow our brands. We're modernizing our fleet so those ships are, highly competitive and are in line with what the customer of today is looking for. We are meaningfully investing, in destination experiences. You know, we have three announced Royal Beach Clubs.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We have one announced Perfect Day, in Mexico that we're building in addition to the one that we have in The Bahamas. Again, you know, meeting our customers, what they're looking to do, and we're able to do that not just by benefiting from the volume, but also enhancing the guest experience as those destinations tend to be the highest rate destinations, that are out there. We're also expanding the experiences that we're delivering, right? And you can see that in our in the addition of River in 2027 and also even even in the hotel that we're building in the Southern part of Chile, which creates differentiation in anyone who looks who's looking to visit Antarctica. And then lastly, all around this, is heavily investing in our commercial apparatus.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Right? So it's what is interacting with our guests, each and every day, and we're utilizing disruptive technology like AI and other and other tools, to be able to million you know, to manage 15,000,000 price points a day and and to be able to listen to what our customers are looking for and curate what our customers are looking for, that are relevant to them, that enhances the experience for them, takes friction out of the experience and also allows us to be more efficient and gain more margin. And then the other thing I would just add is we obviously, last year, rolled out our, our our integration across our brands on loyalty. We are focused on loyalty that matters, loyalty that that really impacts guest behavior. So it has to be something that they appreciate, and, it keeps them inside of our ecosystem.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

So I I just kinda laid out, like, you were to look at, like, where we're investing in terms of especially what we've announced, you know, that's what we're doing in order to make structural differentiation, deepen our moats, continue to lead. And again, ultimately, our focus is not what's happening on the cruise competitor side. Our focus is on how do we close that gap to land based vacation because every one percentage point is worth a tremendous amount of money, to the company, and to our shareholders.

[Matt Boss, Equity Research Analyst at JP Morgan]

That's great color. Maybe as a follow-up, Naftali, near term, what have you embedded for close in demand in the back half relative to the outperformance that you saw in the first half? And then with more than 30% earnings growth now forecasted for this year, that's well above your Analyst Day CAGR. Just any puts and takes to consider as it relates to the phasing of investments multiyear beyond this year?

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Hi, Matt. So as we said in the prepared remarks, we gave guidance based on what we've seen in terms of bookings. But as we said, we have seen acceleration. And so to the extent that there is further acceleration of closing demand, obviously that creates an upside for the second half of the year. Also remember, we're fairly booked for the year.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

So we're kind of closing out a very successful year and now obviously focusing into next year towards in a couple of months. In terms of what's embedded in the in our plans, so as you know, we've announced Perfecta, and this is a 20% annual compounding growth of earnings through 2027. And everything that Jason just mentioned in terms of investments in ships, destinations, technology, modernization of our ships is really what's driving that moat and differentiated performance. Now this year is obviously higher than that 20% CAGR, and so this positions us very well to achieve our Perfecta targets. And so the formula is working and that's really what we're focused on moderate capacity growth, moderate yield growth, strong cost control that obviously drives earnings, drives cash flow, and allows us to execute on our plans.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

One of the things that is important, and we said that also when we announced Perfecta, when we put out these targets, we did not embed any share buybacks into those plans. And so as we get the balance sheet to the range and it is already within the range, obviously, we will be focused on capital return as a supplement to that growth. And that is in the form of share buybacks, which we will opportunistically do and of course dividend. And we're very focused on competitive dividend. Now competitive dividend brings value to the shareholders, but obviously does not factor in into earnings per share itself.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

But as you kind of look at it together, that's another area of that. And at the end of it, as Jason mentioned in his prepared remarks, Perfecta is just, for us another milestone, but definitely not our ambition. And we laid out just in 2028 tremendous tailwinds that we have from all the new ships and destinations that are coming online. So we're very much focused on building the moat and long term shareholder value.

[Matt Boss, Equity Research Analyst at JP Morgan]

Great color. Best of luck.

[Operator]

Next question comes from the line of Steven Wieczynski with Stifel. Please go ahead.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Yes. Hey, guys. Good morning. So Jason, want to go back to the second half of the year guidance, which obviously you talked a lot about. It doesn't incorporate any benefit from close in booking momentum or kind of what you've seen in terms of onboard spend. So let me try to ask this question a little bit differently than Matt just kind of asked. But let's say, Jason, hypothetically, close in demand stays as strong as what you've seen recently, and it sounds like given the feedback that you guys have gotten from your customer base, that's not going to change, and onboard kind of stays the same way as well. Is there a way to think about what that would to yields in the back half of the year?

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

And I guess I'm probably just a little bit surprised that the when you think about the third quarter being able to grow, let's call it, 4% on a like for like basis when you include the start to season impact off of a plus 8% last year. To us, that's kind of impressive. But I guess what I'm trying to figure out here is what could that mean for yields if everything kind of stays status quo? Hopefully, that kind of makes sense.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Yeah. Yeah. Well, thanks for the question, Steve. And of course, it's even if you look at the third quarter, I'm doing this from memory, but I think 2023 was close to 17% and last year was close to 8% on on a yield improvement standpoint. And and we do have we we we try to articulate if you had a full quarter of star, like, what that would what that would have looked like for us as all the all the q three is being driven by, like for like demand generation.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

So I mean, the answer is that if we see similar patterns, the answer is that the back half of the year will be better. As Nav just commented, I mean, we are very well sold into the year. And so there's always the opportunity as we think about even in third quarter, a couple of points load factor that we still have left to build. There's opportunity there and then that opportunity would be larger in the fourth quarter. But we typically, when we think about our forecast, we do try to do a fifty-fifty forecast.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Also, we put a forecast together, we typically want to look more than just a couple of months of of of demand points to to kind of set that going forward. So we do see the similar demand patterns. You know, the, you know, the answer is it's it's better. It's tough to actually quantify. If I could have quantified it, then we probably would have put that into our guidance for the year.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

But I think the main takeaway is that the consumer is strong. There's strong demand for our brands. We're I think we have a very strong handle on costs and on our capital on where we're investing. I think it's very clear where that is, and it's there to not just support the business, but to continue to differentiate the business. 30 plus percent earnings growth year over year is pretty spectacular, I think.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And it's just another adding testament to how we keep finding opportunities to do better. And we're never satisfied as our investors are never satisfied, I'm sure. So we're always looking to do more. And I think all these investments that will play itself out here over the coming years, especially on the destination side, really has an opportunity to have a really significant step change in earnings power.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Okay. That's great color, Jason.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

And then second question, going back to Perfecta. Obviously, you've talked about how that's on track at this point. But, you know, those targets obviously end in 02/1927. So, you know, you mentioned all of these positive things that are to be coming online in '28 that are gonna help you guys out, whether that's Perfect Day Mexico, Oasis Class Icon, River Cruising, other private islands, and the list kinda goes on. So, I guess my question actually is, as you guys are sitting here today, should we think that 2028 could see earnings growth at least in line with your perfected targets? I'd probably even say maybe if not, you know, higher than that?

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Well, I I think it's, I appreciate you pointing it out. Obviously, lot of these investments, take time, to design, and and and build and and bring them online. And, of course, when we bring these things online, we're very thoughtful in the ramp up, because, you know, we, you know, we only have one one chance as they as as my as my mom said, you'll have one chance to make a good impression, on on on somebody. And so we're we're really thoughtful about that. And so I think to your point, you look into 2028 and you see, you know, basically, I I mean, we've all seen the power of Perfect Day in The Bahamas.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Wait until we see Perfect Day Mexico, come to life, and the World Beach Clubs come to life. And now we have River. And, of course, you know, we ramp up from two ships in '27 to four ships in 2028. And, of course, it's probably too early to talk about exactly what that all means, but it it it is it should result in a significant step up on the earnings power as we think about that. And none of that, of course, takes into account when we think about capital allocation.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Naf mentioned us obviously, significantly I mean, we first, of course, are investing in growing our business, but we take very seriously shareholder returns through a competitive dividend and buy back shares. Any share buyback consideration is not something that is contemplated, which will just be another, I think, significant tailwind to earnings per share growth.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Okay. Thanks, Jason. Appreciate it.

[Operator]

Our next question comes from the line of Connor Cunningham with Melius Research. Please go ahead.

[Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC]

Hi, everyone. Thank you. Just on loyalty, you've been talking about a lot more and obviously, one of your competitors is speaking about it a little bit as well. When when I look when when when we're talking about closing the gap to to land based, you know, and whatnot, a big gap, I think, is on the co branded credit card program and then maybe the loyalty program optimization in general. So if you could just talk about the opportunity set there and how you envision that?

[Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC]

I don't think your credit card is tied to your loyalty program currently. If So you could just talk about that a little bit, I think that could be helpful. Thank you.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Sure. Sure. But we do have a cobranded credit card. It is tied today to our loyalty program, but not in the way that fits our ambition. And so we're very closely working with our co branded credit card provider, and I think you're going to see something very meaningful coming out of that very, very soon.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

At the end of the day, we have this great opportunity that we sit on a lot of quality data. We have a lot of interactions with our guests. Our guests are telling us what are important to them. We don't have a business consumer here, right? So we don't have that frequency of a business consumer in the world of you earn and you burn, you earn on the business side, you burn on the consumer side.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And our guests are very focused on recognition and also being incentivized for the spend and the loyalty that they provide. And so we are I mean, if you've spent time in our app and if you've spent time seeing how we're interacting with our guests, especially in the loyalty program side, we are, you know, very tuned into and and and have a lot of plans on what are things in which our guests or our brands feel is a value to them that would result in them behaving even more loyal to us. And we've already seen a shift of a couple of months just in their behavior with us, which is why there was a 40% of our guests in the third quarter that were loyalty members. So loyalty, I think, is very important. I think people wanna be recognized.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

They wanna and not just recognized for their spend today, but recognized for all that they have done, in the past. And then we need to make sure we're creating an environment across our brands to make sure that in their lifetime of vacation that we have the right vacation experience that is relevant to them, and that, you know, that they're they're benefiting from continuing to stay inside of our ecosystem. At the end of the day, I look at loyalty as I look at loyalty with our employees and everyone else is it's a two way street. And our guests should feel that they always wanna stay inside of our ecosystem. And if somebody goes outside of our ecosystem, to another cruise competitor or to somebody else on on on land, then we should we should look at that as a as a fail.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And I think our teams have done such an exceptional job at engaging and putting things in front of our guests that they value and incentivizing them, which is now resulting in even more and more repetitions with our guests.

[Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC]

Okay. Appreciate it. And then maybe I could ask just for a clarification on the drag from the timing of Star of the Season. So is there anything embedded in fourth quarter from Celebrity XL, Star? Does anything linear from Star of the Season there from a load factor perspective?

[Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC]

The only reason why I ask is if you strip out a lot of the noise, I think that's kind of happening. Like core pricing is actually exiting very, very strong. So I'm just trying to understand, where core is for some of these timing issues that kind of out there. Thank you.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Yeah. You're right, Connor. So, most of the impact of Star is really in the third quarter. In the fourth quarter, we have two things that I pointed out. One is Celebrity Excel starts in mid November, so that's obviously just mid quarter.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

So you have that and you have to get it ready. And so that and obviously, ramp are up. So similar to what happened with start in the third quarter. But also recall that last year, we had a pretty heavy dry dock year. And so we usually take our dry docks in the lower yielding periods.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

And so last year in the fourth quarter, we had more dry docks than this year. So that's actually a drag on yield as well. And so together, we quantify that as roughly 90 basis points between timing of new ships as well as dry dock days.

[Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC]

Okay. Thank you. Appreciate it.

[Operator]

Our next question comes from the line of Robin Farley with UBS. Please go ahead.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Great. Thank you. Just looking at the full year guide, I mean, Q2 great results, your commentary is very positive. Why at the top end of the yield range? What's your change in thinking there that the top end of the yield range came down a little for the year?

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Yes.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

I would just say, Robin, when we gave guidance last, we expanded the range. There was a lot of noise in the system geopolitically that resulted in us just widening that range to give kind of investors a sense of what that could be. Obviously, were others in travel leisure that pulled their guidance. We expanded our range just to give, you know, kind of where potential outcomes could be. So really, what you see in our in our range is a reflection of our historical practices.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

At this point in the year, we're typically plus or minus, you know, seven, you know, points there and that's that's what we provided. 70 yeah. 70 points. 70 basis points.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

So if we think about kind of that, obviously, in April, it's a very active sort of geopolitical, headlines all going on. I guess I'm just trying to think how we should interpret the that you're how you're feeling at the sort of most optimistic end versus a quarter ago because it seems like some of the hotel companies have called out things improving in July relative to where they were in that sort of April, May period. So just trying to think how we should view your commentary or your yield change at the top end.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Yeah. Well, I think that one of the differences between only cruise and hotel and even airlines is just what percent booked we are within a period. So I don't think it's in terms of the opportunity, it's probably not sort of the same on hotel and airlines because of household we are in the quarter and household we are for the end of the year. But as I said with that range, that range is a reflection of fifty-fifty on our forecast. And there could be if you want to take the optimistic side, if we continue to see strengthening and closing demand, that would be likely the optimistic side of why it could be towards the top end or better.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Yes. Think I don't recall exactly, but I think most of the some of the hotel companies also may have reduced their guidance in the first quarter. We kind of regardless, we kept it the same. We actually increased it, if you recall. And we really widened this to account for the geopolitical outcomes, the noise that was there and the outcomes it could have.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

And really now we're just going back to normal, right? This is typically what we do through the year.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Thank you. And just one quick follow-up. Would you say that your onboard spend because I know some of the way it's reported can be impacted by sort of how you allocate accounting things. Just broadly speaking, is growth in onboard spend still higher than growth in ticket price? Or how should we think about that relationship?

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

I would say that we're seeing very similar trends on ticket as well as on onboard. Obviously, both of them competing against very, very significant comps. But what we're seeing in terms of where the consumer is spending while they're on the ship looks very similar except that it's stronger. We're also benefiting that every day we get more and more pre cruise sales activities. And we're still in the very early innings of being effective in curating that and getting our guests to book to plan their vacation experiences earlier and earlier.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

That as I mentioned in my comments, you then typically see a significant increase in overall spend because they basically have paid that bill and they've moved on to new activities and new memories they want to create on the ship.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Great. Thank you.

[Operator]

Our next question comes from the line of Brandt Mondor with Barclays. Please go ahead.

[Brandt Montour, Director - Equity Research at Barclays]

Good morning, everybody, and thanks for taking my question. So the first question is on the Royal Beach Club. Maybe you could just talk a little bit about the operational expectation for that destination out of the gate. You guys gave prices out to the market a little bit ago. Wondering maybe the feedback from the travel agent community as well as the pre bookings you're seeing, if that sort of points to full utilization potential out of gate, prices are dynamic or if that's even the goal.

[Brandt Montour, Director - Equity Research at Barclays]

How should we think about the ramp up to the destination?

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Thank you, Brent. I'm so happy you asked that question. We opened for sale in a few weeks ago. Sales are very strong. Interest is very high.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Our first sailing will be in December 21, which will be great timing for the holiday period. Construction is all on target. It's looking great. And we send drones over and share that with with the team on a regular basis. It was really looking impressive, especially the world's largest swimmer bar.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

So it's going to be a a winning product, a great destination, and we're very excited about what we're seeing in terms of activity. Prices start from around $139 It is dynamic because we've got a lot of capacity coming into Nassau and some days will be different from others in terms of the overall Royal Caribbean capacity the port. So we've got dynamic pricing. We've got different packages available, and we've been extremely pleased with the sales to date. I do have to share one interesting story, which is in the first hour when we opened for sale, we sold our Ultimate Family Cabana for one day at 10,000 which which was quite remarkable.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

And subsequently, we've sold a lot of days in the Ultimate Family Cabana at $10,000 So we we really do think we've got the product right, and we think it's going to deliver very high levels of guest satisfaction. So we're excited for the beach club in Paradise Island, and we're equally excited for the beach club in Mexico, La Lepa, and of course, the really big thing, which is of course Perfect Day Mexico in full year 2028.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And Brad, I just want to add in terms of on the ramp up side, we have a very thoughtful formula for this where it's not about a question of demand. It's a question of operational excellence. And so it will be in terms of the actual number of people we take will be meaningfully less as we start and then build up into the first quarter and then into the second quarter. We want to make sure the experience is flawless in what we're doing. So it's while we could probably make more money, the trust that we establish with our customers is a high priority.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And so it will be a slow ramp up like they typically are in any new experience or destination or ship that we bring online.

[Brandt Montour, Director - Equity Research at Barclays]

Thanks for that. That's super helpful, both. Second question, Jason, I feel like you covered the closing demand strength from a number of different angles this morning. I'm struggling between two different narratives on that. Is that one, is that maybe at the expense of longer term bookings and potentially compressing booked lead times?

[Brandt Montour, Director - Equity Research at Barclays]

And would that be sort of a function of either mix younger consumer or you know, residual effects from the tariffs and the macro impacts the last few months? Or is it just, again, more more incremental demand that you're seeing from that younger consumer and and while and at the same time, you're seeing 26 bookings sort of plow along as planned? I don't know if those two things are or if there's a third, but if you can help me sort of understand what you guys are trying to get at with that commentary.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Yes.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Brandon, as I've said this in the past, we never get our yield management perfect. Even with all the technology, we always there's always money we leave on the table. And I think one of the things you just I think the reality of what we have left to sell is little. And I think because we are half of our guests are millennials or younger, there is a reality that they do book closer in. We have more of the shorter product going to great places like Perfect Day and soon Royal Beach Club, which will have them lean a little bit more closer in.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

But in my remarks, just commentary around 2026, right, we're in line with same time last year at higher rates, I think, should give you an indication that demand is actually quite healthy and is keeping pace and guests willing to pay more is certainly there. So I would I think it's really two different things. I think it is a little bit of a younger consumer. And the second piece of it is that confidence in making sure that people are getting the vacation experiences that they want, that people are willing to plan thoughtfully out into the future.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

I think also this is Michael again. I think also another consideration is the increase in the short capacity that we've seen, particularly that goes to Perfect Day. And for the Royal brand, which we have a lot of short cruise capacity, we've got Utopia now sailing out of Port Canaveral in the three and four day market and now Wonder of the Sea. So the second Oasis class ship will be starting soon out of Miami doing the same thing. That takes those those two ships alone in terms of just volume is around, you know, thirty thirty thirty thousand guests a week just on those two ships.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

So they're going to Perfect Day. So I think that also is beginning to skew the how people perceive their booking window because it's kind of a it's a great weekend. We call it the big weekend and people just decide later on to jump on board and have a great time. And we see a lot of repeat on those products as well. It's a great weekend.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

When we open up the Beach Club, which complements Perfect Day, that big weekend is getting even bigger. So we think that that's part of the kind of the evolution of the business.

[Brandt Montour, Director - Equity Research at Barclays]

Okay. Thanks, everybody.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Thank you.

[Operator]

Our next question comes from the line of Ben Chaikin with Mizuho. Please go ahead.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Hey, good morning. Thanks for taking my question. One on Nassau quickly. You know, you've previously given us some preliminary kind of targets or expectations for volume, but how did you think about the attach rate using, you know, royal Nassau visitors in the denominator, if you will? Meaning, is this 25% adoption, 50% adoption?

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

And I asked this in the context of, you know, Coco seeing three and a half million guests or more, presumably a lot of them going to Nassau. So understanding there's a ramp, kind of as you get going, just any way to frame the attach rate based on the volume numbers you've given us the last few quarters?

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Yes. I think our current thinking is when you look at the volume, they're going to bring in 26 into Nassau, which is give or take around 3,000,000 guests and the overall capacity of the Beach Club will be around give or take 1,000,000 then you're looking at 33% of our guests, we think, will be more than happy. And I mean, I think what we may experience is more demand than supply with the beach club in Nassau. We're going to have to and obviously, that's why dynamic pricing is going to play a very important role in that product. But we we think we've got the the numbers perfectly right.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Understood.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Very helpful. And then, Jason, you made a you kind of I made a pretty interesting comment earlier in the call. Mentioned that Costa Maya is gonna be the same size as Magic Kingdom in Orlando, if I caught that right. I'm presumably, you meant that in terms of acreage. I mean, to the extent you have anything to share on amenities, you can kinda, like, float to us understanding this is still several years away.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

I don't know if that was, like, a little bit of a metaphor or whatnot.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

I think it it is in terms of, like, the actual footprint of Perfect Day in Mexico. And I think it's to have people understand the the ultimately, the scale of what's going to be there. Of course, you know, we're going to deliver that with much, much fewer guests than the guests that visit the Magic Kingdom. Right? Because it's we're super focused on that everybody has this perfect day.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And I would I would very much point everybody to to just go on to YouTube and and watch the the videos that we put out from from our event in last May on what perfect day Mexico is going to look like. And it it delivers a perfect day, I think, pretty much everybody, whether you're looking to go down the world's largest lazy river, whether you're looking for kind of that Vegas beach party, just some fun in the sun, relaxation, family and and incredible pools and and and so forth. You know, there's so much that's gonna that's gonna be done, it's curated like we do very well on our ships into different neighborhoods so people can kind of experience with with who they would like to to experience that with. And and that's what we do. Right? I mean, you know, Michael and his team, are heavily focused on designing that perfect day. We clearly delivered down in The Bahamas, and we're gonna do that in Mexico for even more people.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Lastly, I'll just say, I mean, it also opens up this incredible catchment area or for, you know, deeper into markets like Texas and the West Coast and even the Midwest that will will be able to lessen where they spend their share of wallets, on potential air travel and and other travel to shift it to make it more affordable for them and potentially more wallet share for us.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

And more importantly, it has the world's largest sombrero.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

That's definitely important. Did 3Q have Costa Maya cost in the NCC number?

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Yes, does. And so we just closed on it. And obviously, we'll operate it for quite some time until we start development. So yes, and that's part of the headwind. We didn't really call it out in the release or in our prepared remarks, but there is extra cost for that.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

And obviously, for Paradise as well as we ramp up the Beach Club to open up in December, there are some costs there with obviously no APCDs.

[Operator]

Our final question will come from the line of Vince Cipio with Cleveland Research Company. Please go ahead.

[Vince Ciepiel, Senior Research Analyst, Partner - Lodging, OTA's, Cruise, and Luxury at Cleveland Research Company]

Thanks. I wanted to unpack River a little bit more. I know it's still a ways away, but I think at some point in the second half of this year, get a little bit more clarity on what the itineraries and offering might look like. And as you're ninety days further into exploring what that could look like for you, any big picture thoughts on just conviction level of getting to 35, 40 ships, river capacity to do so and, and being able to curate a great experience shoreside for guests when considering birthing rights, etcetera.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

Yep. Well, thanks for the question, Vince. I I wish I wish Laura was here because, you know, she could probably talk a little bit about it more in detail. And she would also tell you that I bother her every single day on how do we get as many ships up as soon as possible. And that's not just a reflection on us now getting comfortable with it operationally, having a very strong idea of all the different destinations, not just in Europe but around the world where we can go out and deliver this incredible river experience.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

We're pretty well baked with the ship design, which we are very confident will be a meaningful differentiator to what is currently available out there. And there's a lot of like, you know, spacers. You know, this is a we think a very underpenetrated marketplace. And so there's room for everybody to grow and grow successfully, but we're going to elevate this. So I would say that we feel very good about the destination experience that Celebrity is going to offer here, not just on the ship itself, but also on land.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And I think it's just I'm probably more focused on how do we get it done faster. And and and but, you know, our teams are being very thoughtful about that. It's gonna be a, I mean, great vacation experience for our guests. And I think the last point I just wanna make about the what brings such confidence is when we announced this and and we kind of get our our our customers coming forward with wanting to be on it as soon as possible and us starting to kind of build up lists of customers who wanna go on. It's gonna it would take us a long time to satisfy that level of demand.

[Jason Liberty, President, CEO & Director at Royal Caribbean Cruises]

And so, you know, we wanna make sure that we can deliver these experiences to our guests, and we have to challenge ourselves, not just because we can make some more money on it, but, we need to we need to meet that demand for our guests who are looking to have that river experience from our, our celebrity brand.

[Vince Ciepiel, Senior Research Analyst, Partner - Lodging, OTA's, Cruise, and Luxury at Cleveland Research Company]

Great. Thanks. One other just kind of housekeeping question. Thinking about CapEx, 5,000,000,000 for the year, I think, onesix of it's not new build, but some Costa Maya in there as well. When you think about the Perfecta plan, is that $5,000,000,000 like a good annual number to use for 2026 and 2027 and a similar mix of non new build and new build as we're thinking about the path ahead?

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Yes. So we're not providing guidance, obviously, for the next couple of years. But on the shipbuilding side, it really depends on the ship deliveries. And so this year, have two fairly large ships, right, both starting the season and Celebrity XL. You can go and see kind of what 2627 are.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

There are only one ship right there. And on the non ship CapEx, we there are a couple of elements there, and obviously, we'll provide more guidance as we get closer to '26. But we have kind of our core investments in maintenance and other initiatives that are typically very stable in a way. And then you have, the destination, so that ramps up depending on the year. This year, obviously, is Paradise.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Next year, we'll have Cozumel and Costa Maya. And obviously 27% will be heavily on Costa Maya. We have modernization programs. And so there are other elements to make sure that we are getting through to perfect that in kind of our long term targets. But I think the most important thing is the company now is very large.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

We're generating a lot of cash flow. So even after CapEx, we have excess cash flow that obviously will be focused on getting making sure that the balance sheet is intact and then supplementing all that growth with capital shareholder returns.

[Vince Ciepiel, Senior Research Analyst, Partner - Lodging, OTA's, Cruise, and Luxury at Cleveland Research Company]

Thanks, Manav.

[Operator]

And

[Operator]

I will now turn the conference back over to Naftali Holt, CFO for closing remarks.

[Naftali Holtz, CFO at Royal Caribbean Cruises]

Thank you. We thank you all for your participation and interest in the company. Blake will be available for any follow ups. We wish you all a great

Participants

Executives

• Jason Liberty, President, CEO & Director
• Naftali Holtz, CFO
• Michael Bayley, President and CEO of Royal Caribbean International

Analysts

• Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group
• Matt Boss, Equity Research Analyst at JP Morgan
• Steven Wieczynski, Managing Director at Stifel Financial Corp
• Conor Cunningham, Director – Travel & Transports Research at Melius Research LLC
• Robin Farley, Managing Director - Leisure Analyst at UBS Group
• Brandt Montour, Director - Equity Research at Barclays
• Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.
• Vince Ciepiel, Senior Research Analyst, Partner - Lodging, OTA's, Cruise, and Luxury at Cleveland Research Company