Royal Caribbean Cruises Ltd. (NYSE:RCL) Q2 2025 Earnings Call Transcript

Royal Caribbean Cruises Ltd. (NYSE:RCL) Q2 2025 Earnings Call Transcript July 29, 2025

Royal Caribbean Cruises Ltd. beats earnings expectations. Reported EPS is $4.38, expectations were $4.09.

Operator: Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group Second Quarter 2025 Earnings Call. [Operator Instructions] I would now like to introduce Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Blake Vanier: Good morning, everyone, and thank you for joining us today for our second quarter 2025 earnings call. Joining me here in Miami are Jason Liberty, our Chief Executive Officer; Naftali Holtz, our Chief Financial Officer; and Michael Bayley, 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. 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 T. Liberty: 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 TUI 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.

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 Perfecta financial targets by 2027 as we continue to win share on the rapidly growing $2 trillion 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 7 and Edge 6 as well as full-year benefit of Icon 4, the full-year operation of Perfect Day Mexico, Royal Beach Club Lelepa 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. 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 million 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. Load factor was 110%, 2 percentage points higher than last year, driven by contributions from new ships and improvements on a 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. We continue to see engaged and excited consumers with roughly 75% intending to spend the same or more on leisure travel over the next 12 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 12 months, the majority have not yet booked. Our book position is in line with prior years at higher APDs for both 2025 and 2026.

In addition, onboard spend and pre-cruise purchases continue to exceed prior years. 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 Xcel, which is coming in the fourth quarter, are strong in both pricing and load factor. 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 3 out of 4 indicating that they feel financially secure. Leisure and travel spend continues to grow and leisure travel continues to be the #1 category when consumers plan to increase spending over the next 12 months. 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 7 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 that they are more likely to consider cruising today compared to 2 years ago, driven mainly by the attractive value proposition of cruise. 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 2 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 bucketlisted adventures on the ocean and on land, we continue to deliver on consumers’ evolving expectations. Moving to our outlook for 2025. The year is on track to be another record year with net yield 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 close-in 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. In the third quarter, we expect to grow yields 2% to 2.5% on top of an 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 Perfecta targets, a 20% compound annual growth rate in adjusted earnings per share through 2027 and a return on invested capital in the high teens. 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. Over the next few years, we plan to introduce 7 new ships, including Star of the Seas, Celebrity Xcel, later this year, followed by Legend of the Seas in 2026, Icon 4 and our first Celebrity River in 2027. In 2028, we’ll deliver Oasis 7 and Edge 6, the next ship 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 end of 2026, then in late 2027, Perfect Day Mexico, which is approximately the size of the Magic Kingdom in Orlando, World 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. In 2027, we’ll expand the reach of our Royal Beach Club Collection to the South Pacific with Royal Beach Club Lelepa. 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. Nearly 50% of onboard purchases are now coming through the mobile app compared to 1/3 at the end of 2023. As a reminder, customers who purchase onboard experiences before their cruise spend about 2.5x more than those who do not buy pre-cruise. 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 million and long-term adoption is increasing. We continue to invest in more commercial and experience capabilities, increasing interactions and enhancing commercial features. 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.

Naf?

Naftali Holtz: 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. Onboard revenue was higher than last year across all key categories as we continue to see very engaged consumers. In the second quarter, approximately half of our onboard spend was booked before the sailing with 3 out of 4 guests making pre-cruise purchases to reserve onboard experiences. In the second quarter, we delivered 2.3 million 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 the timing of spend that will roll into the second half of the year. Adjusted EBITDA margin was 41%, 300 basis points better than last year, and operating cash flow was $1.7 billion. 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. $0.10 per share of favorable timing of spend is expected to roll into the second half of 2025. As Jason mentioned, demand for our portfolio of brands and industry-leading experiences continues to be very strong.

Bookings have accelerated since the last earnings call, particularly for close-in sailings, leading to the second-quarter outperformance. 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 Star 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 Celebrity Xcel and additional APCDs cure 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. Our leading hardware and private destinations strengthen our competitive position in this market with the introduction of Star of the Seas, Celebrity Xcel 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. 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. While we manage our costs more on a yearly basis, the cadence of our cost growth varies throughout the year. This is driven by the 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 $1.14 billion 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 260 basis points growth in adjusted EBITDA margin. 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 expanding capital return to shareholders. Now let me comment on the 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 as 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 230 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. 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 $7.1 billion 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 3 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.

In addition, we amended and upsized our 2 unsecured revolving credit facilities during the quarter, bringing the combined revolving credit facilities commitments to $6.4 billion and extending the maturity of 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-2 turns by the end of 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.

With that, I will ask the operator to open the call for a Q&A session.

Q&A Session

Operator: [Operator Instructions] Our first question will come from the line of Matthew Boss with JPMorgan.

Matthew Robert Boss: Congrats on another great quarter. 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 trillion growing global vacation market?

Jason T. Liberty: 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 late is just this kind of overall acceleration in close-in demand, which is a little bit different. We’ve seen close-in demand acceleration — but we have seen that kind of further shift in behavior, which 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. So we — holistically, as we get to see millions of spending activities per day, we see a very healthy customer. 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 the 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. 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. We focused on this. I know it’s a tagline of going from a vacation of a lifetime to a lifetime of vacation. 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%.

So we’re trying to increase repetition, which ultimately leads to an increase in lifetime value of the customer, lowers our acquisition cost and positions us to close the gap further to land-based vacations. So we are chasing closing that gap to — of the industry is probably around $80 billion, $85 billion on the $2 trillion leisure market that is out there. We’re doing that in several ways. Obviously, when you look at it on structural items like ships, like we’re excelling in the core. So we’re investing and growing our fleet. 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. We have 3 announced Royal Beach Clubs. So we have announced Perfect Day Mexico that we’re building in addition to the one that we have in the Bahamas. Again, 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 in the hotel that we’re building in the southern part of Chile, which creates differentiation in anyone who’s looking to visit Antarctica.

And then lastly, all around this is heavily investing in our commercial apparatus, right? So it’s what is interacting with our guests each and every day. And we’re utilizing disruptive technology like AI and other tools to be able to — to manage 15 million price points a day 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, we rolled out our integration across our brands on loyalty. We are focused on loyalty that matters, loyalty that really impacts guest behavior.

So it has to be something that they appreciate and keeps them inside of our ecosystem. So I just kind of laid out like if you were to look at like where we’re investing in terms of especially what we’ve announced, 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 1 percentage point is worth a tremendous amount of money to the company and to our shareholders.

Matthew Robert Boss: 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: Yes. 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 the mail of closing demand, obviously, that creates an upside for the second half of the year. Also remember, we’re fairly booked for the year. 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 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, drive cash flow and allows us to execute on our plans. 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, dividends.

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. 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.

Operator: Our next question comes from the line of Steven Wieczynski with Stifel.

Steven Moyer Wieczynski: So Jason, I 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, if 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 mean to yields in the back half of the year? And I guess I’m probably just a little bit surprised that when you think of the third quarter, being able to grow, let’s call it, 4% on a like-for-like basis when you include the Star of the Seas 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 T. Liberty: Yes. Yes. well, thanks for the question, Steve. And of course, it’s — even if you look at the third quarter, I do this from memory, but I think 2023 was close to 17% and last year it was close to 8% on a yield improvement standpoint. And we do have — we try to articulate if you had a full quarter of Star, I mean what that would have looked like for us as all the Q3 is being driven by like-for-like demand generation. 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 Naf 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 the third quarter, a couple of points of 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 50-50 forecast. Also, when we put a forecast together, we typically want to look more than just a couple of months of demand points to kind of set that going forward. So we do see similar demand patterns. The answer is 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. 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 cost and on our capital where we’re investing. I think it’s very clear on where that is, and it’s there to not just support the business, but to continue to differentiate the business — and 30-plus percent earnings growth year-over-year is pretty spectacular, I think.

And it’s just another, I think, 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 Moyer Wieczynski: Okay. That’s great color, Jason. And then second question, going back to Perfecta. Obviously, you’ve talked about how that’s on track at this point. But those targets obviously end in 2027. So you mentioned all these positive things that are going to be coming online in ’28 that are going to help you guys out, whether that’s Perfect Day Mexico, Oasis Class, Icon river cruising, other private islands, I mean, the list kind of 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 Perfecta targets? I’d probably even say maybe if not higher than that.

Jason T. Liberty: Well, I think it’s — I appreciate you pointing it out. Obviously, a lot of these investments take time to design and build and bring them online. And of course, when we bring these things online, we’re very thoughtful in the ramp-up because we only have one chance as my mom said, you only have one chance to make a good impression on somebody. And so we’re really thoughtful about that. And so I think to your point, when you look into 2028 and you see basically — I mean, we’ve all seen the power of Perfect Day in the Bahamas wait until we see Perfect Day Mexico come to life and the World Beach Clubs come to life. And now we have a river. And of course, we ramp up from 2 ships in ’27 to 4 ships in 2028. And of course, it’s probably too early to talk about exactly what that all means, but it is — it should result in a significant step-up in earnings power as we think about that.

And none of that, of course, takes into account when we think about capital allocation, Naf mentioned us obviously not 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 buyback shares. And any share buyback consideration is not something that is contemplated, which will just be another, I think, significant tailwind to earnings per share growth.

Operator: Our next question comes from the line of Conor Cunningham with Melius Research.

Conor T. Cunningham: 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 I look — when we’re talking about closing the gap to land-based competitors 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 it? I don’t think your credit card is tied to your loyalty program currently. So just — if you could just talk about that a little bit, I think that could be helpful.

Jason T. Liberty: Sure. Well, we do have a co-branded 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. 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. 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 very tuned into and have a lot of plans on what are things in which our guests, 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 want to be recognized. They want to — 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 vacations that we have the right vacation experience that is relevant to them and that 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 2-way street. And our guests should feel that they always want to stay inside of our ecosystem. And if somebody goes outside of our ecosystem to another cruise competitor or to somebody else on land, then we should look at that as a fail. 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 T. Cunningham: Okay. Appreciate it. And then maybe I could ask just for a clarification on the drag from the timing of Star of the Seas. So is there anything embedded in the fourth quarter from Celebrity Xcel, Star? Does anything linear from Star of the Seas there from a load factor perspective? 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 versus some of these timing issues that are kind of out there.

Naftali Holtz: Yes, you’re right, Conor. So most of the impact of Star is really in the third quarter. In the fourth quarter, we have 2 things that I pointed out. One is Celebrity Xcel starts in mid-November. So that’s obviously just mid-quarter. So you have that and you have to get it ready. And so that — and obviously, rents are up. So similar to what happened with Star 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 period. 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 the timing of new ships as well as dry dock days.

Operator: Our next question comes from the line of Robin Farley with UBS.

Robin Margaret Farley: Just looking at the full year guide, I mean, Q2, great results. Your commentary is very positive. Why you 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 T. Liberty: Yes. 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, there were others in Travel + Leisure that pulled their guidance. We expanded our range just to give kind of where potential outcomes could be. So really, what you see in our range is a reflection of our historical practices. At this point in the year, we’re typically plus or minus 7 points there. And that’s what we provided Yes, 70 points 70 basis points.

Robin Margaret Farley: 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 T. Liberty: Yes. Well, one, I think that one of the differences between owning crews 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 necessarily the same on hotel and airlines because of how sold we are in the quarter and how sold we are for the end of the year. But as I said with that range, that range is a reflection of a 50-50 on our forecast. And there could be — if you want to take the optimistic side, if we continue to see strengthening and close-in demand, that would be likely the optimistic side of why it could be towards the top end or better.

Naftali Holtz: Yes. I 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. And really now, we’re just going back to normal, right? This is typically what we do throughout the year.

Robin Margaret Farley: 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 T. Liberty: I would say that we’re seeing very similar trends on ticket as well as on onboard. Obviously, both of them are 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. And 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 moved on to new activities and new memories they want to create on the ship.

Operator: Our next question comes from the line of Brandt Montour with Barclays.

Brandt Antoine Montour: 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 if the feedback from the travel agent community as well as the prebookings you’re seeing, if that sort of points to full utilization potential out of the gate, I know prices are dynamic. Or if that’s even the goal? How should we think about the ramp-up for the destination?

Michael W. Bayley: Thank you, Brandt. 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. 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 the team on a regular basis. It’s really looking impressive, especially the world’s largest swim-up bar. So it’s going to be 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 in 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 was quite remarkable. And subsequently, we’ve sold a lot of days in the Ultimate Family Cabana at $10,000. So 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 Royal Beach Club Paradise Island, and we’re equally excited for the Beach Club in Mexico, Lelepa and of course, the really big thing, which is, of course, Perfect Day Mexico in full year ’28.

Jason T. Liberty: Yes. And Brandt, I just want to add in terms of on the ramp-up side, we have a very, I think, 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, right? 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. 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 Antoine Montour: That’s super helpful, both. A second question, Jason, I feel like you covered the close-in demand strength from a number of different angles this morning. I’m struggling between 2 different narratives on that. Is that — one, is that maybe at the expense of longer-term bookings and potentially compressing booked lead times? And would that be sort of a function of either mix, younger consumer or residual effects from the tariffs and the macro impacts over the last few months? Or is it just, again, more incremental demand that you’re seeing from that younger consumer and at the same time, you’re seeing ’26 bookings sort of plot along as planned. I don’t know if those 2 things are — 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 T. Liberty: Yes. Well, Brandt, 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 is 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. 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 2 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 W. Bayley: 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 3- and 4-day market. And now Wonder of the Seas, so the second Oasis-class ship will be starting soon out of Miami doing the same thing. That takes — those 2 ships alone in terms of just volume is around 30,000 guests a week just on those 2 ships that 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. 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.

Operator: Our next question comes from the line of Ben Chaiken with Mizuho.

Benjamin Nicolas Chaiken: One on Nassau quickly. You’ve previously given us some preliminary kind of targets or expectations for volume. But how do you think about the attach rate using Royal Nassau visitors in the denominator, if you will? Meaning is this 25% adoption, 50% adoption? And I asked this in the context of Coco is seeing 3.5 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 W. Bayley: Yes. I think our current thinking is when you look at the volume we’re going to bring in ’26 into Nassau, which is, give or take, around 3 million guests and the overall capacity of the Beach Club will be around, give or take, 1 million, 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 think we’ve got the numbers perfectly right.

Benjamin Nicolas Chaiken: Understood. Very helpful. And then, Jason, you kind of made a pretty interesting comment earlier in the call. You mentioned that Costa Maya is going to be the same size as Magic Kingdom in Orlando, if I caught that right. Presumably, you meant that in terms of acreage. I mean, to the extent you have anything to share on amenities, you can kind of like flow to us, understanding this is still several years away. I don’t know if that was like a little bit of metaphor or whatnot.

Jason T. Liberty: Well, I think it is in terms of like the actual footprint of Perfect Day in Mexico. And I think it’s to have people understand the — ultimately, the scale of what’s going to be there. Of course, 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. And I would very much point everybody to just go on to YouTube and watch the videos that we put out from our event in last May on what Perfect Day Mexico is going to look like. And it delivers a perfect day I think, for 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 incredible pools and so forth.

There’s so much that’s going to be done and it’s curated like we do very well on our ships into different neighborhoods so people can kind of experience with who they would like to experience that with. And that’s what we do, right? I mean, Michael and his team are heavily focused on designing that perfect day. We’ve clearly delivered that in the Bahamas, and we’re going to do that in Mexico for even more people. Lastly, I’ll just say, I mean, it also opens up this incredible catchment area or deeper into markets like Texas and the West Coast and even the Midwest that we’ll be able to lessen where they spend their share of wallet on potential air travel and other travel to shift to make it more affordable for them and potentially more wallet share for us.

Michael W. Bayley: And more importantly, it has the world’s largest umbrella.

Benjamin Nicolas Chaiken: That’s definitely important. Did 3Q have Costa Maya cost in the NCC number?

Naftali Holtz: Yes, it 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 an extra cost for that. 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 Ciepiel with Cleveland Research Company.

Vince Charles Ciepiel: I wanted to unpack the 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, we have a little bit more clarity on what the itineraries and offering might look like. And as you’re 90 days further into exploring what that could look like for you, any big picture thoughts on just the conviction level of getting to 35, 40 ships, river capacity to do so and being able to curate a great experience shoreside for guests when considering birthing rights, et cetera.

Jason T. Liberty: Yes. Well, thanks for the question, Vince. I wish Laura was here because she can probably talk a little bit about it more in detail. I should 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. 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 space. This is — 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. And I think it’s just — I’m probably more focused on how do we get it done faster. And — but our teams are being very thoughtful about that. It’s going to be a — I mean, a great vacation experience for our guests. And I think the last point I just want to make about the — what brings such confidence is when we announce this and we kind of get our customers coming forward with wanting to be on it as soon as possible and us starting to kind of build up list of customers who want to go on, it’s going to — it will take us a long time to satisfy that level of demand.

And so we want to 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 meet that demand for our guests who are looking to have that river experience from our Celebrity brand.

Vince Charles Ciepiel: Great. One other just kind of housekeeping question. Thinking about CapEx, $5 billion for the year, I think $1.6 billion of it is non- newbuild with some Costa Maya in there as well. When you think about the Perfecta plan, is that $5 billion like a good annual number to use for ’26 and ’27 and a similar mix of non-newbuild and new build as we’re thinking about the path ahead?

Naftali Holtz: 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, we have 2 fairly large ships, right, both Star of the Seas and Celebrity Xcel. You can go and see kind of what ’26 and ’27 are or 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 Next, 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 Perfecta in kind of our long-term targets. But I think the most important thing is the company now is very large. 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.

Operator: And I will now turn the conference back over to Naftali Holtz, CFO, for closing remarks.

Naftali Holtz: 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 day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.