Q3 2025 Royal Caribbean Group Earnings Call
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 and Naftali will follow with a recap of our third quarter, the current booking environment and our outlook for the remainder of 2025.
We will then open the call for your questions with that I am pleased to turn the call over to Jason.
Thank you Blake and good morning, everyone I am pleased to discuss our third quarter results updated outlook and the many exciting initiatives fueling our momentum at the Royal Caribbean Group.
This has been another great quarter for US we continue to see strong momentum across our business powered by accelerated demand growing loyalty and all time high Def satisfaction.
Our commercial flywheel, combining innovative ships distinctive destinations and world class brands continues to drive sustained growth and guests trust and our ability to deliver the best vacation experiences responsibly.
Before getting to the results for the third quarter I want to highlight how we are continuing to build a stronger further leading and more resilient and vacation company for the long term.
We are focused on building a vacation platform that continues to lead the leisure market through innovative ships, a growing portfolio of exclusive destinations technology and AI that enhance every step of the guest journey.
Together these high return investments strengthen guest loyalty and attract new travelers positioning us to win more share of the fast growing two trillion dollar vacation market.
Earlier today, we announced the Royal Beach Club Santorini further expanding our portfolio of exclusive destinations extending our brands reach beyond the ship.
And meaningfully enhancing the guest experience.
This reflects our vision to redefine how the world vacations and together with the Royal Beach Club Paradise Island, Perfect day in Mexico, and others, we expect to increase our exclusive land based destination portfolio from two to eight by 2028.
These initiatives reflect the thoughtful sustained investment behind our commercial flywheel and reinforce the strength of our vacation platform.
Cruising in leisure travel continued to outperform the broader travel industry and we are exceptionally well positioned to capture that momentum.
With a powerful pipeline of strategic initiatives, a strong balance sheet and a disciplined approach to growth we have both the resources and conviction to continue making game changing investments that delight, our customers strengthen our competitive advantage and drive long term shareholder value.
I want to thank the entire Royal Caribbean group team for their passion dedication and commitment that enable us to deliver the best vacation experiences responsibly and to drive exceptional financial results.
Turning to our results and outlook.
Third quarter results exceeded our expectations driven primarily by strong close in demand for our vacation offerings and lower costs.
In the third quarter, our capacity increased 3%.
And we delivered nearly $2 5 million incredible vacations, a 7% increase year over year at high guest satisfaction scores.
Net yield grew two 4% driven by strong demand across all key itineraries.
We delivered adjusted earnings per share of $5 75.
For the third quarter, which was 11% higher than last year.
<unk> will elaborate more on Q3 results in a few minutes.
Moving to our outlook for the remainder of the year our capacity in the fourth quarter is up 10% year over year, and we expect to grow yields two 2% to two 7% on top of a 7% yield increase in the same quarter last year.
Our fourth quarter outlook has been truly impacted due to adverse weather and the unplanned extension of the temporary closure of LABA D. One of our exclusive destinations.
Spite these marginal headwinds we are expecting our total revenue to be up approximately 13% year over year in the fourth quarter.
Full year net yield is expected to grow in the range of three 5% to 4% that's 25 basis points better than our initial expectations in January which highlights the continued strong demand for our brands and the amazing vacations they deliver.
Our yield growth. This year is on top of several years of double digit growth, resulting in an industry, leading 31% yield growth compared to 2019.
This highlights the remarkable transformation of our business and the enduring strength of our leading brands.
Full year adjusted earnings per share is now expected to be in the range of $15 58.
To $15 63.
A 32% year over year growth.
We're also on track to deliver nearly $6 billion of operating cash flow. This year, a significant step change in our performance.
We are a growth company and our proven formula of moderate capacity growth moderate yield growth and strong cost discipline is driving significant earnings growth continued margin expansion and robust cash flow generation.
We remain on track to achieve our perfect targets by 2027, and 20% compound annual growth rate and adjusted earnings per share and return on invested capital in the high teens.
As we've always said perfect. It is an important milestone on our growth journey, but our ambitions go well beyond the combination of our game changing ships on order are growing exclusive destination portfolio advancing our commercial technology platforms that are fueled by AI and disciplined capital management.
Setting up the post perfect era for another step change in the guest experience and financial performance.
Now I'll provide some more insight into what we're seeing in the demand environment.
Consumers continue to prioritize experiences and make room in their budgets for meaningful vacations are independent research combined with millions of daily customer interactions continues to show positive sentiment towards travel leisure and continued growth in spend.
Roughly three quarters of consumers intend to spend the same or more on vacations over the next 12 months and level that has remained consistent for several quarters, while the broader consumer environment has normalized from the exceptional strength over the past two years demand for experiences and leisure travel remains intact.
Cruising offers superior value for money versus alternative options driven by the high quality onboard amenities and services pricing inclusive of meals and entertainment and the opportunity to visit a variety of destinations with the convenience of having everything in one place.
Earlier this year, we announced our plan to launch a new vacation experience celebrity River. The introduction of Celebrity River has received an extraordinary response with all initially available deployment selling out almost immediately.
The majority of book guests, our Royal Caribbean Group loyalty members without prior river cruise experiences highlighting a powerful opportunity to attract new guests to this segment and deepen engagement by creating new vacation occasions with our existing ecosystem.
In fact, the majority of guests shared their primary motivation for booking at celebrity River vacation was the opportunity to experience a new celebrity product driven by the trust and affinity they have for the celebrity brand.
Guests were also motivated by our new reverse ship design and features with most of them expecting superior state rooms ship amenities and outdoor spaces, all hallmarks of the brand.
These early booking patterns are a powerful validation of our strategy to expand the Royal Caribbean group vacation ecosystem.
Creating new ways for guests to experience the world with us while deepening the connection to our family of brands.
We continue to be encouraged by the demand environment since the last earnings call bookings are up on both new and like for like hardware with particular acceleration for closing families book load factors for 2026 remained well within historic ranges at record rates with booked Apd growth at the high end of historic.
<unk> ranges as always we remain focused on optimizing our pricing and yield growth.
Our spectacular new ships continued to generate strong quality demand.
Star of the seas is exceeding our expectations and celebrity excel is shaping up to be the best performing new ship in the brand's history.
The last three years saw unprecedented yield growth and although that creates a high bar for comparables, our proven formula for success, a moderate capacity growth moderate yield growth and strong cost control is expected to continue to drive top line growth margin expansion and substantial cash flow.
While still very early in the planning process, we anticipate earnings in 2026 to have a $17 handle on it.
At the Royal Caribbean Group, we've always believed that clarity and conviction our competitive advantages. Our mission is clear to deliver the best vacations responsibly and our objective is just as ambitious to capture a greater share of the growing two trillion dollar global vacation market by turning to vacation of a lifetime.
To a lifetime of vacations we.
We don't just talk about that ambition, we built a robust multi year plan that shows exactly how we intend to get there.
Through bold high return investments that strengthen our brands elevate the guest experience and create long term value for our shareholders.
That includes our expansion into river the ongoing expansion of our private destination portfolio. The transformational development of perfect day, Mexico and of course, a steady stream of game changing ships.
This quarter, we announced a long term agreement with <unk> securing shipbuilding slots through the next decade.
To continue both companies tradition of innovation.
The agreement confirmed in order for icon five for delivery in 2028 added an option for a seventh icon class ship.
And positions us for a new game changing class beyond icon, making the next stage and Royal Caribbean Group's history, as we continue to redefine the future of vacations.
In a world where digital experiences also defined customer expectations. We're working to set the standard we continue to enhance our digital capabilities to engage customers remove friction from the guest experience and drive incremental revenue.
When we first introduced our App in 2017, the Golar simple gift.
Give guests back the first day of their vacation by eliminating the need to wait in line for onboard reservations.
Since then the App together with our E. Commerce engines has evolved into a cornerstone for our ecommerce strategy transforming from a utility into a powerful platform that drives revenue improves operational efficiencies and deepen guest engagement.
In the third quarter e-commerce visits and conversion rates, both increased double digits versus last year, marking a very strong improvement for these channels.
In addition, a record share of onboard revenue was booked pre cruise with nearly 90% of those purchases being made through our digital channels.
And we continue to redefine loyalty in a way that deepens engagement and provides guests with greater flexibility in how they earn points and status.
Building on the success of status match I am excited to announce points choice. The next evolution and how guests earn and apply loyalty points across our family of brands.
Beginning in early 2026 guests will be able to apply loyalty points to the Royal Caribbean Group brand, they prefer regardless of which brand they are sailing with.
This initiative further strengthens the overall value of our loyalty proposition deepening engagement across our portfolio and reinforcing our commitment to putting the guest at the center of our orbit.
As our ecosystem expands it creates a virtuous cycle of demand value and advocacy.
One that drives both short term performance and enduring growth.
It's a model that compounds over time, and we're just at the beginning of what it can become.
I am incredibly proud of our teams at the Royal Caribbean group for their dedication and exceptional execution.
The opportunity is significant and we're well positioned to lead the next era of leisure travel.
With that I will turn it over to Naftali.
<unk>.
Yes.
Thank you, Jason and good morning, everyone I will start by reviewing third quarter results net yields grew two 4% in constant currency compared to the third quarter of last year 15 basis points above the midpoint of our guidance.
The yield outperformance was driven by the stronger than expected close in demand.
Yields grew across all key products and were mainly driven by existing hardware given the timing of new ship deliveries.
During the quarter a record share of onboard revenue was booked pre cruise nearly 90% of those purchases were completed through our digital channels with the app emerging as the fastest growing driver of engagement and conversion across those platforms.
NCC, excluding fuel increased four 3% in constant currency 195 basis points lower than our guidance as we continue to find ways to better deliver the best vacations without compromising the guest experience.
Adjusted gross EBITDA margin was 44, 6% 60 basis points better than last year and operating cash flow was $1 5 billion.
Adjusted earnings per share were $5 75.
11% higher than last year, and 3% higher than the midpoint of our guidance.
Earnings outperformance was driven by the strong close in demand and lower costs.
As Jason mentioned demand for our portfolio brands and industry, leading experiences continues to be very strong.
Booked load factors remain within historical ranges.
Good rates for both 2025 and 2026.
Capacity is expected to grow five 5% for the full year and 10% in the fourth quarter as.
As expected capacity growth in the fourth quarter is driven by new ships startup the seas and celebrity itself as well as additional ADC DS due to lower dry dock days compared to 2024.
The Caribbean represents 57% of our deployment this year and 63% of capacity in the fourth quarter, a region, where we hold a strong position and are advancing a series of strategic initiatives to reinforce that these.
These include industry, leading hardware shorter and longer attractive itineraries, the upcoming Royal Beach Club Paradise Island, and perfect Day, Mexico.
Our Caribbean capacity is up 6% for the year and 10% in the fourth quarter.
And even with capacity growth in the region, we see continued yield growth with Caribbean yields in the fourth quarter expected to be up 37% compared to the fourth quarter of 2019.
Europe will account for 15% of capacity for the year and 9% in the fourth quarter and is in a strong booked position as European season wraps up.
Asia Pacific is expected to account for 11% of capacity for the year and 13% for the fourth quarter.
Now, let me talk about our updated 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.
We continue to expect net yield growth of three 5% to 4% for the full year driven by gains in load factor and apd across new and like for like hardware.
Full year net cruise costs, excluding fuel are expected to decline approximately 0.1% <unk>.
40 basis points better than our prior guidance as we remain focused on better execution through leveraging our scale and utilizing technology and AI oil while ensuring.
Strong customer satisfaction, and enhanced product offering and vacation experiences.
We anticipate our fuel expense of $1 4 billion for the year, and we have 68% hedged below market rates.
Based on current fuel prices currency exchange rates and interest rates, we expect adjusted earnings per share between $15 58 and.
$15 63.
12% increase compared to our prior guidance is driven by.
Q3, outperformance <unk> of better Q4 performance offsetting a <unk> <unk> impact from recent adverse weather events and the unplanned extension of the closure of <unk>.
We also expect 18% growth in adjusted EBITDA to just about $7 billion and 290 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 returned to shareholders.
Now, let me comment on fourth quarter guidance in the fourth quarter, we expect capacity will be up 10% year over year with net yield growth of two two to two 7%.
As noted on the last earnings call the timing of celebrity Istel's delivery and fewer dry dock days versus last year will unfavorably impact fourth quarter net yield growth by about 90 basis points.
Net cruise costs, excluding fuel I expect it to decline between six 6% and six 1% during the fourth quarter.
Taking all this into account, we expect adjusted earnings per share for the quarter to be $2 74.
The $2 79.
Now I will share insights for 2026, which is shaping up to be another very exciting year for us with multiple strategic initiatives that are already well underway.
2026 capacity is expected to be up 6% as we introduce legend of the seas in Europe next summer as well as benefit from a full year of star and excel.
Capacity growth is higher than the first and third quarter.
Due to the timing of new ship deliveries and dry docks.
In 2026, we expect to have more dry dock days compared to this year.
Partially due to longer dry docks for several planned modernization projects of our existing ships.
Caribbean capacity will represent about 57% of our deployment in 2026.
Our Caribbean products, we have continued to add shorter itineraries building on our success in the last several years enhanced by the opening of the Beach club in Nassau This year.
European Itineraries will account for 14% of our capacity, Alaska and West Coast will account for about 10% and Asia Pacific will also accounts for 10%.
As Jason mentioned book load factors remain within historical ranges at record rates for 2026 bookings.
Bookings for 2026 have come in at Apd, there are nicely higher than prior year, resulting in 2026 booked apd growth at the high end of historical ranges.
Now moving to costs, where.
We remain committed to driving margin expansion supported by strong cost performance, even as we advanced major initiatives throughout 2026, including the opening of the Beach club in Nassau and to build out of perfect Day, Mexico.
Even with these strategic initiatives that way on the NCS metric, while being significantly accretive to margins, we expect anemic cost growth next year.
We continue to focus on improving fuel efficiency and are also hedging our rate exposure next.
Next year, we expect EU ETS to increase from 70% this year to 100% weighing.
Weighing on our energy efficiency gains.
Moving below the line keep in mind that announced dividend and already completed share repurchases refunded through a combination of strong operating cash flow and incremental borrowings while maintaining our commitment to keep leverage below three times.
Additionally, we expect the global minimum tax policy updates beginning January one 2026 to impact us by an incremental couple of hundred basis points.
Taking all this into account, we expect adjusted EPS to have a $17 handle and we will provide more details during our fourth quarter earnings call.
Turning to our balance sheet.
We ended the quarter with $6 8 billion in liquidity and its adjusted leverage was below three times on an LTM basis.
We're in a very strong financial position, which allows us to fund our growth ambitions, while also returning capital to shareholders.
During the third quarter, we issued $1 5 billion of investment grade unsecured notes at five and three eights coupon.
Proceeds were used to Opportunistically finance the delivery of celebrity excel at a lower cost than the existing committed ECA financing as well as refinance other debt.
This was an opportunistic issuance, where we utilized our strong investment grade balance sheet to access the capital markets to finance, our new ship delivery.
We intend to continue to evaluate these types of transactions compared to existing committed ECA arrangements to lower cost of capital and gained tenor.
We have very limited maturities left for this year all related to ship amortization payments that we plan to repay with cash flow.
In connection with the debt offering Fitch upgraded our credit rating to Triple B and S&P update our outlook from stable to positive.
We are very pleased with the recognition of the rating agencies of the strength of our balance sheet and our strong financial performance.
In September we received a cash dividend of $258 million from our joint venture TUI cruises and we expect it to continue to pay a regular cash dividend given its strong financial performance and balance sheet.
Also during the quarter, we repurchased approximately one 3 million shares and as of September 30, we have $345 million still available under the current authorization in September.
The board of directors authorized a 30% increase to the quarterly dividend to $1 per common share.
We remain focused on both growing the company through strategic investments as well as returning capital to shareholders.
Since July 2024, we returned $1 6 billion of capital to shareholders through dividends and share repurchases and we intend to utilize our strong financial position to return capital going forward.
In closing, we remain committed and focused on our mission to deliver the best vacation experience as responsibly as we wrap up another strong year and look ahead to an exciting 2026 and with that I will ask our operator to open the call for question and answer session.
At this time, if you'd like to ask a question press star followed by the number one on your telephone keypad as a reminder, given the number of participants on today's call. We are strictly limiting each person to one question.
No follow ups will be permitted if you have additional questions you must reenter the queue.
First question will come from the line at the Steve <unk> with Stifel. Please go ahead.
<unk>.
Hey, guys good morning.
Good morning.
Good morning, So so Jason you mentioned that 2006, EPS is going to start with the 17 handle it seems pretty clear that 26 bookings demand pricing outlook.
Pretty solid at this point, so look I fully understand you guys arent prepared to give detailed guidance for next year, but as we think about 'twenty six I would assume your company tagline very much remains in place here, meaning look we know capacity growth not set at 6% moderate yield growth I would assume is kind of in that low to mid single digit range and then the disciplined cost control.
Probably means low single digit growth or the near terms anemic.
Some of your structural cost you will be taking on next year. So from a from a high level perspective is that kind of the right way to think about 'twenty six.
Hi, Steve Yes, I think that is a good high level way of saying it I think first to start off with it is early.
Our planning process.
And I actually I, even said I said earlier on CNBC $17 $17 handle does not mean 17 on one.
If you take moderate yield growth.
It's a good cost control or is not used to term anemic, which I think is probably a better description.
How do we think about cost for next year as we are significantly leveraging our scale and leveraging technology and so forth.
To get more and more efficient each and every day because that leads you to yield sizable earnings per share growth ROIC growth et cetera.
Where there is probably a little bit of noise as below the line.
Probably in fuel and so there are there are.
An increase in our in our fuel costs that have.
Compliance component to it.
And then also as we.
As we are managing global minimum tax there is a slight increase in the taxes that we're anticipating to plan, but thats, probably where theres a little bit of a.
Of a disconnect. The other thing is just wanted to add is we're also investing a lot in technology, we're investing a lot in these new destinations.
Going from two to eight and so as we bring these things online Theres also depreciation and other things that could potentially come into play.
Lastly, I would just add as you know we're also leveraging.
To return capital to our shareholders and you saw that from here.
With the raise in our dividend to $1.
And I think you've also seen that as <unk> talked about.
And our buyback of shares and so we are our balance sheets in an incredibly strong position and we are opportunistically.
Buying back shares and we're doing that.
Taking advantage of being able to lever ourselves up to maintain a strong investment grade position.
Maintaining that leverage point that we've said.
<unk>.
To to maintain that rating so we feel really good about.
The book position.
Are the rates that were that they were booking at provide us a lot of rate room and opportunity for next year as we are optimizing our yield profile, while we're growing the business at 6% amount of capacity basis, and bringing on new incredible.
Sure.
Destination experiences with the Royal Beach club here in Nassau, So theres, a lot of really great and exciting things.
And I would say just last one is that we continue to see.
A very strong consumer our guests are their thirst.
For our brands.
For the ships.
For the destinations and the incredible experiences that are incredible crew are delivering.
Is that the very highest level and we see that in our net promoter scores. So we're super excited about.
About the strengthen and and there was a little bit of noise here in the fourth quarter. There were three storms that just wasn't even even in Asia. There was a typhoon in Asia.
<unk> R R.
Some of the land based experience and some of the compensation, we needed to give back but that's.
Not a reflection of the.
The strength that we're seeing.
Our next question will come from the line of Robin Farley with UBS. Please go ahead.
Great. Thanks, and I also wanted to think a little bit about 2026 comments.
Can you clarify.
When you talk about the anemic net cruise cost growth is that sort of anemic.
Because that would sound like sub 2% and is that before we think about the impact of the new destinations are opening in other words would that be in addition, anemic referring to sort of.
Like for like and then there would be more than that and then similar clarification on that.
On the bookings side of things for 2026, it sounds like your price on the books is up year over year and may be booked load is down year over year and I assume that's intentional and maybe you could just kind of give.
Give us some color on that thank you.
Yes, Hi, Robyn, let me talk about the cost expectation for next year. So.
In the last couple of years, we're opening and we have plans to open every year.
Private destination right. So next year is going to be Paradise Island, and Beach club in Nassau and we have a lot of other initiatives that we're doing but at the end of the day the way we manage our costs as we look at where subscribe to our formula and we have the moderate capacity growth Martin deal growth strong cost control, we grow capacity next year by 6%.
So with all this we take this into account and my comments are totally on the total amount and of course, we have those headwinds but on the other hand, we have a lot of things that we're doing we are finding better ways as I noted in my in my remarks to manage the business deliver the experience.
In a more efficient way to technology, just efficiencies in AI and so the way we manage it is all in a total and so my comments are on the on the total cost growth for next year.
Yes so.
And just to put a point on Robin is that the anemic comment includes the structural costs. So it's not.
Not just like for like and include some other Royal Beach Club.
In the Bahamas, as well as we leverage AI and <unk> leverage.
The scale of our business.
On the comment on your question on the booking side of things I think there's a few things to keep into consideration one we've obviously leveraging our incredible ships and leveraging our.
Our private destinations while also considering what the consumer different segments of consumers are looking for we have more short product.
Im coming online next year and those guests book closer in.
And so thats, a little bit of probably what I would say is the.
The year over year comparable on the load factor standpoint is really.
As was what influences that we actually think we're in an optimal.
Our book position. We're at rates that are that are higher than we probably thought that they would be at which I think is a really great thing is we see really strong demand and people are dreaming.
More and more on their vacation experiences and we're also seeing that translate to the onboard spend.
And so we're thoughtfully meeting our guests with the experiences and they're willing to pay for that.
Yes.
Our next question will come from the line of Matthew Boss with J P. Morgan. Please go ahead.
Great. Thanks.
So Jason maybe could you just elaborate on the progression of global demand that you saw over the course of the third quarter any change in momentum at all that <unk> seen in October and maybe to your comment before just drivers that you see supporting 26 bookings at the high end of historical ranges and maybe just if youre seeing anything.
From new customer acquisition.
Sure. So I'll just start off maybe first of all on the on the new customer acquisition side.
First our all of the things that our brands are doing and what we're doing on an enterprise basis too.
To really kind of build out further our commercial flywheel is really working.
So even like the announcement today.
Bob points choice, and making sure that our guests.
When they choose to sell in any of our brands that theyre getting the point that they want on their primary.
And Brennan they have loyalty status.
Yeah. So we continue to evolve things like that or technology or AI tools are getting smarter and smarter. So that we're able to curate what is relevant to that consumer.
And thats drawing in more new to cruise really seeing an elevated amount of increase.
First a brand so we're seeing people shift from other cruise lines to our brands, we've seen an elevated level.
Mount of that and then our loyalty program and what we've been doing to add to that is we're just getting more and more reps.
That consumer and so we're really happy about that.
When you think about just what we see broadly.
You really each of the markets that we're doing business in or that we're sourcing our guests from is doing quite well, we saw a little bit of a pullback from the north here in Canada.
And the early kind of mid part of the year, but we've now seen that that normalized.
Demand from Europe. This summer was really strong in there. They are focused now on booking into 2026 is actually stronger and the reason for that.
When we talk to those those guests and our travel partners is that we didn't have a lot of inventory left in the summer of 2025 for the European consumers that typically book a little bit later, so they're getting a little bit ahead of that curve.
And that's that's really encouraging.
And then but we.
Again, we.
We continue to see in the U S consumer really across all segments, whether thats, our family segment to our ultra luxury segment.
You want to sell with us and until those those demand patterns have been quite strong what I will say is that as these tools develop.
Our forecasting is getting better.
So our ability to predict whats.
What's going to happen.
In a quarter and then close in.
Is getting better as you just kind of marriage between.
And our historical forecasting capabilities is getting closer and closer in terms of its predictability and so I would not.
In any way take that because we hit the high end of our range in Q3, that's we don't guide.
With the with the hope of coming out with some incredible bead, we guide because thats, our best thinking on a point in time, it's a 50 50 forecast.
And that's how we that's how we try to manage the business. We've just studying all collectively been.
In an environment, where.
What we would see.
The forward looking picture was greater than what we saw in the previous picture and we're still seeing that but now we're able to predict better.
Our next question will come from the line of <unk> with Goldman Sachs. Please go ahead.
Hi, there thanks for taking the question.
I just wanted to ask about the Caribbean.
A lot of talk about whether there's ample supply in the region as people move.
More capacity that you know you gave that great start about <unk> and it doesn't sound like you're seeing it but curious just what you're seeing that whether there is over supply and how you think about the.
To set up for 2026.
Yes, well I mean.
It's.
I think it's well known it's been known for some time.
There is an increase in supply in the Caribbean.
Of course, the Caribbean has been working incredibly well for us.
And so im not surprised that there's been a supply increase there, but it is a very manageable increase in supplier. So we have seen it.
It's been a little bit more a little bit more promotional in the Caribbean activities, but for us I think because of our differentiated assets with our ships in our destinations.
And our ability to kind of keep our our guests inside of our ecosystem and we're seeing a draw from other ecosystems coming into our ecosystem.
We were able to not only.
Manage that demand, but we're able to see our guest paint.
Pay up to two experienced some.
Our delivery.
Our next question will come from the line of Brent <unk> with Barclays. Please go ahead.
Great. Thanks, everybody and seeking my question so.
If you look at your guidance for the fourth quarter net yields and you add back the 90 basis points or so from.
The comparisons that you laid out and then maybe add something to the storms you kind of get to maybe something like mid threes.
Exiting the year I just want to know is that the way you would sort of claims in the fourth quarter in terms of how to yield growth is exiting the year through the lens of the fact that there is not much new hardware, helping out there and so maybe this is what we could look at as a like for like exiting the year, but let me note that other puts and takes as we can.
Think of that.
Building our models for 2006.
Yes, I mean, obviously, we're not providing guidance for 2006, but we are going to subscribe to the formula as we just talked about but in terms of how you exited the fourth quarter. Your math is directionally correct. So we did quantify.
The more the more the less dry docks as well as the.
The new hardware and so when you take kind of a more normalized new hardware and like for like you're definitely in the Zip code.
Yeah.
Our next question comes from the line of James Hardiman with Citi. Please go ahead.
Hey, good morning, So maybe to that last point as we as we sort of roll forward into 2026, I think investors are very keen.
As we think about puts and takes that that there is a lot of puts right.
You've got whereas in 2025, you had sort of negative ship timing that was a headwind now becomes a tailwind.
Obviously weather.
It's not a big number but.
In theory that that becomes a tailwind as we think about 2026.
Guess, where I struggle, a little bit is to get to anything less than $18.
If I don't assume that yields are I don't know.
Less than they were this year as we think about growth. So maybe help us are there any.
As we think about the puts and takes.
<unk>.
Typically.
Are some of these tailwind maybe offset by a weaker consumer environment broadly it doesn't really sound like it but just trying to sort of put some of these items.
Yeah. So so.
Thanks, James for the question I think firstly to start off is that.
The consumer for our guests just as strong.
Jobs, great balance sheets bank accounts.
And they have a strong desire to to vacation and build experiences and memories with their friends and family.
But we're also not immune to what's generally happening.
The and the environment.
And so it's what the consumer's willing that their willingness to pay.
And they are willing to pay up they may not be willing to pay.
Last year.
Double digits up or the year before I think it was 13%, 14% up but they are willing to pay more and so I think in your math.
<unk> yield growth as we expect moderate yield growth for next year.
I would describe this year was a moderate yield growth type of year, which we had.
Foreshadowed for a very long period of time.
I would say second as we said as we expect.
Our cost to grow on a per on a per <unk> basis.
At an anemic level. So we want to have a healthy margin between our yields and our costs.
And that's going to drive more margin to our business more returns more cash flow to our shareholders.
And <unk>.
Gives us the confidence to continue to invest in our business I think we're when you when youre probably trying to reconcile your numbers and you can certainly, but youre Blake and team to help you do more of it I think it's more of it is below the line, where I think that there is that there is an opportunity to provide some clarity here and again I just want to stress I.
<unk> did not say our earnings for next year, we're going to be $17, I said that theyre going to have a 17 <unk>.
Handel.
On that just to just to clarify.
Again, so I think we feel very good about the business for next year.
And it's.
Whether we look at our book position from what we're hearing from our guests.
We're going to continue to generate very strong demand.
And deliver these incredible vacation experiences.
Our next question will come from the line of Ben Chaiken with Mizuho. Please go ahead.
Hey, good morning.
A question on the river.
You mentioned, Jason you sold out of our 27 itineraries in a few hours.
I think you have 10 ships in the first order or how are you thinking about allocating capital to this opportunity.
In the context of what appears to be accretive ROI like are there other balance sheet limitation of ship construction limitations or is it just getting comfortable with the opportunity. Thanks.
Sure. Thanks.
Thanks for the question, but first I didn't sell out in a few hours and sold out in a few minutes.
No.
So.
Our head of our celebrity brand I told you so.
[laughter].
The good news is we're going to have more right.
Right, yes, so our.
Our initial order was 10.
Honestly, we have options for much more than all of that.
First and foremost what you wanted to do is you want to make sure that you get the product right.
So our launch of it and you've had the opportunity to see what the ship is going to look like the amenities that it is going to offer it.
It will deliver on the true DNA of the Royal Caribbean Group rent it well.
It will be a step change and will change the expectations of what our guests are looking for.
As I also said when we announced this this is not a hobby.
Do expect to be a substantial.
Vacation player in the in the river business and so we will continue to grow that I mean, our limitations I think more as just squaring up that we got.
The experience on what we want it to be.
And then this is this is an area, where we have an opportunity to accelerate into <unk>.
And we have full confidence in doing that.
Our next question will come from the line of Conor Cunningham with Melius Research. Please go ahead.
Hi, everyone. Thank you, maybe just going back to the comment of moving to shorter duration itineraries and as a result banking on close in yields I think that a lot of the questions is just been obviously around the yield performance into next year, but it seems like that mix dynamic is.
Really what what's your what kind of changing your approach to the 2026 years. So I guess, maybe my question is if close in demand were to stay here would that suggest that like the ultimate like that that you would see significant upside to the to your underlying.
Earnings outside of in 2026 is that a fair assumption. Thank you.
Yes.
One I wouldn't say that we are banking on close in demand I would probably describe it as.
Each product that we offer to our guests in different segments and different brands and different.
Destinations has a different booking pattern to it.
That's very natural and I think we can get away is not typically went on somebody's mind.
18 months in advance.
So as we have more of those opportunities that we're able to deliver because of the assets.
Given that we have that is whats driving a change in that behavior, but the behavior in our other products actually looks very similar to what we what we have.
We have typically seen for 708, Caribbean or 708 in Europe et cetera.
And so those patterns are are there there are strong and they're accelerating and so I think that's that's what you want to see is that for each of the product in those different tracks that that things are moving at a rate that's going to optimize your total revenue performance.
So that's how I think we how we think about it now certainly we have seen in the past and we do not count on this is that.
Youll close in on all of these products.
Accelerate.
And we ended up.
BD.
Our expectations, but we do of course try to begin.
Two our forecast these are the patterns that could be good patterns. We saw last quarter. The patterns. We saw a year ago tried to inform how we expect to track to occur.
And that's how our yield management works, that's how our tools work.
And trying to predict and to lay out what we should be.
<unk> in the market. So I think again, we feel very good about the booked on the booking environment, we feel good about our book position.
I would read into our commentary is we are optimizing our revenue.
As when we look back in time, we see more often than not that we have left some money on the table.
That's.
It's our job to to.
<unk> revenue.
Yeah.
Our next question will come from the line of Sharon Zackfia with William Blair. Please go ahead.
Hi, Good morning, I wanted to talk through kind of the composition of your revenue as you ramp up R&D on destination. So I know that's kind of go Hey, you also saw ticket lift.
In addition to the onboard spend that you get on the island is that a similar dynamic with the Royal Beach clubs or the Royal Beach clubs come on and we start to see the the composition shifted a little bit more to onboard and then have that lead versus ticket.
Hey, Sharon it's Michael Yes, it's a good question I mean, perfect day was really was a huge driver of check.
Ticket lift as well as on onboard spend.
With the Beach club, it's a slightly different product. So it does kind of slip more into the short excursion revenue frame.
<unk>.
So it's also a driver for itinerary as well because we're beginning to see the itineraries that include the Beach club as well as perfect day seem to be driving even more demand than historically, which has been really strong. So I think we'll see that kind of combination of beach club.
<unk> really pushed through in Unbilled revenue insurance excursions and then perfect day is typically a key driver of ticket.
And I think just to add on to Michael's point, it's kind of.
It's kind of modulate a little bit right because the perfect day model is tends to bring a lot of premium on the ticket side.
And so we still have opportunity for us to grow more in cocoa K, but as perfect day, Mexico comes online.
Probably a little more of a balance between ticket and onboard while when the beach clubs come online it's more on the onboard side. So it will modulate a little bit.
Here in.
It's.
Well the answer to all of it is.
That's great revenue.
Guest experience great margins great returns.
And so it's a true kind of win win opportunity for everybody.
Yeah.
Our next question will come from the line of Vince <unk> with Cleveland Research. Please go ahead.
Thanks, So much just wanted to clarify kind of the yield picture here in 'twenty five the first half was up closer to 5% second half looks on track for two and a half or maybe something a little bit north of that.
Clearly some moving pieces.
How much of that DSL as related to that just tougher compares versus.
Maybe less new hardware tailwind is is new hardware still a tailwind for the second half on a year over year basis or is it kind of transition to a little bit of a headwind and then the last piece, obviously as you've called out I think some port.
Port fees as well as dry dock as well as Haiti et cetera. So there's a number of isolated headwinds, but just help us kind of bridge that that step down first half versus second half if you could yeah.
And thanks, Vince so.
Every quarter is.
Some.
Something right because the ship delivery timing does impact those are these are large ships.
We had two deliveries I think the best way to look at it as you kind of look it on a yearly basis.
If you kind of.
Kind of look at it across the board, it's probably and if you normalize all these quarter over quarter thing some of it was 24.
Z comp or a harder comp.
And some of it is just some of these events and timing of some deliveries on how we ramp up but if you look at it on a yearly basis. That's a great I think just way to look at our at our business and it also subscribes to a formula which we've said all along this is how we manage the business. This is how we we subscribe to that and then we drive two to <unk>.
Grow the business.
According to the formula, including the yield the capacity and the cost.
Okay.
Our next question will come from the line of Andrew <unk> with Bank of America. Please go ahead.
Hey, good morning, everyone.
Excellent.
Just wanted to touch on the bond deal quickly to finance deliberate EXL.
Not usual.
Unusual way to finance a ship, but certainly makes sense given the rate differential that's my question.
Are you pretty much different than how you finance the ships right now.
As long as there is that benefit.
Curiosity or are there any additional benefits or tapping the unsecured market as opposed to the ECA financing. Thanks, Yeah. Great question. Thank you.
And so yes. So for now we're in we're in a place where we have a very strong investment grade balance sheet.
Benefiting from from from rates that are basically commensurate with our.
With our financial performance and our ratings and so when we evaluate that we look at it and we say what does it what does that make sense to finance with.
DCA, obviously, they're great partners and we're very grateful to kind of the partnership we have it's obviously very important during the construction period to the financing.
And all these ships.
They always have that committed financing in place also post delivery, which is obviously very valuable but when we come to the decision when we take the ship we have.
This alternative and for this one we negotiated this financing several years ago when the credit rating was not as good as today and so we and all our improvement in the capital markets was quite substantial and so when we looked at that it just made more sense and much lower cost of capital and the other thing is just to.
Everybody is these <unk> also have amortization payments. So when you look at the average tenure of the loan is roughly a little bit over 60 years. We obviously now issuing 10 year piece of papers in the unsecured market. So it's not just US of course is low we also gained tenor with it and obviously the covenant.
Package is a little bit different too. So you have the benefit there so well.
We're very happy with kind of how this went we are we're going to continue to evaluate all the alternatives its very important to understand that all of our ship financing.
Deliveries and orders will have committed financing going forward and then we will have that option to evaluate what's the best alternative for us when we take delivery.
And that will conclude our question and answer session I will turn the call back over to Kelly for closing comments.
Thank you.
Thank you all for your participation and interest in our company Blake will be available for any follow ups. We wish you all a very good day.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for joining you may now disconnect.
Varian for box family vacation in the World.
It's the first of a whole new class of ship.