Image source: The Motley Fool.
Date
Tuesday, July 29, 2025 at 2:00 p.m. ET
Call participants
Chief Executive Officer — Jason Liberty
Chief Financial Officer — Naftali Holtz
President and CEO, Royal Caribbean International — Michael Bayley
Need a quote from one of our analysts? Email [email protected]
Takeaways
Adjusted EPS—CEO Jason Liberty said, "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," attributing the outperformance to "better revenue, a shift in the timing of some expenses, and better below-the-line performance."
Net yield—CFO Naftali Holtz reported, "Net yields grew 5.2% in constant currency compared to the second quarter of last year," 70 basis points above guidance, with growth divided evenly between new hardware and existing fleet on an adjusted, constant currency (non-GAAP) basis.
Capacity—CEO Jason Liberty stated, "Our capacity increased 6% as we delivered over 2 million incredible vacations," resulting in a 10% rise in guest volume year over year, driven in part by new ship deliveries.
Load factor—CEO Jason Liberty said, "Load factor was 110%, two percentage points higher than last year," supported by fleet expansion and improved itinerary performance.
Adjusted EBITDA margin—CFO Naftali Holtz reported, "Adjusted EBITDA margin was 41%, 300 basis points better than last year," with adjusted EBITDA expected to grow 17% for the full year 2025.
Net cruise costs excluding fuel—CFO Naftali Holtz said, "Net cruise costs, excluding fuel, increased 2.1% in constant currency, a 180 basis points lower than our initial guidance," due to the timing of expense recognition that will shift to the second half.
Full-year adjusted EPS guidance—CEO Jason Liberty stated, "Full year adjusted earnings per share is now expected to grow 31% and be in the range of $15.41 to $15.55," with guidance for adjusted earnings per share increased by $0.43 following Q2 2025 outperformance and cost favorability.
Full-year net yield guidance—CFO Naftali Holtz said, "We are increasing our yield guidance for the year and now expect net yield growth of 3.5% to 4%," which does not include potential upside from continued close-in demand trends in its full-year 2025 adjusted guidance.
Q3 guidance—CFO Naftali Holtz stated, "In the third quarter, we expect capacity will be up 3% year over year, and net yield growth of two to two and a half percent," with adjusted EPS projected between $5.55 and $5.65 for Q3 2025.
Liquidity—CFO Naftali Holtz reported, "We ended the quarter with a strong $7.1 billion in liquidity," bolstered by upsizing two unsecured revolving credit facilities to $6.4 billion during the quarter and extending one facility's maturity to October 2030.
Shareholder returns—CFO Naftali Holtz said, "We are committed to investing in our growth strategies, delivering a competitive dividend yield, and opportunistically buying back shares," enabled by high cash flow generation and limited 2025 debt maturities.
Onboard spend—CFO Naftali Holtz stated, "In the second quarter, approximately half of our onboard spend was booked before the sailing," with three quarters of guests making pre-cruise purchases and pre-cruise buyers spending about 2.5 times more than others.
Loyalty and digital engagement—CEO Jason Liberty said, "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," and "Nearly 50% of onboard purchases are now coming through the mobile app, compared to a third in 2023."
Fleet and newbuild pipeline—CEO Jason Liberty stated, "Over the next few years, we plan to introduce seven new ships, including Star of the Seas, Celebrity XL, Legend of the Seas, Icon 4, Oasis 7, and Edge 6, plus the introduction of river cruising and multiple exclusive private destinations, including the first full operational year of Celebrity River and new private destinations such as Perfect Day Mexico and Royal Beach Club La Lapa, expected in 2028."
Destination strategy—CEO Jason Liberty said, "The near-term opening includes Royal Beach Club Paradise Island in late 2025 and expansion in the Bahamas, Mexico, and the South Pacific through 2028," supported by the recent Port of Costa Maya acquisition.
Private destination attach rate—President Michael Bayley stated, "Royal Beach Club Paradise Island capacity is expected to represent about 33% of Nassau volume in 2026," with dynamic pricing expected due to anticipated demand exceeding supply.
Geographic mix—CFO Naftali Holtz reported, "The Caribbean represents 57% of our deployment this year, and 42% of capacity in the third quarter. 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."
Millennial and new-to-cruise penetration—CFO Naftali Holtz said, "New to cruise or new to brand accounted for approximately 60% of our guests, of which more than half millennials or younger," and company research shows more than half of millennials now more likely to consider cruising.
Fuel costs and hedging—CFO Naftali Holtz stated, "We anticipate a fuel expense of $1.14 billion for the year, and we are 66% hedged at below market rates."
Summary
Royal Caribbean(RCL 0.44%) reported significant year-over-year adjusted (non-GAAP) EPS growth in Q2 2025 and exceeded its Q2 2025 adjusted (non-GAAP) projections, fueled by robust net yield expansion, higher onboard spending, and cost timing advantages. Management has raised full-year adjusted earnings per share and net yield guidance for 2025, reinforcing a multi-year earnings growth outlook underpinned by consistent demand, new ship deliveries, and a disciplined approach to cost management. Bookings and forward demand trends, particularly close-in, remain strong and are contributing to price and volume gains, with loyalty initiatives and digital sales channels playing a growing role in monetizing guest relationships.
CEO Jason Liberty described a "powerful pipeline" of new offerings, including segment-leading ships and exclusive private destinations, with the 2028 full-year ramp-up from initiatives such as Oasis 7, Edge 6, ICON 4, and Perfect Day Mexico explicitly cited as drivers of further earnings growth in 2028.
CFO Naftali Holtz detailed that net cruise costs excluding fuel are expected to rise only 0.3% for the full year 2025, 10 basis points lower than prior guidance, as efficiency improves despite the absorption of newbuild ramp-up and destination pre-opening expenditures.
Management said, "Repeat bookings are meaningfully rising and cross-brand loyalty is accelerating," with loyalty bookings comprising almost 40% and digital app downloads have surpassed 30 million.
President Michael Bayley disclosed that for the new Royal Beach Club Paradise Island, the company sold individual cabanas for up to $10,000 within the first hour, based on sales activity when bookings opened a few weeks prior to the July 29, 2025 earnings call, and noted "extremely pleased with the sales to date."
Future guidance maintains a moderate capacity growth approach, targeting a 20% compound annual growth rate in adjusted earnings per share (non-GAAP) through 2027 and high-teens return on invested capital by leveraging a lineup of ship and destination launches, plus ongoing digital innovation.
Industry glossary
Net yield: Revenue earned per available passenger cruise day, net of variable passenger costs, and used as a key profitability metric in the cruise industry.
Load factor: The percentage of passenger berths sold versus total available, measuring fleet occupancy.
Close-in demand: Bookings made closer to the sailing date rather than far in advance.
Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for specific non-recurring items as defined by management.
Onboard spend: Revenue generated from guest purchases made on the ship, such as excursions, dining, and merchandise.
Perfect Day: The company's branded private island experience concept and a pillar of its destination strategy.
Full Conference Call Transcript
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 in the reconciliation of all non-GAAP items found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency, adjusted basis. Naftali will follow with a recap of our second quarter, the current booking environment, and we will then open the call for your questions. With that, I'm pleased to turn the call over to Jason Liberty.
Jason Liberty: Thank you, Blake, and good morning, everyone. Our world-class brands and the exceptional experiences they offer continue to resonate deeply with consumers, 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 cost. 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 Perfect Day financial targets by 2027 as we continue to win share in the rapidly growing $2 trillion global vacation market.
Like we have said before, our ambitions go well beyond Perfect Day 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 the full year benefit of ICON 4, the full-year operation of Perfect Day Mexico, Royal Beach Club La Lapa at full capacity, and the first complete operational year of Celebrity River. As we advance our journey to help our guests turn the vacation of a lifetime into a lifetime of vacations, we are 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 Royal Caribbean Group for their passion, dedication, and commitment to delivering 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 with high guest satisfaction scores. Net yield grew 5.2%, 70 basis points higher than our guidance 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%, two 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 families. We continue to see engaged and excited consumers with roughly 75% intending to spend the same or more on leisure travel over the next twelve months.
At the same time, more than half of consumers tell us they are booking closer to their departure date than they used to, and for the people who intend to travel over the next twelve months, the majority have not yet booked. Our booked position is in line with prior years at higher EPDs for both 2025 and 2026.
In addition, onboard spend and 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 the Star of the Seas and Celebrity Excel, 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 to elevate the vacation value proposition within our ecosystem.
We conduct independent research and leverage data points from millions of daily interactions with our customers. We continue to see very positive sentiment from our customers bolstered by strong labor markets, high wages, surplus savings, and elevated wealth levels. Overall, consumers remain financially confident with three out of four indicating that they feel financially secure. Leisure and travel spend continues to grow, and leisure travel continues to be the number one category when consumers plan to increase spending over the next twelve months, that's outpacing dining. We are also seeing a strong intent across demographics are increasingly choosing cruise vacations as their preferred way to celebrate meaningful life moments.
They are also more likely to book closer to departure reflecting a desire for spontaneity. In addition, more than half of the millennials tell us they are more likely to consider cruising today compared to two years ago. Driven mainly by the attractive value proposition of cruise. Value continues to be a critical driver. Consumers consistently cite cruises 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. Among those, who were once skeptical of cruising and growing share now say they are more likely to consider it. Than they were two years ago.
Meanwhile, repeat cruisers continue to rate cruising as the best value for their vacation spend. With brands that consistently lead in guest satisfaction, and vacation options that range from weekend getaways to bucket list adventures on 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 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 approximately 150 basis points. Our proven formula is working.
Moderate capacity growth, moderate yield growth, and strong cost discipline. And it's driving significant earnings growth, continued margin expansion, and robust cash flow generation. a 20% compound annual growth rate in adjusted earnings per share through 2027 and a return on invested capital in the high teens. 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, meeting the evolving needs of our guests.
We amplify that strength in the most innovative ships, exclusive private destinations, and a connected ecosystem that makes planning and enjoying your vacation seamless and rewarding. Over the next few years, we plan to introduce seven new ships, including Star of the Seas, Celebrity XL later this year, followed by Legend of the Seas in 2026, icon four, and our first celebrity river in 2027. In 2028, we'll deliver Oasis 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 World Beach Club Paradise Island opening in The Bahamas later this year. World Beach Club Cozumel at the 2026, then in late twenty seven, Perfect Day in Mexico, which is approximately the size
Michael Bayley: the Magic Kingdom in Orlando. Will debut. Earlier this month, we officially closed on our acquisition of the Port Of Costa Maya, and are now well underway in bringing this exciting destination to life. In 2027, we'll expand the reach of our Royal Beach Club collection to the South Pacific, with Royal Beach Club Lallapa. These experiences are located across key strategic markets are engineered to generate premium yields 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, spend 25% more per trip. Nearly 50% of onboard purchases are now coming through the mobile app. Compared to a third at the 2023. As a reminder, customers who purchase onboard experiences before their cruise spend about two and a half times more than those who do not buy precruise.
We are investing in a modern digital travel platform infusing AI into almost everything we do, and investing in enriched data make it easier than ever for guests to book and design their dream vacations while allowing us to expand wallet share. App downloads have now surpassed 30,000,000 and long-term adoption is increasing. We continue to invest in more commercial and experience capabilities increasing interactions, 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, will turn the call over to Naftali. Naft?
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 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 consumer. In the second quarter, approximately half of our onboard spend was booked before the sailing. With three out of four guests making precruise purchases to reserve onboard experiences. In the second quarter, we delivered 2,300,000 incredible vacations.
New to cruise or new to brand accounted for approximately 60% of our guests. Of which more than half millennials or younger. Net cruise costs, excluding fuel, increased 2.1% in constant currency a 180 basis points lower, than our initial guidance. Driven by shifting of timing of spend that will roll into the second half of the year. Adjusted EBITDA margin was 41%, 300 basis points better than last year. And operating cash flow was $1,700,000,000. Adjusted earnings per share were $4.38, 36% higher than last year and 8% higher than the midpoint of our guidance. Earnings outperformance was driven by the strong close in demand shifting timing of spend, and favorability below the line.
10¢ per share of favorable timing of spend is expected to roll into the 2025. As Jason mentioned, the NAND for our portfolio brands and industry-leading experiences continue to be very strong. Bookings have accelerated since the last earnings call, particularly for closing sailings. Leading to the second quarter outperformance. Our book load factor is in line with prior years and higher APDs. Capacity is expected to grow 6% for the full year, and 3% in the third quarter. As expected, capacity in the third quarter is the lowest throughout the year, and is impacted by the delivery timing of start of disease in late August. Looking ahead, fourth quarter capacity growth is expected to be 10%.
Benefiting from a full quarter of starved disease, the launch of Celebrity XL, and additional APCDs cured to lower dry dock days compared to twenty-four. 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 the star of the seeds, Celebrity XL, and the opening of Royal Beach Club Paradise Island by the end of the year. Europe will account for 15% of capacity for the year, and 28% in the third quarter. Alaska is expected to account for 6% of total capacity and 13% in the third quarter.
Now let me talk about our revised guidance for 2025. Our proven formula for success, moderate capacity growth, moderate yield growth, and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation this year. 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 timing of dry docks, ship deliveries, and the ramp-up of costs related to our acquisition of the Costa Maya Port and other new private destinations. We anticipate a fuel expense of $1,140,000,000 for the year, and we are 66% hedged. At below market rates. Based on our current fuel prices, currency exchange rates, and interest rates, we expect adjusted earnings per share between $15.41 and $15.55. The 43¢ increase compared to our prior guidance is driven by Q2 outperformance of $0.23 taking into account the 10¢ timing shift of spend, and 20¢ benefit. We also expect a 17% growth in adjusted EBITDA and 260 basis point 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 the capital return to shareholders. Now let me comment on third quarter guidance. In the third quarter, we expect capacity will be up 3% year over year, and net yield growth of two to two and a half percent driven almost entirely by like-for-like hardware as the start of the season launches very late in the quarter. Net cruise costs, excluding fuel, are expected to be up six to six and a half percent.
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 $7,100,000,000 in liquidity. We are in a very strong financial position and will continue to further strengthen the balance sheet during the first half of the year. Reflecting the strength of our financial position 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 two unsecured revolving credit facilities during the quarter, bringing the combined revolving credit facilities commitments to $6,400,000,000, and extending the maturity of one facility to October 2030. With a strong balance sheet, we are committed to investing in our growth strategies, delivering a competitive dividend yield, and opportunistically buying back shares. We have very limited maturities left for this year. All related to ship amortization payments, that we plan to repay with cash flow. We also expect leverage to be at mid two turns by the 2025. In closing, we remain committed and focused on our mission to deliver the densification 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.
Operator: At this time, if you would like to ask a question, then reenter the queue for any additional questions you may have. Our first question will come from the line of Matthew Boss with JPMorgan. Please go ahead.
Matthew Boss: Thanks and congrats on another great quarter.
Jason Liberty: Thank you.
Matthew Boss: 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 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 closing demand is a little bit different. We've seen closing 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 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 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. 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. You know, we focused on this.
I know it's the tagline of going from a vacation of a lifetime to a lifetime of vacations, but it's very important for us as we think about how do we increase our repetition of 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 will lead to an increase in lifetime value of the customer. Lowers our acquisition cost, and positions us to close the gap further to land-based vacation.
So we are chasing closing that gap to, you know, you could say the industry is probably around $8,085,000,000,000. 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 in growing our fleet. You know, we have, I think, a very clear reputation of designing and building the most innovative ships not just in the industry, but also in our respective segments. We're continuing to grow our brands, 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. Know, we have three announced Royal Beach clubs. We have one announced Perfect Day in Mexico that we're building, in addition to the one that we have in The Bahamas. Again, you know, meeting our customers, what they're looking to do. And we're able to do that not just by benefiting from the volume but enhancing the guest experience as those destinations tend to be the highest rate destinations out there. We're also expanding the experiences that we're delivering, 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 looks who's looking to visit Antarctica. And then lastly, all around this is heavily investing in our commercial apparatus. 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 manage 15 million price points a day and to be able to listen to what our customers are looking for and curing 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, you know, 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, you know, our focus is not happening on the cruise competitor side. Our focus is on how do we close that gap to land-based vacation because every one percentage point is worth a tremendous amount of money to the company and to our shareholders.
Matthew 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: Yeah. Hi, Matt. So as we said in the prepared remarks, we gave guidance based on what we've seen in terms of booking. But as we said, we have seen acceleration. And so to the extent that there is further acceleration of demand, closing demand, 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 focusing into next year towards the end of a couple of months. In terms of what's embedded in the is in our plans, so as you know, we've announced Perfecta this is a 20% annual compounding growth of earnings through 2027.
And everything that Jason just mentioned in terms of investments in SHIP 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, so this positions us very well to achieve our perfect 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. 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, know, when put out these milestones.
And so as we get the balance sheet to the range, and it is already within the range, obviously, we will be focused on capital return as a supplement to that growth. And that is in the form of share buybacks. Which we will opportunistically do, and, of course, dividend. And we're very focused on competitive dividend now. Competitive dividend brings value to shareholders, but obviously, does not factor into earnings per share itself. But as you look at it together, that's another area of that as Jason mentioned in his prepared remarks, know, 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.
Matthew Boss: Great color. Best of luck.
Operator: Next question comes from the line of Steven Wieczynski with Stifel. Please go ahead.
Steven Wieczynski: So, Jason, wanna 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. 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 gonna change. And onboard kinda 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 at when you think about the third quarter, being able to grow, let's call it, 4% on a like-for-like basis when you include the start of season impact, off of a plus 8% last year. To us, that's impressive. But I guess what I'm trying to figure out here is, what could that mean for yields if everything kind of stays? Hopefully, that makes sense.
Jason Liberty: Yeah. Well, thanks for the question, Steve. And, of course, it's, you know, even if you look at the third quarter, I think I'm doing this from memory, but I think 2023 was close to 17%. And last year, it was close to 8%. On yield improvement standpoint, and we try to articulate if you had a full quarter of star, like, what that would have looked like for us, as all the Q3 is being driven by like-for-like demand generation. So, the answer is that, if we see similar patterns, the answer is that the back half of the year will be better. As Naft just commented, I mean, we are very well sold into the year.
And so, yeah, there's always the opportunity we think about even in the third quarter, for a couple points there, and then that opportunity would be larger in the fourth quarter. But we typically when we think about our forecast, we do try to do a fifty forecast. Also, when we put a forecast together, we typically wanna look more than just a couple of months of demand points to set that going forward. So we do see with similar demand patterns, the answer is it's better. It's tough to actually quantify. If I could've quantified it, then we probably would've put that into our guidance for the year. I think the main takeaway is that the consumer is strong.
There's strong demand for our brands. We have a very strong handle on costs and on our capital. On where we're investing. I think it's very clear where that is, and it's there to not just support the business, but to continue to differentiate the business. And, you know, 30 plus percent earnings growth year over year is pretty spectacular. To how we keep finding opportunities, you know, to do better. And we're never satisfied as our investors are never satisfied, I'm sure. So we're always looking to do more.
And I think all these investments that will play itself out here over the coming years, especially on the destination side, really has, an opportunity to have a really significant step change in, earnings power.
Steven Wieczynski: Okay. That's great color, Jason. 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 thousand twenty-seven. So you mentioned all of these positive things that are to be coming online in '28 that are gonna help you guys out, whether that's Perfect Day Mexico, Oasis class icon, River Cruising, other private islands, mean, the list kinda goes on. So, guess my question actually is, as you guys are sitting here today should, you know, should we think that 2028 could see earnings growth at least in line with your perfected targets. Probably even say maybe not, you know, higher than that.
Jason Liberty: Well, 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, you know, we only have one chance as they as my, my mom said, you only have one chance to make a good impression. On somebody. So we're really thoughtful about that. And so I think to your point, you look into 2028, and you see, basically, I mean, we've all seen the power of Perfect Day in The Bahamas. Wait until you see Perfect Day in Mexico. Come to life, and the World Beach Clubs come to life.
And now we have River, and of course, you know, we ramp up from two ships in '27 to four ships in 2028. And, of course, it's probably too early to talk about exactly what that all means, but it should result in a significant step up on the earnings power as we think about that. And none of that, of course, takes into account when we think about capital allocation. You know, Naft mentioned us, you know, obviously, not significantly.
I mean, we are, 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 significant tailwind to earnings per share growth.
Steven Wieczynski: Okay. Thanks, Jason. Appreciate it.
Operator: Our next question comes from the line Connor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Hi, everyone. Thank you. Just on loyalty, you've been talking about a lot more, and, obviously, you are one of your competitors speaking about it a little bit as well. When I look, when we're talking, like, about closing the gap to land-based, competitors and whatnot, a big gap, I think, is on the cobranded credit card, you know, program and then maybe the loyalty program optimization in general. So if you could just talk about the opportunity set there and how you envision that. I don't think your credit card is tied to your loyalty program at currently. So just if you could just talk about that a little bit, I think that would be helpful. Thank you.
Jason Liberty: Sure, but 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, you know, we're very closely working with our cobranded credit card provider and I think you're gonna see something very meaningful coming out of that very, very soon. At the end of the day, you know, 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 is important to them. You know, 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, you know, we are, I mean, if you've spent time in our app, and if you 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 or our brands feel is a value to them that would result in them behaving even more loyal to us. And we've already seen a shift of a couple of months just in their behavior with us, which is why there was a 40% of our guests in the third quarter that were loyalty members. So Loyalty, I think, is very important.
I think people want to be recognized. They and not just recognized for their spend today, but recognized for all that they have done in the past. And then we need to make sure we're creating an environment across our brands to make sure that in their lifetime of vacation, we have the right vacation experience that is relevant to them, and that they're benefiting from continuing to stay inside our ecosystem. At the end of the day, I look at loyalty, I look at loyalty with our employees and everyone else is it's a two-way street. And our guests should feel that they always want to stay inside our ecosystem.
If somebody goes outside of our ecosystem to another cruise competitor or to somebody else on land, then we should we should look at that as a fail. Our teams have done such an exceptional job at engaging and putting things in front of our guests that they value and incentivizing them, which is now resulting in even more and more repetitions with our guests.
Conor Cunningham: Okay. Appreciate it. And then maybe I could ask just for a clarification on the drag from the timing start of the season. So is there anything embedded in the fourth quarter from Celebrity XL, Star? Does anything linear from Star of the Season there from a load factor perspective? The only reason why I ask is that you strip out a lot of the noise, I think, that's kind of happening. Like, core pricing is actually exiting very, very strong. So I'm just trying to understand where core is for some of these timing issues that are out there. Thank you.
Naftali Holtz: Yeah. You're right, Conor. So most of the impact of STAR is really in the third quarter. In the fourth quarter, we have two things that I pointed out. One is Celebrity Excel starts in mid-November, so that's obviously just mid-quarter. So you have that, and you have to get it ready. And so that and, obviously, ramp up. So similar to what happened with Star in the third quarter. But also recall that, Nick, last year, we had a pretty heavy dry dock year, and so we usually take our dry dock we had more dry docks than this year, so that's actually a drag on yield as well.
So together, we quantify that as roughly 90 basis points between, with a between timing of new ships as well as, dry dock base.
Conor Cunningham: Okay. Thank you. Appreciate it.
Operator: Our next question comes from the line of Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Thank you. Just looking at the full-year guide, I mean, Q2, great results. Your commentary is very positive. Why at the top end of the yield range? Or, what's your change in thinking there about the top end of the yield range came down a little for the year? Thanks.
Jason Liberty: Yes. I would just say, Robin, when we gave guidance last we expanded the range. You know, there's a lot of noise in the system, geopolitically, that resulted in us just widening that range to give investors a sense of what that could be. Obviously, there were others in travel user 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, you know, 70 basis points there, and that's what we provided.
Naftali Holtz: 70, yeah, 70 basis points.
Robin Farley: So if we think about April, it's a very active sort of geopolitical headline and all going on. We I guess, I'm just trying to how we should interpret that your how you're feeling at the sort of most optimistic end versus a quarter ago because it seems like, you know, some of the hotel companies have called out things improving in July, you know, relative to where they were in that sort of April, May period. So just trying to think how we should view your commentary or your yield change at the top end.
Jason Liberty: one of the differences between cruise and hotel and even airlines is 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 in hotel and airlines because of how sold we are in the quarter and how sold we are for the end of the year. As I said with that range, that range is a reflection of a fifty on our forecast. You know, there could be if you wanna take the optimistic side, if we continue to see strengthening in closing demand, you know, back that would be likely the optimistic side of why it could be towards the top end or better.
Naftali Holtz: Yeah. 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. Regardless, we kept it the same. We increased it, if you recall. We widened this to account for the geopolitical outcomes, the noise that was there, and the outcomes it could have. Now we're just going back to normal. This is typically what we do through the year.
Robin Farley: Thank you. And just one quick follow-up. Would you say that your onboard spend because I know some of the way it's reported can be impacted by 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? Thanks.
Jason Liberty: I would say that we're seeing very similar trends on ticket as well as onboard. Obviously, both of them are competing against very significant comps. But what we're seeing in terms of where the consumer is spending while they're on the ship looks, you know, very similar except that it's stronger. We're also benefiting that, you know, 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 plan their vacation experiences early and earlier, and that because as I mentioned in my comments, 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.
Robin Farley: Great. Thank you.
Operator: Our next question comes from the line of Brandt Montour with Barclays. Please go ahead.
Brandt 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 know, you guys gave prices to the market. You know, wondering maybe if the feedback from the travel agent community as well as potential out of gate. I know prices are dynamic, or if that's even the goal. How should we think about the ramp-up to the destination?
Michael Bayley: Thank you, Brent. I'm so happy you asked that question. We opened for sale a few weeks ago. Sales are very strong. Interest is very high. Our first sailing will be on 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 swimmer bar. So it's gonna 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, and 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 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 gonna deliver very high levels of guest satisfaction. So excited for the beach club in Paradise Island, and we're equally excited for the beach club in Mexico, La Lapa, and, of course, the really big thing, which is, of course, perfect day in Mexico in full year twenty-eight.
Jason Liberty: Yeah. And, Brad, 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, the actual number of people we take will be meaningfully less as we start and then build up into the first quarter, and then into the second quarter. We want to make sure the experience is flawless in what we're doing. So it's while we could probably make more money, the trust that we establish with our customers is a high priority.
And so it will be a slow ramp up like a they typically are in any new experience or destination or ship that we bring online.
Brandt Montour: Thanks for that. That's super helpful, both. Second question, Jason, feel like you covered the closing demand strength from a number of different angles this morning. Struggling between two different narratives on 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 mixed younger consumer or residual effects from the tariffs and the macro impacts of the last few months, or is it just, again, more incremental demand that you're seeing from that younger consumer and while and at the same time, you're seeing 26 bookings?
I don't know if those two things are or if there's a third, but if you could help me sort of understand what you guys are trying to get at with that commentary.
Jason Liberty: Yeah. Well, you know, Brandon, as I've said this in the past, we never get our yield management perfect even with all the technology we always there's always money we leave on the table. And I think of the things you just, I think the reality of what we have left to sell is little. And I think because we are half of our guests are millennials or younger, there is a reality that they do book closer in. We have more of the shorter product going to great places like Perfect Day and some Royal Beach Club, which will have them lean a little bit more, closer in.
But in my remarks, just commentary around, 2026, we're in line with the same time last year at higher rates. I think, should give you an indication that demand is, actually quite healthy and demand is pacing and guests willing to pay more is certainly there. So I think it's really two different things. I think it is a little bit of a younger consumer. The second piece of it is that confidence in making sure that people see the vacation experiences that they want, that people are willing to plan thoughtfully out in the future.
Michael Bayley: Yeah, and this is Michael again. I think also another is the increase in the short capacity that we've seen, particularly that goes to Perfect Day and for the Royal brand, which we have a lot of short cruise capacity, we've got Utopia now sailing out of Port Canaveral in the three and four day market. And now Wander of the Sea. So the second Oasis class ship will be starting soon out of Miami doing the same thing. That takes those two ships alone in just volume is around you know, thirty thousand guests a week. Just on those two ships. So they're going to Perfect Day.
So I think that also is beginning to skew the know, how people perceive their booking window because 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 repeats 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's part of the evolution of the business.
Brandt Montour: Great. Thanks, everybody.
Naftali Holtz: Thank you.
Operator: Our next question comes from the line of Ben Chaikin with Mizuho. Please go ahead.
Benjamin Chaiken: Hey, good morning. Thanks for taking my question. One on Nassau quickly. You know, you've previously given us some preliminary targets or expectations for volume, how did 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 Cocoa seeing three and a half million guests or more presumably a lot of them going to NASA. 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 given the last few quarters?
Michael Bayley: I think our current thinking is when you look at the volume they're gonna bring in 2026, into Nassau, which is give or take around 3,000,000 guests. And the overall capacity of the Beach Club will be around give or take, a million, then you're looking at 33% of our guests, we think, will be, more than happy. And, I think what we may experience is more demand than supply with the beach club in Nassau. Obviously, that's why dynamic pricing is gonna play a very important role in that product. But we think we've got the numbers perfectly right.
Benjamin Chaiken: Understood. Very helpful. And then, Jason, you made a kind of a I made a pretty interesting comment earlier in the call. Mentioned that Costa Maya is going to be the same size as Magic Kingdom in Orlando, if I caught that right. Presumably meant that in terms of acreage. To the extent you have anything to share on amenities, you can float to us understanding this is still several years away. I don't know if that was a little bit of a metaphor or whatnot.
Jason Liberty: I think it is in terms of, like, the actual footprint of Perfect Day in Mexico. To have people understand 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? Super focused on that everybody has this perfect day, and I would very much point everybody to just go on YouTube and watch the videos that we put out from our event last May.
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, relaxing 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 in different neighborhoods. People can kind of experience with who they would like to experience that with. And that's what we do. You know, Michael and his team are heavily focused on designing that perfect day.
We clearly delivered down in The Bahamas, and we're gonna do that for, even more people. Lastly, I'll just say, it also opens up this incredible catchment area or for, deeper into markets. Like Texas and the West Coast. And even the Midwest that will be able to lessen where they spend their share of wallets on potential air travel and other travel. To make it more affordable for them and potentially more wallet share for us.
Michael Bayley: And more importantly, it has the world's largest sombrero.
Benjamin Chaiken: That's definitely important.
Jason Liberty: Did Q3 have Maya Costa cost? In the NCC number? Yes. It does. So we just closed on it. And, obviously, we'll operate it for quite some time until we start development. So, yes, And that's part of the headwind. We didn't really call it out in the release or in our prepared remarks, but there is extra cost for that. And, obviously, for Paradise as we ramp up the beach club, to open up in December, there are some costs there with, no APCDs.
Operator: Our final question will come from the line of Incipio with Cleveland Research Company. Please go ahead.
Vince Ciepiel: Thanks. I wanted to unpack River a little bit more. I know it's still a ways away, but I think at some point in the second half of this year, give a little bit more clarity on what itineraries and offering might look like. And as you're ninety days further into exploring what that could look like for you, any big picture thoughts on just conviction level of getting to 35, 40 ships, river capacity to do so and, and being able to curate a great experience shoreside for guests when considering birthing rights, etcetera.
Jason Liberty: Well, thanks for the question, Vince. I wish Laura was here because, you know, she could probably talk a little bit about it more in detail. And she would also tell you that I bother her every single day on how do we get as many ships up as soon as possible. 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, you know, spacers. This is a, we think is 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. I'm probably more focused on how do we get it done faster. But, our teams are being very thoughtful about that. It's gonna be a great vacation experience for our guests.
The last point I just want to make about what brings such confidence is when we announce this and we get our customers coming forward with wanting to be on it as soon as possible and us starting to build up lists of customers who want to go on. It would take us a long time to satisfy that level of demand. 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, our celebrity brand.
Vince Ciepiel: Great. Thanks. One other housekeeping question. Thinking about CapEx, $5 billion for the year, I think one-sixth of it's not new build, but some Costa Maya in there as well. When you think about the Perfecta plan, that $5 billion a good annual number to use for 'twenty six and 'twenty seven and a similar mix of non-new build and new build as we're thinking about the path ahead.
Naftali Holtz: Yeah. So we're not providing guidance, obviously, for the next couple of years. But on the shipbuilding side, it really depends on ship deliveries. So this year, we have two fairly large ships, right, both start of the season and Celebrity XL. You can see kind of what twenty-six and twenty-seven are. There's only one chip right there. On the nonchip CapEx, there are a couple of elements there, and we'll provide more guidance. As we get closer to 26. We have our core investments in maintenance, and other initiatives. There are typically stable in a way, and then you have the destination. So that ramps up depending on the year. This year, obviously, is Paradise.
Next year, we'll have Cozumel and Costa Maya. Obviously, '27 will be heavily on Costa Maya. We have modernization programs. So there are other elements to make sure that we get through to Perfecta kind of our long-term targets. The most important thing is the company now is very large. We're generating a lot of cash flow. So after CapEx, we have excess cash flow that will be focused on getting making sure that the balance sheet is intact and then supplementing all that growth with capital shareholder returns.
Vince Ciepiel: Thanks, Manav.
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.
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.