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Date
Tuesday, Oct. 28, 2025 at 10 a.m. ET
Call participants
President and Chief Executive Officer — Jason Liberty
Chief Financial Officer — Naftali Holtz
President and Chief Executive Officer, Royal Caribbean International — Michael Bayley
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Risks
Jason Liberty stated the full-year outlook "has been trivially impacted due to adverse weather and the unplanned extension of the temporary closure of Labadie," resulting in a $0.05 impact to Q4 guidance.
Holtz noted that an increase in the EU Emissions Trading System (EU ETS) from 70% in 2025 to 100% in 2026 is "weighing on our energy efficiency gains."
Holtz indicated that global minimum tax policy updates beginning January 1, 2026, are expected to "impact us an incremental couple of hundred basis points."
Takeaways
Adjusted earnings per share (EPS) -- $5.75 adjusted earnings per share, up 11% year over year and 3% higher than guidance midpoint.
Net yield -- Net yield increased 2.4% year over year, exceeding the midpoint of guidance by 15 basis points.
Capacity -- Increased by 3%, delivering nearly 2.5 million vacations, a 7% increase year over year.
Operating cash flow -- Operating cash flow reached $1.5 billion.
NCC excluding fuel -- NCC excluding fuel rose 4.3% in constant currency, 195 basis points below guidance.
Adjusted gross EBITDA margin -- Adjusted gross EBITDA margin was 44.6%, 60 basis points above the prior year.
Full-year adjusted EPS guidance -- Raised to $15.58 to $15.63 adjusted earnings per share for 2025.
Full-year net yield growth -- Net yield growth expected in the 3.5% to 4.0% range for the full year, 25 basis points above initial expectations.
Q4 year-over-year capacity growth -- Expected to be 10%.
Q4 adjusted EPS guidance -- Projected adjusted earnings per share at $2.74 to $2.79.
Q4 net cruise costs (excluding fuel) -- Forecasted to decline by 6.6% to 6.1% year over year.
Exclusive destinations expansion -- Portfolio set to grow from two to eight by 2028, with Royal Beach Club Santorini announced.
Digital channel penetration -- Nearly 90% of precruise onboard revenue was booked through digital channels; both e-commerce visits and conversion rates increased by double digits year over year.
Caribbean capacity -- Caribbean capacity increased 6%, 10% capacity growth in the fourth quarter; Caribbean yields projected 37% above 2019 levels.
Debt and financing -- $1.5 billion investment-grade unsecured notes issued at a 5.38% coupon to refinance Celebrity XL delivery and other debt.
Liquidity -- Quarter-end liquidity of $6.8 billion, with adjusted leverage below 3 times LTM.
Shareholder returns -- $1.6 billion returned since July 2024 through dividends and share repurchases; quarterly dividend increased by 30% to $1.00 per share.
TUI Cruises dividend -- Received $258 million cash dividend from joint venture.
2026 capacity outlook -- Projected rise of 6% in 2026, with Legend of the Seas debuting in Europe and a full year impact from STAR and Excel.
2026 booked APD growth -- At the high end of historical ranges for bookings; book load factors for 2026 "within historic ranges at record rates."
2026 adjusted EPS outlook -- Management indicated adjusted EPS "to have a $17 handle" for 2026, according to Jason Liberty, with further details to come.
Technology initiatives -- Ongoing use of AI and digital platforms highlighted as significant for operational efficiency and customer engagement.
Points Choice loyalty program -- Set to launch in 2026, allowing flexible loyalty point application across brands.
Private destination revenue dynamics -- Management expects Beach Clubs to drive higher onboard/shoreside revenue, while "Perfect Day" destinations deliver more ticket lift, according to Michael Bayley.
Summary
Royal Caribbean (RCL 8.53%) reported double-digit growth across key profit metrics, driven by higher yields, disciplined costs, and robust consumer demand. Management highlighted the full sell-out of the new Celebrity River product, citing its strong appeal to loyal guests and expansion potential in the vacation ecosystem. Digital bookings and e-commerce conversions accelerated, resulting in a record share of onboard revenue booked precruise via digital channels.
The company executed a $1.5 billion unsecured note offering, securing lower-cost financing for fleet expansion, and received ratings improvements from Fitch and S&P. Portfolio expansion for exclusive destinations, continued deployment of AI-driven commercial tools, and sustained margin expansion remain central to the multiyear growth strategy.
Holtz said, "We continue to expect net yield growth of 3.5% to 4% for the full year, driven by gains in load factor and APD across new and like-for-like hardware."
Management confirmed that "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."
Naftali Holtz said, "we intend to utilize our strong financial position to return capital going forward," referencing $1.6 billion returned since July 2024 through dividends and buybacks.
Holtz stated, "we are 68% hedged below market rates" on fuel expense for 2025, estimating a $1.14 billion outlay.
Industry glossary
APCD (Available Passenger Cruise Days): Total passenger capacity available, calculated as number of berths multiplied by days in operation, used to measure cruise line capacity.
NCC excluding fuel (NCCX): Net cruise costs excluding fuel, a key operational cost metric for cruise operators.
Yield: Revenue earned per available passenger cruise day, reflecting both ticket price and onboard spending.
Load factor: Percentage of available berths sold, indicating occupancy and demand.
Full Conference Call Transcript
Jason Liberty: 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 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 $2 trillion vacation market. Earlier today, we announced the Royal Beach Club Santorini, further expanding our portfolio of exclusive destinations, extending our brand's reach beyond the ship, and meaningfully enhancing the guest experience.
This reflects our vision to redefine how the world vacations. Together with the Royal Beach Club Paradise Island, Perfect Day 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 and leisure travel continue 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 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, with high guest satisfaction scores. Net yield grew 2.4%, driven by strong demand across all key itineraries. Delivered adjusted earnings per share of $5.75 for the third quarter, which was 11% higher than last year.
Naftali 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 2.2% to 2.7%, on top of a 7% yield increase in the same quarter last year. Our fourth quarter year outlook has been trivially impacted due to adverse weather and the unplanned extension of the temporary closure of Labadie, one of our exclusive destinations. Despite 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 3.5% to 4%, which is 25 basis points better than our initial expectations in January, highlighting 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 are 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 perfected targets by 2027, a 20% compound annual growth rate in adjusted earnings per share, and return on invested capital in the high teens. As we have always said, Perfecta is an important milestone on our growth journey, but our ambitions go well beyond.
The combination of our game-changing ships on order, our growing exclusive destination portfolio, advancing our commercial technology platforms that are fueled by AI, and disciplined capital management is setting up the post-perfect era for another step change in the guest experience and financial performance. Now I will provide some more insight into what we are seeing in the demand environment. Consumers continue to prioritize experiences and make room in their budgets for meaningful vacations. Our independent research, combined with millions of daily customer interactions, continues to show positive sentiment towards travel and leisure and continued growth in spend.
Roughly three-quarters of consumers intend to spend the same or more on vacations over the next twelve months, a 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 booked guests are Royal Caribbean Group loyalty members without prior river cruise experiences, highlighting a powerful opportunity to attract new guests to the 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 a 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 rivership design and features, with most of them expecting superior staterooms, 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 close-in families. Book load factors for 2026 remain well within historic ranges at record rates, with booked APD growth at the high end of historical ranges.
As always, we remain focused on optimizing our pricing and yield growth. Our spectacular new ships continue to generate strong quality demand. Star of the Seas is exceeding our expectations, and Celebrity XL 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 of 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 have always believed that clarity and conviction are 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 $2 trillion global vacation market by turning a vacation of a lifetime into a lifetime of vacations. We do not just talk about that ambition. We built a robust multiyear 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 Mayra Turku, securing shipbuilding slots through the next decade to continue both companies' tradition of innovation. The agreement confirmed an 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, marking the next stage in Royal Caribbean Group's history as we continue to redefine the future of vacations. In a world where digital experiences also define customer expectations, we are 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 goal was simple: 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 e-commerce strategy, transforming from a utility into a powerful platform that drives revenue, improves operational efficiencies, and deepens 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 StatusMatch, I am excited to announce Points Choice, the next evolution in 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 guests 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 is a model that compounds over time, and we are 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 are well-positioned to lead the next era of leisure travel. With that, I will turn it over to Naftali. Naft?
Naftali Holtz: Thank you, Jason, and good morning, everyone. I will start by reviewing third quarter results. Net yields grew 2.4% 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, and 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 4.3% 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 closing demand and lower costs. As Jason mentioned, demand for our portfolio brands and industry-leading experiences continues to be very strong. Book load factors remain within historical ranges at record rates for both 2025 and 2026.
Capacity is expected to grow 5.5% for the full year and 10% in the fourth quarter. As expected, capacity growth in the fourth quarter is driven by new ships, Star of the Seas and Celebrity XL, as well as additional APCDs 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 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 deal growth, with Caribbean yields in the fourth quarter expected to be up 37% compared to 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 the 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 3.5% 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%, 40 basis points better than our prior guidance, as we remain focused on better execution through leveraging our scale and utilizing technology and AI, all while ensuring strong customer satisfaction and enhanced product offering and vacation experiences.
We anticipate a fuel expense of $1.14 billion for the year, and we are 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. The $0.12 increase compared to our prior guidance is driven by Q3 outperformance, $0.02 of better Q4 performance offsetting a $0.05 impact from recent adverse weather events and the unplanned extension of the closure of Labadie. We also expect 18% growth in adjusted EBITDA to just above $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 return 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 2.2% to 2.7%. As noted on the last earnings call, the timing of Celebrity XL'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 are expected to decline between 6.6% and 6.1% during the fourth quarter.
Taking all this into account, we expect adjusted earnings per share for the quarter to be $2.74 to $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 in the first and third quarters 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. For 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 account for 14% of our capacity, Alaska and West Coast will account for about 10%, and Asia Pacific will also account for 10%. As Jason mentioned, book load factors remain within historical ranges at record rates for 2026.
Bookings for 2026 have come in at APDs that are nicely higher than the prior year, resulting in 2026 booked APD growth at the high end of historical ranges. Now moving to costs. We remain committed to driving margin expansion supported by strong cost performance even as we advance major initiatives throughout 2026, including the opening of the Beach Club in Nassau and the build-out of Perfect Day Mexico. Even with these strategic initiatives that weigh on the NCCX 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 year, we expect EU ETS to increase from 70% this year to 100%, weighing on our energy efficiency gains. Moving below the line, keep in mind that announced dividends and already completed share repurchases were funded through a combination of strong operating cash flow and incremental borrowings while maintaining our commitment to keep leverage below three times. Additionally, expect the global minimum tax policy updates beginning January 1, 2026, to impact us an incremental couple of hundred basis points. Taking all this into account, 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 at adjusted leverage that was below three times on an LTM basis. We are 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 investment-grade unsecured notes at a 5.38% coupon. Proceeds were used to opportunistically finance the delivery of Celebrity XL 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 a new ship delivery.
We intend to continue to evaluate these types of transactions compared to existing committed ECA arrangements to lower the cost of capital and gain 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 BBB, and S&P updated 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 1.3 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 one point 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 experiences responsibly as we wrap up another strong year and look ahead to an exciting 2026. With that, I will ask our operator to open the call for the question and answer session.
Operator: As a reminder, given the number of participants on today's call, we are strictly limiting each person to one question only. No follow-ups will be permitted. If you have additional questions, you must reenter the queue. Our first question will come from the line of Steven Wieczynski with Stifel. Please go ahead.
Steven Wieczynski: Hey, guys. Good morning. Good morning, Steve. So good morning. So, Jason, you mentioned that 2026 EPS is going to start with a 17 handle, and it seems pretty clear that 2026 bookings, demand, and pricing all look pretty solid at this point. So look, I fully understand you guys are not prepared to give detailed guidance for next year. But as we think about 2026, I would assume your company tagline very much remains in place here, meaning, look, we know capacity growth is 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, in your terms, anemic, even with some of your structural costs you will be taking on next year. So from a high-level perspective, is that kind of the right way to think about '26?
Jason Liberty: Hi, Steve. Yeah. I think that is a good high-level way of saying it. I think first to start off with, it is early in our planning process. And I actually even said it earlier today on CNBC. $17 handle does not mean $17.01. But if you take moderate yield growth, you take good cost control or, as Naftali used the term anemic, which I think is probably a better description of how we think about cost for next year as we are significantly leveraging our scale and leveraging, you know, technology and so forth to get more and more efficient each and every day. So that leads you to, you know, sizable earnings per share growth, ROIC growth, etcetera.
I think where there's probably a little bit of noise is below the line and probably in fuel. And so there are, you know, an increase in our fuel costs that have a compliance component to it. And then also, as we are managing global minimum tax, you know, there is a slight increase in the tax that we are anticipating to pay. And that's probably where there's a little bit of a disconnect. The other thing is I just want to add is, you know, we are also investing a lot in these new destinations. We are going from two to eight.
And so as we bring these things online, there's also depreciation and other things that could potentially come into play. Lastly, I would just add is, you know, we are also leveraging to return capital to our shareholders. You saw that here with the raise in our dividend to a dollar. And I think you've also seen that as Naftali talked about in our buyback of shares. And so, you know, our balance sheet is in an incredibly strong position, and we are opportunistically buying back shares, and we are doing that and taking advantage of being able to lever ourselves up to maintain a strong investment-grade position.
But maintaining that leverage point that we've said, to, you know, to maintain that rating. So we feel really good about the book position. You know, the rates that we are booking at provide us a lot of rate room and opportunity for next year as we are optimizing yield profile while we are growing the business at 6% on a capacity basis and bringing on new incredible destination experiences with the Royal Beach Club here in Nassau. So there's a lot of really great and exciting things. And I would say just last 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 our incredible crew are delivering is at the very highest level, and we see that in our net promoter score. So we are super excited about the strength, and, you know, there's a little bit of noise here in the fourth quarter. There were three storms that just, you know, one even in Asia, there's a typhoon in Asia that impacted some of the land-based experience and some of the compensation we needed to give back. But that's not a reflection of the strength that we are seeing.
Operator: Our next question will come from the line of Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Also wanted to think a little bit about your 2026 comments. To clarify, when you talk about the anemic net cruise cost growth, is that sort of anemic before because that would sound like sub 2%. And is that before we think about the impact of the new destinations opening? In other words, would that be in addition to that anemic referring to sort of like-for-like, and then there would be more than that? And then similar clarification on the booking side of things for 2026. It sounds like your price on the books is up year over year. And maybe booked load is down year over year. And I assume that's intentional.
Maybe you could just kind of give us some color around that. Thank you.
Naftali Holtz: Yeah. Hi, Robin. Let me talk about the cost expectations for next year. So in the last couple of years, we are opening and we have plans to open every year private destinations, right? So next year is going to be the Paradise Island Beach Club in Nassau. And we have a lot of other initiatives that we are doing. But at the end of the day, the way we manage our costs is we look at we're subscribed to our formula. We have the moderate capacity growth, moderate yield 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.
Of course, we have those headwinds. But on the other hand, we have a lot of things that we are doing. We are finding better ways, as I noted in my remarks, to manage the business, deliver the experience in a more efficient way, technology, just efficiencies, and AI. And so the way we manage it is all in a total. And so my comments are on the total cost growth for next year.
Jason Liberty: Yeah. So and to put a point on it, Robin, is that the anemic comment includes the structural costs. So it's not just like-for-like. It includes the Royal Beach Club in The Bahamas as well as we leverage AI and we 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, you know, we have obviously been leveraging our incredible ships and leveraging our private destinations while also considering what's coming online next year, and those guests book closer in.
And so that's a little bit of probably what I would say is year-over-year comparable on the load factor standpoint is really what influences that. We actually think we are in an optimal book position. We are at rates that are, I think, higher than we probably thought they would be at, which I think is a really great thing. As we see really strong demand and people are dreaming more and more about their vacation experiences. And we are also seeing that translate to onboard spend. And so we are thoughtfully meeting our guests with the experiences, and they are willing to pay for them.
Operator: Our next question will come from the line of Matthew Boss with JPMorgan. Please go ahead.
Matthew Boss: 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 you've seen in October? And maybe to your comment before, just drivers that you see supporting 2026 bookings at the high end of historical ranges. And maybe just if you are seeing anything different from new customer acquisition?
Jason Liberty: Sure. So I'll just start off maybe first on the new customer acquisition side. First, all the things that our brands are doing and what we are doing on an enterprise basis to really kind of build out further our commercial flywheel is really working. So even, like, the announcement today about Points Choice and making sure that our guests, when they choose to sail with any of our brands, that they are getting the points that they want on their primary brand that they have loyalty status with. So we continue to evolve things like that. Our technology, our AI tools are getting smarter and smarter so that we are able to curate what is relevant to that consumer.
And that's drawing in more new-to-cruise, really seeing an elevated amount of increase first to brand. So seeing people shift from other cruise lines to our brands, we've seen an elevated amount of that. And then our loyalty program and what we've been doing to add to that is we are just getting more and more reps from that consumer. And so we are really happy about that. When you think about just what we see broadly, you know, really, each of the markets that we are doing business in or that we are sourcing our guests from is doing quite well.
We saw a little bit of a pullback from the North here in Canada, you know, in the early kind of mid part of the year, but we've now seen that normalize. Demand from Europe this summer was really strong, and their focus now on booking into 2026 is actually stronger. And the reason for that, when we talk to 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 are getting a little bit ahead of that, and that's really encouraging.
And then, you know, but we again, we continue to see the US consumer really across all segments, whether that's our family segment to our ultra-luxury segment, wanting to sail with us, and so those demand patterns have been quite strong. What I will say is that as these tools develop, our forecasting is getting better. And so our ability to predict what's going to happen in a quarter and then close in is getting better as this kind of marriage between AI 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 yeah. We do not guide with the hope of coming out with some incredible beat. We guide that's our best thinking at a point in time, it's a fifty-fifty forecast. And that's, you know, that's how we try to manage the business. We've just steadily all collectively been in an environment where, you know, what we would see in the forward-looking picture was greater than what we saw in the previous picture. And we are still seeing that, but now we are able to predict it better.
Operator: Our next question will come from the line of Lizzie Dove with Goldman Sachs. Please go ahead.
Lizzie Dove: Hi, there. Thanks for taking the question. I just wanted to ask about The Caribbean. There's been a lot of talk about whether there's oversupply in the region as people move more capacity there. You gave that great stat about 4Q, and it doesn't sound like you are seeing it, but curious as to what you are seeing there, whether there is oversupply and how you think about the setup for 2026 specifically.
Jason Liberty: Yeah. Well, I mean, it's well known. It's been known for some time that there is an increase in supply in The Caribbean. You know, of course, The Caribbean has been working incredibly well for us, and it's a lot of surprise that there's been a supply increase there. But it's a very manageable increase in supply. So we, you know, we've seen it. It's been a little bit more promotional in The Caribbean activities.
But for us, I think because of our differentiated assets with our ships and our destinations, and our ability to kind of keep our guests inside of our ecosystem, and we are seeing a draw from other ecosystems coming into our ecosystem, you know, that we are able to not only manage that demand, but we are able to see our guests, you know, pay up to experience our delivery.
Operator: Our next question will come from the line of Brandt Montour with Barclays. Please go ahead.
Brandt Montour: Great. Thanks, everybody. Thanks for taking 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 comparison issues that you laid out and maybe add something for the storms to kind of get to, I don't know, maybe something like mid-threes exiting the year. I want to know if that's the way you would sort of cleanse the fourth quarter in terms of how yield growth is exiting the year through the lens of the fact that there's not much, you know, 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 know if there are other puts or takes as we think about building our models for '26.
Naftali Holtz: Yes. I mean, obviously, we are not providing guidance for 2026, but we are going to subscribe to the formula as we just talked about. But in terms of how you exit the fourth quarter, your math is directionally correct. So we did quantify the, you know, the more the more the less dry docks as well as new hardware. And so when you take kind of a more normalized new hardware and like-for-like, you are definitely in the ZIP code.
Operator: Our next question comes from the line of James Hardiman with Citi. Please go ahead.
James Hardiman: Hey, good morning. So maybe to that last point, as we sort of roll things forward into 2026, I think investors are very keen, as we think about puts and takes, that there's a lot of puts. Right? You've got whereas in 2025, you had sort of negative shift timing that was a headwind that now becomes a tailwind. Obviously, you know, weather it's not a big number, but you know, in theory, that becomes a tailwind as we think about 2026. I 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 takes as we think about the puts and takes? Specifically, you know, are some of these tailwinds maybe offset by a weaker consumer environment broadly? It doesn't really sound like it. Just trying to sort of put some of these items. Thanks.
Jason Liberty: Yeah. So, James, for the question. I think first, to start off, is that the consumer or our guests is strong. They have great jobs. They have great balance sheets, bank accounts. And they have a strong desire to vacation and build experiences and memories with their friends and family. But, you know, there's, you know, we are also not immune to what's generally happening in the environment. And so it's what the consumer's willingness to pay up and they are willing to pay up. May not be willing to pay like last year, you know, double digits up or the year before, I think it was 13 or 14% up, but they are willing to pay more.
And so I think in your math of yield growth is, you know, we expect moderate yield growth for next year. I would describe, like, this year was a moderate yield growth type year, which we had foreshadowed for a very long period of time. I would say second, as we said, is we expect our cost to grow on a per APCD 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, you know, more margin to our business, more return, more cash flow to our shareholders. And it gives us the confidence to continue to invest in our business.
I think where when you are probably trying to reconcile your numbers, and you can certainly your Blake and team to help you do more of it. I think it's more of it is below the line. I think that there's an opportunity to provide some clarity here. And I just want to stress I did not say our earnings for next year are going to be $17. I said that they're going to have a 17 handle on there, just to clarify. Again, so I think we feel very good about the business for next year.
And it's, you know, whether we look at our book position, what we are hearing from our guests, you know, we are going to continue to generate very strong demand and deliver these incredible vacation experiences.
Operator: Our next question will come from the line of Ben Chaiken with Mizuho. Please go ahead.
Ben Chaiken: Hey, good morning. I have a question on River. You mentioned, Jason, you sold out of your 27 itineraries in a few hours. I think you have 10 ships in the first order. How are you thinking about allocating capital to this opportunity in the context of what appears to be accretive ROIs? Like, are there other balance sheet limitations? Are there ship construction limitations? Or is it just getting comfortable with the opportunity? Thanks.
Jason Liberty: Sure. Thanks for the question. But first, it didn't sell out in a few hours. It sold out in a few minutes. So to our head of our celebrity brand, I told you so. The good news is we are going to have more. That's right. That's right. Yes. So our initial order was 10. We obviously have options for much more than all of that. First and foremost, what you want to do is you want to make sure that you get the product right.
And so our launch of it and you had the opportunity to see what the ship is going to look like, the amenities that it's going to offer, it will deliver on the true DNA of the Royal Caribbean Group. Right? It will be a step change, and it will change the expectations of what our guests are looking for. As I also said when we announced this, this is not a hobby. We do expect to be a substantial vacation player in the river business. And so we will continue to grow that. I mean, our limitations, I think, more is just squaring up that we got the experience on what we want it to be.
And then this is an area where we have an opportunity to accelerate into here, and we have full confidence in doing that.
Operator: Our next question will come from the line of Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: 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 have just been obviously around the yield performance into next year, but it seems like that mix dynamic is really what's kind of changing your approach to the 2026 year. So I guess maybe my question is if close-in demand were to stay here, would that suggest that, like, the ultimate, like, that you would see significant upside to your underlying earnings upside in 2026? Is that a fair assumption? Thank you.
Jason Liberty: Yeah. So one, I wouldn't say that we are banking on close-in demand. I would probably describe it as, you know, each product that we offer to our guests and their different segments and different brands and different, you know, destinations, has a different booking pattern to it. That's very natural. And, like, we getaway is not typically what's on somebody's mind, you know, eighteen months in advance. And so as we have more of those opportunities that we are able to deliver because of the assets, you know, that we have. If that is what's driving a change in that behavior.
But the behavior in our other products actually looks very similar to what we, you know, what we have typically seen for Seven Night Caribbean or a seven-night in Europe, etcetera. And so, you know, those patterns are there, they're strong, and they're accelerating. And so I think that's what you want to see is that for each of the products in those different tracks that things are moving at a rate that's going to optimize your total revenue performance. And so that's how I think we think about it.
Now, certainly, we have seen in the past, and we do not count on this, is that, you know, that your close-in, on all these products, accelerate and we end up, you know, you know, you're beating our expectations. But we do, of course, try to bake into our forecast. These are the patterns that could be, you know, the patterns we saw a quarter, the patterns we saw a year ago, to inform how we expect to track to occur. And that's how our yield management works. That's how our tools work in trying to predict and to lay out what we should be offering in the market.
So I think, again, we feel very good about the booking environment. Feel good about our book position. I would read into our commentary as we are optimizing our revenue. As when we look back in time, we see more often than not that we've left some money on the table. And that's it's our job to maximize revenue.
Operator: Our next question will come from the line of Sharon Zackfia with William Blair. Please go ahead.
Sharon Zackfia: Hi, good morning. I wanted to talk through kind of the composition of your revenue as you ramp up more of the owned destinations. So I know with CocoCay, you also saw a 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 as the Royal Beach Clubs come on, do we start to see the composition of yield shift a little bit more to onboard spend and have that lead versus ticket?
Michael Bayley: Hey, Sharon. It's Michael. Yeah. It's a good question. I mean, Day was really a huge driver of ticket lift as well as onboard spend. I think with the beach clubs, it's a slightly different product. So it does kind of slip more into the short excursion onboard revenue frame. And so it's also a driver for itinerary as well because we are beginning to see that 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 clubs really push through in onboard revenue and short excursions.
And then the Perfect Day is typically a key driver of ticket.
Jason Liberty: Yeah. And Sharon, I think just to add on to Michael's point, it's got to modulate a little bit, right, because the perfect day model tends to bring a lot of premium on the ticket side. And so we still have there's opportunity for us to grow more in CocoCay, but as Perfect Day Mexico comes online, you know, that's probably a bit 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, but it's all the answer to all of it is it's great revenue. It's a great guest experience, great margins, great returns.
And so it's a true kind of win-win opportunity for everybody.
Operator: Our next question will come from the line of Vince Ciepiel with Cleveland Research. Please go ahead.
Vince Ciepiel: Thanks so much. Just want to clarify kind of the yield picture here in 2025. The first half was up, I think, 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 deceleration is related to just tougher compares versus maybe less new hardware tailwind? 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, is you've called out, I think, some port fees as well as dry dock as well as Haiti, etcetera.
So there's a number of, like, isolated headwinds. But just help us kind of bridge that step down first half versus second half. If you could.
Naftali Holtz: Yeah. And, thanks, Vince. So every quarter, something right because the ship delivery timing does impact those. These are large ships, and this year we had two deliveries. I think the best way to look at it is you kind of look at it on a yearly basis. And that's if you kind of look at it across the board, it's probably in if you normalize all these quarter-over-quarter things, some of it was at 24%, easy comp or a harder comp, and some of it is just some of these events. And timing of ship deliveries and 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 business. And it also subscribes to our formula, which we've said all along, this is how we manage the business. This is how we subscribe to that. And then we drive to grow the business according to that formula, including the yield, the capacity, and the cost.
Operator: Our next question will come from the line of Andrew Didora with Bank of America. Please go ahead.
Andrew Didora: Good morning, everyone. Actually, Matt, just wanted to touch on the bond deal quickly to finance Liberty XL. Obviously, not a usual way to finance a ship, but certainly makes sense given the rate differential. I guess my question is, are you pretty much indifferent in how you finance the ships right now as long as there is that rate benefit? Out of curiosity, are there any additional benefits of tapping the unsecured market as opposed to the ECA financing? Thanks.
Naftali Holtz: Yes. Great question. Thank you. And so yes, for now, we are in a place where we have a very strong investment-grade balance sheet. We are benefiting from rates that are basically commensurate with our financial performance and our ratings. So when we evaluate that, we look at it and we say, what does it make sense to finance with? DCA, obviously, they are great partners. We are very grateful for the kind of partnership we have. It's obviously very important during the construction period to have the financing. And all these ships will 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, 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 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. The other thing is just to remind everybody is these ECAs also have amortization payments. When you look at the average tenor of the loan is roughly a little bit over six years. We are obviously now issuing ten-year pieces of paper in the unsecured market.
So it's not just the cost 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 we are very happy with kind of how this went. We are going to continue to evaluate all the alternatives. It's very important to understand that all our ship financing, all our ship deliveries, and orders have committed financing going forward, and then we'll have that option to evaluate what's the best alternative for us when we take delivery.
Operator: And that will conclude our question and answer session. I will turn the call back over to Naftali for closing comments.
Naftali Holtz: Thank you. We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a very good day.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect. Experience the best family vacation in the world. Icon of the seas. It's the first of a whole new class of ships. Where everyone in your crew will have the time of their life multiple times a day. You'll never forget the feeling of plunging down six record-breaking slides at Thrill Island. Or finding the courage to conquer the crown's edge, a test of bravery like