Royal Caribbean (RCL) Q3 2026 Earnings Call Transcript

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DATE

Tue, Oct 27, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Blake Vanier
• Chairman and Chief Executive Officer - Jason Liberty
• EVP and Chief Financial Officer - Naftali Holtz
• President and CEO of The Royal Caribbean Brand - Michael Bayley

TAKEAWAYS

• Total Revenue -- $5.6 billion, representing a 9% increase driven by strong close-in demand in Europe and the Caribbean.
• Adjusted EPS -- $6.57, exceeding the company's midpoint guidance by $0.26 due to yield outperformance and the timing of expenses.
• Full-Year Adjusted EPS Guidance -- $17.85 to $17.95, representing 14% year-over-year growth despite fuel and currency headwinds.
• Sandals and Beaches Resorts Investment -- $3 billion for a 50% stake, valued at 10 times forward EBITDA and expected to be immediately accretive upon closing.
• Synergy Opportunities -- Several hundred million dollars over time, expected from scale in procurement, revenue management, and digital engagement between the cruise and resort brands.
• Quarterly Capacity -- 8% increase compared to the prior year, as the company delivered 2.7 million vacations during the period.
• Load Factor -- 112%, reflecting high occupancy levels across the global fleet during the third quarter.
• Net Yields -- 0.6% growth in constant currency, which was 60 basis points higher than prior guidance due to stronger-than-expected pricing.
• Net Cruise Costs excluding Fuel -- Decreased 1.8% in constant currency, outperforming expectations by 40 basis points because of cost timing shifts into the fourth quarter.
• Booking Volumes -- Increased in the mid-teens since the last earnings call, with 2027 sailings currently up in the high teens.
• Liquidity -- $7.4 billion as of Sept. 30, consisting of cash, cash equivalents, and undrawn revolving credit facility capacity.
• Leverage -- Below 3.0 times, which management stated is consistent with its goal for solid investment-grade metrics.
• Full-Year Fuel Expense -- $1.35 billion, based on current at-the-pump prices and a 58% hedge position for the fourth quarter.
• Total Capital Expenditures -- $4.6 billion for the full year, primarily allocated to the new ship order book and land-based destination initiatives.
• Non-Ship Capital Expenditures -- $1.5 billion, focusing on capacity expansion and the development of new land destinations.
• Adjusted EBITDA -- $2.5 billion for the third quarter, resulting in an adjusted EBITDA margin of 45%.
• Operating Cash Flow -- $1.6 billion for the quarter, supporting the company's strategic growth initiatives and capital returns.
• Future Capacity Growth -- 4.5% in 2027, 6.0% in 2028, and 6.5% in 2029, based on the current ship order book.
• Debt Issuance -- $1.25 billion of 5.550% senior unsecured notes due 2034, used to repay floating-rate loans and debt maturing in 2027.
• Caribbean Capacity Exposure -- 57% of total capacity for the full year and 44% of capacity during the fourth quarter.

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RISKS

• Holtz stated, "Our higher earnings outlook also reflects stronger than expected third-quarter results, partially offset by higher projected fuel costs and unfavorable currency movements," highlighting macroeconomic factors impacting guidance.
• Holtz noted that the business remained on track for its targets "despite the significant fuel and exchange rates headwinds and the impact we experienced during the year from geopolitical events."

SUMMARY

Royal Caribbean Cruises Ltd. (NYSE:RCL) reported third-quarter results that surpassed guidance, led by sustained consumer demand for vacation experiences and accelerated booking momentum. Management raised the full-year earnings outlook while announcing a $3 billion investment in a 50% stake of Sandals and Beaches Resorts to expand its reach in the all-inclusive vacation segment. The company stated that it remains on track to achieve its multiyear Perfecta financial goals, including a $20-handle for Adjusted EPS by 2027, supported by a connected vacation ecosystem. This platform leverages loyalty, technology, and data to increase guest frequency and capture a larger share of the $2 trillion global vacation market.

• Liberty stated, "Today, we capture only 20%-25% of our guests' annual vacation spend," noting that the Sandals partnership expands the company's reach to approximately 50% of the guest vacation wallet.
• The Sandals and Beaches portfolio includes 18 high-quality resorts and a land bank of over 1,000 undeveloped acres in key Caribbean beachfront locations for future room expansions and greenfield projects.
• Management reported that millennial and younger travelers now account for approximately 50% of the guest mix, often choosing shorter weekend itineraries with high onboard spend.
• The company will enter the river cruising market in 2027 through Celebrity River Cruises, adding an incremental vacation occasion for its premium brand customers.
• In 2027, the launch of Hero of the Seas on a Miami program will allow Icon of the Seas to transition to Galveston as the first Icon-class vessel in that home port.

INDUSTRY GLOSSARY

• APCD: Available Passenger Cruise Days, a measure of capacity representing double occupancy per cabin multiplied by the number of cruise days.
• NCC: Net Cruise Costs, a non-GAAP measure used to monitor cost performance by excluding certain variable expenses.
• Perfecta: A multiyear strategic program targeting a 20% Adjusted EPS CAGR and a Return on Invested Capital of 17% or higher by 2027.
• Net Yields: A pricing performance metric calculated as adjusted gross margin per APCD.
• Load Factor: A measure of occupancy calculated by dividing passenger cruise days by APCD.
• Constant Currency: A method of calculating financial results that removes the impact of foreign exchange rate fluctuations.
• Status Match: A loyalty program feature that allows guests to maintain their tier status across different cruise brands within the company's portfolio.
• Hero of the Seas: A new cruise vessel scheduled to join the fleet in 2027.
• Icon-class: A category of large, high-capacity cruise ships designed by Royal Caribbean.

Full Conference Call Transcript

Operator: Good morning. My name is Morgan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group third quarter 2026 earnings call. All participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you will need to press star, then the number 1 on your telephone. I would now like to introduce Mr. Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Blake Vanier: Good morning, everyone, and thank you for joining us today for our third quarter 2026 earnings call. Joining me here in Miami are Jason Liberty, our Chairman and Chief Executive Officer, Naftali Holtz, EVP and Chief Financial Officer, and Michael Bayley, President and CEO of The Royal Caribbean Brand. Before we get started, I'd like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning, as well as our filings with the SEC for a description of these factors.

We do not undertake to update any forward-looking statements as circumstances change. Also, we will be discussing certain non-GAAP financial measures which are adjusted as defined and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency-adjusted basis. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our third quarter, the current booking environment, and our outlook for 2026. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

Jason Liberty: Thank you, Blake, and good morning, everyone. I'm very happy to share the results of another outstanding quarter that exceeded our expectations and drove an increase to full-year guidance as demand for our leading vacation brands continues to accelerate. Before we get into the results and outlook, I want to talk about our recent announced partnership to buy a 50% stake in Sandals and Beaches Resorts. Our strategy is to turn the vacation of a lifetime into a lifetime of vacations. Our mid-70s net promoter scores are a testament to our unwavering commitment to delivering the best vacation experiences responsibly.

At the same time, we are building a connected vacation platform that brings guests back more frequently across more occasions and captures a greater share of the growing $2 trillion-plus global vacation market. In recent years, we have strengthened our connected vacation ecosystem by investing in technology, loyalty, and commercial capabilities. Everything starts and ends with the customer. We are building a portfolio that serves more of their needs across more occasions. A guest might choose Royal Caribbean for a multigenerational vacation, Sandals for a romantic getaway, Celebrity for a premium couples Galapagos adventure, and Silversea for an Antarctica expedition.

We have also broadened how guests can vacation with us through Celebrity River Cruises and our growing portfolio of differentiated destinations and experiences. Connecting these opportunities through loyalty, data, and technology, all while obsessing about delivering the best vacation experiences gives high-value guests more reasons to remain within our family of brands. This, in turn, enables us to deepen engagement, increase frequency, and expand lifetime value. That brings me to Sandals and Beaches Resorts. The business has two leading and complementary brands in the fast-growing and high-potential all-inclusive resort segment. Sandals is the leading adult-only all-inclusive resort brand in the Caribbean, and Beaches leads in serving families and multigenerational all-inclusive resort travelers.

It is also a strong strategic fit that builds on the strength and growth potential of our cruise businesses. Today, we capture only 20%-25% of our guests' annual vacation spend. About 30% of our guests have vacations in a Caribbean all-inclusive resort in the last two years. By adding all-inclusive resorts to our ecosystem, we expand our reach to roughly 50% of the vacation wallet. This investment lets us serve guests that are already spending in all-inclusive resorts while also attracting new guests to our ecosystem and building on our Caribbean footprint and North American sourcing, all while reinforcing our core cruise business.

Caribbean all-inclusive is an attractive $16 billion market growing 11% a year, and Sandals and Beaches Resorts is a leading owner operator with strong brand awareness and financial profile. Financially, our approximately $3 billion investment for a 50% stake at 10 times forward EBITDA is expected to be immediately accretive to our earnings while keeping us within our leverage targets. We are very excited about the value that is going to be brought to our customers, to our shareholders, to our employees, to the communities that we serve with this partnership for Sandals and Beaches. I will elaborate more about this opportunity a bit later, but now let me turn to our results.

This morning, we reported third-quarter results that exceeded our expectations and resulted in an increase to our full-year guidance. Third-quarter revenue grew 9% year-over-year, while earnings came in 4% above our guidance. In the third quarter, we delivered 2.7 million incredible vacations at industry-leading guest satisfaction scores. Capacity increased 8% year-over-year, and net yields were up 0.6%, which was about 60 basis points higher than our guidance. The beat was driven by better-than-expected closing demand, along with strong onboard revenue, primarily for Europe and Caribbean products. Costs also came in favorably due to timing, and as a result, adjusted EPS was $0.26 higher than our guidance. Now, Naftali will elaborate on our results and outlook in a few minutes.

Turning to the demand environment, we continue to see accelerated momentum as consumers prioritize our vacations and experiences. Travel remains the number one leisure category where consumers intend to increase spending. Traveling more is a top priority for a third of Americans, and consumers see cruising as a good value due to high-quality onboard amenities, pricing that includes meals, accommodations, and entertainment, and the ability to visit multiple destinations in one trip. That confidence is reflected in our booking activity. Since the last earnings call, booking volumes have increased in the mid-teens year-over-year, and bookings for 2027 sailings up in the high teens, demonstrating strong demand as we continue to build a strong base of business for 2027.

Our book position for both 2026 and 2027 is ahead of prior year at record rates. We are also seeing our relationship with our guests deepen. This year, close to half of our guests were repeat customers, with the balance experiencing our brands for the first time. These new-to-brand guests are becoming loyal repeat cruisers and returning more frequently as the average time between cruises continues to decrease. Our differentiated brands, net promoter scores in the mid-70s, expanding portfolio, and growing loyalty and technology capabilities gives us more ways to engage with guests and more opportunities to capture a greater share of their vacation spend.

Moving to the outlook for the remainder of the year, our capacity in the fourth quarter is up 5% year-over-year, and we expect to grow yields 4.2%-4.7%, which is in line with our prior expectations. As we discussed last quarter, the increase in expected fourth quarter yields reflects a more favorable year-over-year comparison, deployment mix, and timing of dry docks. Full-year net yields is expected to grow approximately 2.1%. Full-year adjusted EPS is now expected to be in the range of $17.85-$17.95, representing 14% year-over-year growth. 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.

This allows us to invest in high-returning and strategic growth opportunities while also returning capital to our shareholders through dividends and share repurchases. 2027 is the final year of our Perfecta program, and the business is performing well ahead of expectations. In fact, at the spot fuel rate when we announced the program, we would exceed our 2027 earnings target by about a dollar per share. Despite the significant increase in fuel rates this year, we remain on track to achieve our 20% adjusted earnings per share CAGR target based on the current forward fuel price curve for a $20 handle in 2027. Separately, we have already achieved our ROIC target.

As I mentioned on our last call, we have a great partnership with local communities and the government of Mexico, where we deliver close to a million vacations a year. While I know there is great interest in our efforts in Mahahual, we will share further progress and updates at the appropriate time or as they become available. Stepping back, our goal is straightforward. Keep guests vacationing with us again and again, whatever the occasion and whichever brand fits best. We are pursuing that through an integrated vacation ecosystem in which loyalty, technology, and data reinforce one another to drive repeat travel and grow the long-term value of each guest. Loyalty is the foundation of the platform.

Status Match carries guests' loyalty status across our brands, while Points Choice and Royal ONE let them earn and redeem rewards across the ecosystem. These capabilities are already driving greater cross-brand engagement and repeat travel. In fact, this year, 40% of our guests are loyalty customers. Loyalty share has increased across nearly all tiers over the last few years, with the strongest growth concentrated among entry-level members. This suggests more guests are engaging with the loyalty ecosystem earlier in their journey, expanding the pipeline of future repeat rates and deepening longer-term customer relationships. That deeper engagement is paying off in spend as well.

Since we launched Status Match earlier this year, guests who sail across brands have higher APDs than guests who only sail on one brand. Sandals and Beaches Resorts is where we are putting some additional capital as a TSR accelerator to our strategy. It extends our platform into the attractive all-inclusive category with loyalty benefits flowing in both directions. The roughly 30% category overlap gives us a natural way to introduce Sandals and Beaches to our guests and to welcome their guests into our brands. Over time, that means more vacation occasions, greater frequency, and higher lifetime value for both the Royal Caribbean Group and Sandals & Beaches Resorts.

Just as important, this is a business with significant room to grow. The portfolio today has 18 high-quality all-inclusive resorts on some of the most attractive beachfront sites in the Caribbean. The Stewart family has invested significantly in modernizing the resorts and elevating the guest experience, which is reflected in the quality of the product, guest loyalty, strong pricing, and compelling financial performance. The portfolio also includes more than 1,000 acres of undeveloped Caribbean real estate, much of it adjacent to existing resorts. Together with Sandals and Beaches' proven track record, this scarce, hard-to-replicate land portfolio provides a strong foundation for growth.

Funded by the business' own cash flow generation, the development plan includes three new beach resorts and significant room expansions across the existing portfolio, with substantial opportunity to further expand the plan over time as we capture more of the attractive and growing all-inclusive resort market. Beyond room and hotel expansion, the same capabilities that power our platform are what will drive value from this partnership. We bring decades of experience in revenue management, digital engagement, distribution, procurement, technology, and data. Together, we see tangible opportunities to grow revenue, enhance customer acquisition, and leverage our global scale while preserving the identity, Caribbean character, and differentiated guest experiences of Sandals and Beaches.

All in, we see several hundred million dollars of synergy opportunities over time, and every guest we connect across the two businesses strengthens the broader ecosystem. We look forward to sharing more detail once the transaction closes, and we are excited about the value this partnership will create for our shareholders and our customers. In summary, demand remains strong and we are encouraged by the strength we are seeing for 2027 and beyond. At the same time, we continue to expand the opportunities in front of us.

Our investments in new ships and destinations, Celebrity River Cruises, Sandals & Beaches Resorts, loyalty, digital and technology, and broadening our vacation platform and creating more ways for our guests to interact and vacation with us. We are executing from a position of strength with a growing base of loyal guests, an expanding portfolio of differentiated vacation experiences, and significant opportunities ahead. With that, I will turn the call over to Naftali. Naf?

Naftali Holtz: Thank you, Jason, and good morning, everyone. I will start by reviewing third-quarter results. Adjusted earnings per share were $6.57, $0.26 higher than the midpoint of our guidance. Growth in both yields and capacity drove a 9% increase in total revenue for the quarter. Yields for the quarter were 60 basis points above our guidance, driven by stronger close-in demand compared to our expectations in July, particularly in Europe and the Caribbean. Net cruise costs per APCD, excluding fuel, decreased 1.8% year over year, approximately 40 basis points better than expected, or $0.05, due to timing of costs shifting into the fourth quarter. Adjusted EBITDA was $2.5 billion, margin was 45%, and operating cash flow was $1.6 billion.

As Jason noted, booking activity accelerated during the quarter, and our booked position for 2026 and 2027 is ahead of prior years at record rates. As I discussed last quarter, a more favorable year-over-year comparison, deployment mix, and the timing of dry docks provide an approximately 200 basis point benefit to fourth-quarter yields in 2026, following a similar headwind in the third quarter. Capacity is expected to grow 6.6% this year. The Caribbean represents 57% of our capacity and 44% in the fourth quarter. We remain well-positioned in the Caribbean, where our ships, destinations, and onboard experiences set us apart, driving positive net yields this year, even with the elevated capacity in the region.

Europe will account for 15% of capacity for the year and 10% of capacity in the fourth quarter. Our Europe season has been very successful, even with the geopolitical events this year. Lastly, Alaska is expected to account for 5% of total capacity for the year and immaterial for the fourth quarter. Now, let me talk about our updated guidance for 2026. For the full year, net yields are expected to grow approximately 2.1% in constant currency. The increase in yield guidance is driven by outperformance in the third quarter and expectations for fourth-quarter yields that are in line with our July guidance. Together with capacity growth of 6.6%, total revenue is expected to grow 9%.

Net cruise costs, excluding fuel, are expected to be approximately flat in constant currency, consistent with our prior guidance. This reflects ongoing efficiency improvements while continuing to invest in the guest experience. We now expect full-year fuel expense of approximately $1.35 billion. Fourth-quarter consumption is 58% hedged, and we have continued to opportunistically add hedges for future years. Based on current fuel prices, currency exchange rates, and interest expense, we expect full-year adjusted earnings per share to be $17.85 to $17.95. This brings us in line with our initial earnings expectations in January, reflecting the strength of the underlying business despite the significant fuel and exchange rates headwinds and the impact we experienced during the year from geopolitical events.

Our higher earnings outlook also reflects stronger than expected third-quarter results, partially offset by higher projected fuel costs and unfavorable currency movements. We expect continued cash flow to grow to support margin expansion, investment in our strategic initiatives, solid investment-grade balance sheet metrics, and continued capital returns to shareholders. Now let me discuss our fourth quarter guidance. In the fourth quarter, capacity is expected to increase 5% year-over-year, and net yields are expected to grow between 4.2% and 4.7% in constant currency, in line with our July expectations. As we discussed last quarter, yield growth in the fourth quarter reflects strong demand, a more favorable year-over-year comparison, deployment mix, and the timing of dry docks.

Net cruise costs, excluding fuel, are expected to decrease between 0.9% and 1.4% in constant currency. We expect fourth quarter fuel expense of approximately $379 million based on current at-the-pump prices, net of hedging and forecasted consumption of approximately 463,000 metric tons. Taking all of this into account, we expect adjusted earnings per share for the fourth quarter to be between $3.48 and $3.58. Looking ahead to 2027, we expect capacity growth of 4.5% driven by new hardware and fewer dry dock capacity days. 2027 deployment mix will be similar to 2026, with 56% in the Caribbean, 16% in Europe, 11% in Asia Pacific, and 5% in Alaska.

We are also very excited to welcome Hero of the Seas to the fleet in 2027, as well as beginning operating Celebrity River. With Hero of the Seas launching on the seven-night Miami program, Icon of the Seas will move to Galveston, our first Icon-class ship in this home port. We expect yield growth to be weighted towards the second half of the year, as the first quarter faces approximately 200 basis points of structural headwinds, including timing of dry docks. Turning to our balance sheet, we ended the quarter with $7.4 billion in liquidity and leverage below three times, consistent with our goal of solid investment-grade metrics.

During the quarter, we issued $1.25 billion of approximately 5.5% senior unsecured notes due 2034, with the proceeds used to repay a portion of our floating rate term loans and debt maturing in 2027. In October, we also entered into a 400 million delayed draw term loan with Export Development Canada, a new source of capital for us, and increased our revolving credit facility by $50 million to $6.65 billion. We continue to maintain strong access to diverse sources of capital that support our liquidity, strategic growth initiatives, and shareholder returns. I want to provide a few additional details on our investment in Sandals and Beaches Resorts.

We expect to account for the investment as an unconsolidated equity method investment, with results reported on a one-quarter lag. We expect the transaction to close in early 2027 and for the investment to be immediately accretive to our financial metrics and grow over time. The contribution to 2027 earnings will be immaterial and depend on when the transaction closes. As Jason mentioned, the business has significant growth ahead of it, including room expansion, new resorts, and potential acquisitions. With strong cash flow generation and leverage below one time, the company can self-fund the ambitious development plan while leaving room for distributions.

At this point, we do not expect to make any more contributions into the joint venture beyond the initial purchase price. The equity method investment income will be included in our financial guidance following the close of the transaction, and we expect to provide more detail then. In closing, we remain committed and focused on our mission to deliver the best vacation experiences responsibly as we work to deliver another year of strong results. With that, I will ask our operator to open the call for a question-and-answer session.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from Matthew Boss with JPMorgan. Your line is open.

Matthew Boss: Thanks, and congrats on another nice quarter.

Jason Liberty: Thanks, Matt.

Matthew Boss: Jason, as you approach the end of your Perfecta plan, underlying earnings growth as you cited is pacing to exceed the 20% earnings growth CAGR if you exclude the impact from the additional fuel. As we think multi-year, do you see any moderation in the way you're thinking about multi-year prospects for cruise and any change in confidence around larger picture market share opportunities in that $2 trillion plus total vacation market?

Jason Liberty: Well, Matt, thanks for the question. I will start off with the short answer, which is no, I do not. What we see is obviously, whether it is our business or in the general cruise space, we are a sliver of this growing $2 trillion plus travel space. Quite frankly, that space is predicted to expand at a faster rate than we are going to grow and the cruise industry is going to grow. So I see really strong, high quality demand for the vacation experiences that our different brands are delivering. They are the leaders in their segments.

They are doing that through this incredible innovation on the ships that we build, the vacation experiences that we are delivering on those ships by our incredible crew. Of course, the destinations which we continue to bring online here, which is elevating guest satisfaction. Collectively, those things drive a NPS score in the low to mid-70s. So trust is high. Expectations are that we are going to deliver the best vacation experience and doing that in a responsible way, and that is resulting in us getting more reps.

You combine that with adding River and you are adding all-inclusive resorts, further deepens our relationship with our customers, and we are getting more and more reps, which we are clearly showing in the numbers. So we are very excited, obviously, about the performance this year. We are very encouraged by all the signals we are getting for next year and beyond. Matt, that is a long way of me saying we feel really confident in the future.

With the trust that we have built, as well as the technology platforms, whether it is with AI or digital and the connectivity we are bringing across our brands, we feel very confident that we are going to get a greater share of our guests and our customers' vacation wallet. That vacation wallet is. We take that very seriously to make sure we are delivering high quality vacations and they are getting high value for that. But also, that share is typically coming because we are able to curate and identify these high value customers. It is resulting in higher margin and higher lifetime value for that customer.

Matthew Boss: Great color. Congrats again.

Jason Liberty: Thank you.

Operator: Your next question comes from Steve Wieczynski with Stifel. Your line is open.

Steve Wieczynski: Yeah. Hey, guys. Good morning, and congratulations on the strong results here.

Jason Liberty: Thanks, Steve.

Steve Wieczynski: Jason, I want to ask another question about 2027. As we think about getting to your $20 handle next year, I would assume you are not ready to give exact yield and cost guidance for 2027, but I would assume it is going to fall under your company tagline of moderate capacity and yield growth and disciplined cost control. Having said that, I would assume getting to that $20 plus in earnings next year does not include any type of help from things like Sandals, buybacks, debt refis. I would also assume that if oil prices stay status quo, that is probably embedded in there as well.

I just want to make sure that, as we think about next year, some of the potential upside to that $20 number. And then if I can ask a second question as well, Jason. As we think about the 1,000 acres of undeveloped land that Sandals has, can you just help us think about maybe what some of the potential development opportunities could be there over time as well? Thanks, guys.

Jason Liberty: Sure. I think first to your first point, Steve. One, we do not know exactly when the Sandals transaction is going to close. Our expectations will be end of this year or early next year, but we do not know exactly when it is going to close. And it is also going to be on a quarter lag. To answer your first question, whether it is Sandals, whether it is share buybacks, debt refinancing, et cetera, that is stuff that is not in consideration to our statement around next year. As Naf said in his comments, as we close, at that point in time, we will know the timing of that.

We will know what the forecast is based off of the lag. At that point, we will update guidance. But regardless, we expect the impact for next year to be immaterial to our business. So you have another.

Naftali Holtz: Hey, Steve. Just on the second question on the land. The purchase price that we paid and we have agreed to includes that 1,000 acres. This is beachfront key locations. We are very excited about continuing to have the company develop that. They have a very, very strong track record of development and enhancements and growing their existing footprint. Lots of these lands are actually adjacent to existing properties. These are just building on the current infrastructure they have, and they will just be room expansions in existing locations. There is also a couple of opportunities to do greenfield development in really attractive locations and markets. Today, they have 18 resorts and 3 of them are being built.

Lots of room to grow, expand the keys. We, of course, as you know, are very focused in making sure that, consistent with our core business, those are developed, of course, to guest satisfaction scores, but also accretive financial results.

Jason Liberty: Yeah. Steve, I think it is important to be clear, because I know there has been lots of questions that we have gotten about, are we going to show up at Sandals Saint Vincent with a cruise ship and tender people into that beautiful resort? The answer to that is no. Sandals needs to be Sandals. Beaches needs to be Beaches. There is this massive land bank and, of course, we will collectively be evaluating how we grow this business and also where there might be adjacencies or opportunities pre, post, et cetera, with our other cruise brands.

But these are additional vacations our guests are taking, and we want to make sure they are taking that additional vacation with us. I think we are very keen, and ultimately, as I made in my comment, we think that, and not just we think this, but also our partner in this feels very confident that what we have been able to build with technology, with AI, the connected loyalty, obviously our huge supply chain footprint, et cetera, that there is an opportunity for us to just bring greater scale and synergy to the business, which will not only help elevate the current performance, but it is also going to provide a lot of tailwinds to grow this business.

As Naf said, the growth of this business is self-contained because this business generates a tremendous amount of cash flow, including the opportunities for dividends. So we are very excited about this. The last thing I will say is, this land, when you see it, yes, it is adjacent. There are other greenfield opportunities on other parcels of land that are inside this land bank. But this is not stuff that you can just go buy off the shelf. This has been curated brilliantly by the Stewart family.

Operator: Your next question comes from Trey Bowers with Wells Fargo. Your line is open.

Trey Bowers: Hey, guys. Thanks for the question. I was just going to ask about the 2027 commentary, where you guys mentioned being up high teens for next year. It is a little bit different language than you guys sometimes use when discussing the book position. It is obviously a really impressive number. Just want to make sure I understand what that represents in terms of, is it year-over-year, is it quarter-over-quarter? And in terms of the pricing dynamics underlying that, are those up again next year? Thanks so much.

Jason Liberty: Yeah, I would read that we are just trying to give you a measurement on how we have seen demand elevate for future periods. And of course, we are booked. Our book position is at a higher place and at higher rates. And I think, and of course, we are always, and you have heard me say this before in the past, we are looking to optimize always our revenue performance.

We have, I think, leading world-class tools that are helping us determine what our best book position and best rate should be at any given point, which I think is why we are seeing the level of performance that we have now seen for several years come out of this. But I would take the commentary as customers are willing to pay us more in the future and today than they did yesterday. And of course, we're also getting more reps out of our existing customers because our brands, our crew are delivering the very best vacation experiences, which are clearly seen in net promoter scores, which create huge advocacy for us that are in the low to mid-70s.

Operator: Your next question comes from Ben Chaiken with Mizuho. Your line is open.

Ben Chaiken: Hey, good morning, and thanks for taking my question. There was an interesting comment in the release this morning, Jason. It says 30% of Royal Caribbean guests take all-inclusive vacations, and a similar percentage of Sandals Beaches guests also cruise. Maybe in broad strokes, what is the penetration of that today? Meaning 30% take all-inclusive, but how many or what percentage are Sandals versus elsewhere, and then vice versa for the percentage of Sandals that are showing up at Royal in broad strokes? Thanks.

Naftali Holtz: Hey, it's Naf. It's a good portion, but there's definitely room to grow. We see that in the results. When we say a Sandals guest takes a cruise, they definitely cruise on some of our competitors. As Jason said before, we are very much focused on loyalty. We see our loyalty continuing to grow. We see repeat rates are growing, so we definitely feel that there is a significant opportunity to capture that and keep them in our ecosystem. That's really our strategy. That's our goal.

Jason Liberty: Yeah. Ben, I always like to put things in a simple format, which is, like today, if a Royal Caribbean customer goes on a competitive cruise brand, I think that's a fail. We offer, I think, the very best vacation experiences in the key segments. We go to well over 1,000 different destinations. So having connected loyalty and delivering these incredible experiences should keep our customer inside of our ecosystem. Today, that customer might exit our ecosystem to go into River. But into the future, as we get into next year, if a customer is not traveling on Celebrity River across our ecosystem, that's a fail.

Then you take that one step further with all-inclusive, people go to a lot of different all-inclusive resorts for many different reasons. But we feel very confident in the level of experience that Sandals and Beaches is producing, that when our customers go into all-inclusive resorts in the Caribbean, they should be going to Sandals and Beaches. Collectively, we want to keep that customer in our ecosystem, as I said, because we get better margin, and we ensure that customer gets the vacation experience that they really desire to go, and then we get the repeat rate out of that as well.

Naftali Holtz: Yeah, just one other thing to note. Similar to what we've seen in River, where the occasion was an incremental, not a substitution, the same trend we see here as well with all-inclusive. So the occasion is different, maybe the way you travel or the guest is traveling or the occasion itself. So that incrementality is really encouraging to us, and we're very excited about making sure that comes to us.

Operator: Your next question comes from Meredith Jensen with HSBC. Your line is open.

Meredith Jensen: Thanks. Good morning. I was hoping you might speak a little bit more about opportunities outside the Caribbean. Further out, I think there's going to be unique for Australia. Rhapsody of the Seas will be in Europe year-round and also thinking about, while early days, the terminal in Japan. What this kind of says about what you're seeing, not only in Europe for year-round and winter opportunities, but in Asia and what you're thinking about potential returns there as well. Thank you.

Jason Liberty: Well, 46% of our business is not in the Caribbean. Obviously we listen very closely to what our customers are looking to do, their vacation experiences, as well as the build-out of other markets like Southeast Asia and Australia, New Zealand and Japan and China. As we kind of think about that Asia Pac corridor, we see a lot of opportunities to enhance the vacation offering as well as generate high-quality demand. Similar as we see in Europe, which is to me a vacation playground for our guests. We see high demand, Alaska, et cetera. So all of our different segments continue to grow. All of our markets continue to grow. Our products continue to grow.

They're always competing on where is the most optimal place for our fleet to be. You're seeing us very, I would say on an aggressive basis, build out. We have well over 100 different destination projects in some form or fashion going on, and we're building that out so that it's not just about going to a location, it's about making sure that the vacation experience when they go to that location has them walking away with a great experience, memories and stories.

Michael Bayley: Meredith, it's Michael. Just to add to Jason's point, in two weeks, we have the groundbreaking ceremony for the Royal Beach Club in Lelepa, and already that product is very attractive in the Australian market. We've got four ships operating out of Australia in 2028, three in 2027. If you look at our deployment for 2027, 2028, you'll see that we have moved more capacity into Asia Pacific.

Operator: Your next question comes from Robin Farley with UBS. Your line is open.

Robin Farley: Great. Thank you for taking the question. Kind of a two-part question, if I could, on Sandals. You talked about the benefit and the synergies. Do you see opportunity or interest in land-based outside of the Caribbean? There's all-inclusive resorts in other parts of the world, so is this something that Royal might be looking into elsewhere? Also any sort of rough. You made a reference to kind of hundreds of millions in synergies. Is that mostly coming from increasing the reps on the revenue side, or would some of that be expense?

Then I do not know if you have any thoughts about going from 50% to higher ownership of Sandals, if there are sort of provisions for that in the agreement. Thanks.

Jason Liberty: Well, the last one, we are focused on this great partnership we have with the Stewart family, so I will not get into future ownership outside of saying that I think we are very happy to be able to partner with an incredible operator and who has led this business for a very long time. So we are very excited about that. The answer to outside the Caribbean, the answer is yes. By the way, we also sit on a lot of land around the world, which we do not talk a lot about. But yes, the answer is we think the Sandals brand, we have tested this, the Beaches brand, have great legs to it around the world.

We are focused, I would say, today on really growing the footprint inside the Caribbean. We think that is certainly. Well, that is all kind of within our full control, and so I think we are very excited about that. As it relates to the timing, synergies come in over time. I think this will come in many different ways. It will certainly come on the revenue side, whether it is yield management, whether it is the connectivity of our loyalty systems, whether it is what we have built around data. I mean, we sit on a mountain range of high-quality, consolidated, well-tuned data with great analytical layers and capabilities that are on top of that.

Then on the cost side, it is a very well-run business. So the cost side here is about how do we bring scale and to things like purchasing, as an example, while also balancing the importance of the communities that support the business. So just like the Sandals team, we are very community-focused. We're about enhancing benefits for all. But there's going to be opportunities for us to do things at a different level.

Operator: Your next question comes from Brandt Montour with Barclays. Your line is open.

Brandt Montour: Good morning, everybody. Thanks for taking my question. The commentary on 2027 sounds really good. Yet the story of maybe the cruise industry mid-year in 2026 seems to be just really strong, close-in demand and consumers booking closer in. I'm curious if there's a bit of a bifurcation under the surface going on, whereby, the contemporary brands and/or some of the lower price itineraries within the spectrum is seeing consumers just maybe temporarily or permanently booking closer in. If you think that's a behavioral shift that'll last or if that's maybe the signs of a consumer that's on their last leg in their spending with what the economy is doing or any sort of thoughts around those dynamics. Thank you.

Jason Liberty: Sure. Well, I think, first of all, Brandt, I think if we just look back over time here, I mean, you look back at the past three or four years, I think almost every quarter we've talked about being somewhat surprised to the upside on close-in demand. I think that's the reality of the consumer and it's also a reality of the products that we're offering. We've made shifts to where we have more weekend getaways, where we have just shorter itineraries. Also the incredible ships that we bring online are just attracting more people into that space, and the shorter products tend to be a closer-in booking kind of product. Some of it's product.

The second is, half of our guests are millennial and younger, and so weekend getaways, they take more trips. They basically spend as much as they would on a short trip as they would on a six or seven-night itinerary. We have more of those guests in the mix. I think the other thing just to give you another, I think, important data point is onboard spend has been much stronger than we thought it was going to be. Not that people weren't going to pay more than they did yesterday, but they're paying even more than we had anticipated. I understand there's been a lot of noise in the market this year.

There's a lot of geopolitical stuff, but I look at our business, our initial guide for this year had a midpoint of $17.90. We have a midpoint on our guidance year of $17.90. I think that really talks to the resilience of the business, the resilience of the consumer, and how they value effectively the vacation experience that we deliver which is not only resulting in them paying more, but also them coming back for more.

Operator: Your next question comes from Conor Cunningham with Melius Research. Your line is open.

Conor Cunningham: Everyone, good stuff today. I wanted to talk a little bit about the spread to land-based for a second. You have Disney out there raising prices for park passes. Hilton this morning is talking about RevPAR growing 3%-4%. I think it could set up a pretty healthy environment for you all. But on the flip side, you have a competitor that's talking about a decel into one Q just based on some deployment mixes. I just think it would be super helpful if you could just talk high level, like any obvious moving parts to net yields next year. I mean, as deployments kind of shift around a smidge here, just any thoughts there would be helpful. Thank you.

Jason Liberty: Yeah. Well, I think first, we tend to, I think, lag a little bit to land-based. I mean, our yields over the past several years have grown 35%, still behind where land-based had elevated to. So when we see land rise, that is typically a good sign. But we tend to lag a little bit behind that increase. It is not a point of view on yield for next year. It is just understanding what has historically occurred. So that is positive signs that the consumer is willing to spend more on travel. And because of the value differential, that tends to be great tailwinds for us.

I run my cruise line and not others, so I am not going to really comment there outside to say that, I think us and others have seen different trends. And we are focused when we think about our competitive set on vacation experiences, land-based vacation. Our customers are not really trading us for other cruise lines. They are looking for, are they doing other vacation experiences that are typically on land?

Operator: Your next question comes from Vince Ciepiel with Cleveland Research. Your line is open.

Vince Ciepiel: Hi, thanks for taking my question. You mentioned Icon going to Galveston. I was wondering if you could just talk about how you think that ship is being received in that market and maybe just thoughts on the Western Caribbean in general over the next couple of years. I know somewhat tied to developments in Mexico, but when you think about coming up with deployment and itineraries, how you are thinking for planning around that which is somewhat up in the air.

Michael Bayley: Hey, Vince, it's Michael. I think Icon is going to be received exceptionally well. It's the best product entering into Texas from the cruise industry in the history of time. So it's an exciting product. We've already got a lot of great response from our travel partners, and we think it's going to be a huge success. And of course, it sets the table really for the future as it relates to those itineraries, particularly when we work our way through everything with Mahahual and Cozumel. So we're very optimistic about how Icon's going to perform. As Jason mentioned earlier, these ships are generating net promoter scores in the 80s.

You can tell that if we're filling these ships with 7,600 people with a load factor of 133% and people are rating it in the 80s, it means that they're having an exceptional time and they're happy to pay a good price for that experience. So we're pretty switched on for Icon.

Operator: Your next question comes from David Katz with Jefferies. Your line is open.

David Katz: Morning. Thanks for taking my question. I just want to clarify some of the earlier commentary around Sandals. Naf referenced it as immaterial as we stand today. My sense is that is a comment that's before any synergies, and we can't really have an intelligent conversation about synergies until such time as it closes, right? Is that the right way to characterize that?

Naftali Holtz: Yeah, I wouldn't characterize that. This obviously depends on the timing. We expect this to be closing early in 2027. We're hoping to keep that date. We're working very hard. It really depends on the timing, and then the synergies, of course, will come over time. Not everything will come day one. There's a lot of work to do, but we're very excited about what this means to our customers, to their customers, as well as to the financial results.

Operator: That concludes our Q&A session. I will now turn the conference back over to Naftali Holtz, CFO, for any closing remarks.

Naftali Holtz: We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a great day.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect and have a wonderful rest of your day.

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