Allure of the Seas and Adventure of the Seas at CocoCay, Bahamas, in 2024. Photo: Larry D. Moore, Wikimedia Commons, CC BY 4.0. Image resized.
Royal Caribbean Group raised its full-year earnings forecast Tuesday after stronger last-minute cruise demand in Europe and the Caribbean helped lift third-quarter revenue 9% to $5.6 billion.
The cruise operator carried 2.7 million guests, up 9% from a year earlier, as capacity increased 8%. Net income rose to approximately $1.7 billion, or $6.45 a share, from approximately $1.6 billion, or $5.74 a share.
The company now expects full-year adjusted earnings of $17.85 to $17.95 a share. It said the stronger third quarter more than offset the pressure from higher-than-anticipated fuel costs and currency exchange rates in its updated outlook.
Travelers keep booking, including for 2027
Since its previous earnings call, booking volumes have increased by a mid-teens percentage across all major channels, Royal Caribbean said. Bookings for 2027 sailings rose by a high-teens percentage over that period.
Chairman and Chief Executive Jason Liberty said 2027 bookings were pacing ahead of historical levels at higher rates, while emphasizing that it was still early. Third-quarter pre-cruise and onboard revenue rates also exceeded the prior year’s levels.
For travelers, those figures describe demand and spending within one cruise operator’s business. They do not establish that every itinerary costs more or that the company’s experience represents all vacation spending.
Net yields, a measure Royal Caribbean uses to track cruise revenue performance relative to capacity, increased 0.9% as reported and 0.6% excluding currency effects. The company attributed the better-than-guided performance primarily to stronger close-in demand in Europe and the Caribbean.
Some cost savings reflect a shift into the next quarter
Adjusted earnings were $6.57 a share, compared with $5.75 a year earlier. Adjusted net income totaled approximately $1.8 billion, and adjusted EBITDA was $2.5 billion.
Net cruise costs excluding fuel per available passenger cruise day fell 1.9% as reported. Royal Caribbean cautioned that the better-than-expected cost performance reflected expenses shifting from the third quarter into the fourth quarter, rather than disappearing.
The distinction matters when comparing quarters: delayed spending can improve one period’s profit without providing the same benefit over the full year.
For the fourth quarter, the company expects revenue growth of 9%, net yield growth of 4.4% to 4.9% as reported, and adjusted earnings of $3.48 to $3.58 a share. It included $379 million of fuel expense in that forecast using current fuel prices and the effect of its hedging arrangements.
Royal Caribbean said 58% of forecast fourth-quarter fuel consumption was hedged through swaps. Such contracts can limit exposure to some price changes, but the company still identified higher fuel costs as a pressure on its earnings outlook.
Sandals investment remains pending
The earnings release also provided an update on Royal Caribbean’s September agreement to acquire a 50% interest in Sandals and Beaches Resorts. The investment is expected to close in early 2027, subject to regulatory approvals and customary closing conditions.
The resort portfolio includes 18 Caribbean properties, three resorts under development and more than 1,000 acres of undeveloped land. Royal Caribbean said about 30% of its guests also take all-inclusive vacations, giving it an audience for the expanded offering.
The company expects its share of the resort business’s earnings to add to profit after closing. The size of the 2027 contribution will depend on when the transaction closes, and Royal Caribbean said it will incorporate that contribution into its 2027 guidance upon completion.
Royal Caribbean ended September with $7.4 billion in liquidity, including cash and undrawn revolving credit capacity. During the quarter, it issued $1.25 billion of senior unsecured notes due in 2034 to repay part of its floating-rate loans and debt maturing in 2027.
JBizNews Desk | Miami
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