Royal Caribbean Cruises Q4 2024 Earnings Report

Royal Caribbean Cruises EPS Results

• Actual EPS: $1.63
• Consensus EPS: $1.50
• Beat/Miss: Beat by +$0.13
• One Year Ago EPS: $1.25

Royal Caribbean Cruises Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $3.77 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Royal Caribbean Cruises Announcement Details

• Quarter: Q4 2024
• Date: 1/28/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, January 28, 2025
• Conference Call Time: 10:00AM ET

Royal Caribbean Cruises (NYSE:RCL) operates as a cruise company worldwide. The company operates cruises under the Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands, which comprise a range of itineraries. As of February 21, 2024, it operated 65 ships. Royal Caribbean Cruises Ltd. was founded in 1968 and is headquartered in Miami, Florida.

Royal Caribbean Cruises Q4 2024 Earnings Call Transcript

Presentation

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 6 record breaking slides at Thrill Island or finding the courage to conquer the crown's edge. A test of bravery like nothing you've ever dared dangling high above the ocean. And dial up your downtime at the Surfside neighborhood where little cruisers can get drenched in fun at Splashaway Bay Aqua Park while adults can soak up the views from the water's edge pool. Ah, inspiring by day, iconic by night, the Aqua Dome, perched with the crown of the ship, is home to mesmerizing performances beneath a towering waterfall, gourmet dining, and dramatic ocean view.

Icon of the Seas is everything you've ever loved about every vacation, all rolled into 1. Experience it all with your family on board 7 Night Caribbean Adventures from Miami, Florida. And in summer 2025, we're introducing even more new wows, thrills, and chill for everyone. Introducing the next icon of vacation, Star of the Seas. Learn more about icon class ships@royalcaribbean.com.

At Celebrity Cruises, we elevate every detail beyond what you thought a vacation could be. With globally inspired food, exclusive destinations, and exciting itineraries, we're nautical miles ahead of any other vacation. From bartenders who remember your favorite cocktails to concierges who you'll swear can read minds, you'll always feel like a regular. Once you explore the world with us, you'll never want to vacation any other way. Nothing comes close to Celebrity Cruises.

We look forward to seeing you onboard soon.

It's when all your senses become aware. You are present

and focus. That's traveling to me.

It's an urgent need to go and observe this world that we all share. A ray of light, a pair of eyes that tell a story, an instant imperfection. Images printing on your soul. This is authentic beauty. It's all out there, trust me.

There's always room for discovery.

Discover more on silversea.com.

Reset all your expectations for what you can do in one day at the award winning private island in the Bahamas, Perfect day at CocoCay. Plunge down 13 water slides at Thrill Water Park, including the tallest slide in North America, Dare Devil's Peak. Take flight on a helium balloon ride that stores 450 feet up, then play it cool at the largest freshwater pool in the Caribbean, Oasis Lagoon. And kids can have even more fun by the gallon at the biggest Splashaway Bay aqua park yet, or board the shipwreck splash pad for splash buckling thrills like slides, rope bridges, and 30 water cannons. So whether you're riding 1600 feet of zip line, getting your game on at South Beach or enjoying the ultimate beach day at Chill Island, you've got countless adventures to choose from all in one day, all in one island, only on Royal Caribbean.

Learn more at royalcaribbean.com/perfectday@cocokay.

With Celebrity Cruises, you're going to need a bigger bucket list. We can take you to over 300 destinations across 7 continents and offer authentic experiences in each one. Feel like a local on anything but ordinary excursions from the Great Barrier Reef in Australia to the glaciers of Alaska, from secluded beaches in the Caribbean to the Colosseum in Rome. Whichever destinations you've been dreaming about, we're here to take you there. And what really makes us different is our ships, which offers so much to explore along the way.

You'll never ask, are we there yet?

It's when all your senses become aware. You are present and focus.

That's traveling to me.

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 6 record breaking slides at Grill Island or finding the courage to conquer the crown's edge, a test of bravery like nothing you've ever dared dangling high above the ocean. And dial up your downtime at the Surfside neighborhood where little cruisers can get drenched in fun at Splashaway Bay Aqua Park, while adults can soak up the views from the water's edge pool. Awe inspiring by day, iconic by night, the Aqua Dome, perched at the crown of the ship, is home to mesmerizing performances beneath a towering waterfall, gourmet dining, and dramatic ocean view.

Icon of the Seas is everything you've ever loved about every vacation, all rolled into 1. Experience it all with your family on board 7 Night Caribbean Adventures from Miami, Florida. And in summer 2025, we're introducing even more new wows, thrills, and shill for everyone. Introducing the next icon of vacation, Star of the Seas. Learn more about icon class ships@royalcaribbean.com.

At Celebrity Cruises, we elevate every detail beyond what you thought a vacation could be. With globally inspired food, exclusive destinations, and exciting itineraries, we're nautical miles ahead of any other vacation. From bartenders who remember your favorite cocktails to concierges who you'll swear can read minds, you'll always feel like a regular. Once you explore the world with us, you'll never want to vacation any other way. Nothing comes close to celebrity cruises.

We look forward to seeing you onboard soon.

It's when all your senses become aware.

You are present and focus. That's traveling to me.

It's an urgent need to go and observe this world that we all share. A ray of light, a pair of eyes that tell a story, an instant imperfection, images printing on your soul. This is authentic beauty. It's all out there, trust me. There's always room for discovering.

Discover more on silversea.com.

Reset all your expectations for what you can do in one day at the award winning private island in the Bahamas, perfect day at CocoCay. Plunge down 13 water slides at Thrill Water Park, including the tallest slide in North America, Dare Devil's Peak. Take flight on a helium balloon ride that stores 450 feet up, then play it cool at the largest freshwater pool in the Caribbean, Oasis Lagoon. And kids can have even more fun by the gallon at the biggest Splashaway Bay Aqua Park yet, or board the shipwreck splash pad for splash buckling thrills like slides, rope bridges, and 30 water cannons. So whether you're riding 1600 feet of zip line, getting your game on at South Beach, or enjoying the ultimate beach day at Chill Island, you've got countless adventures to choose from all in one day, all in one island, only on Royal Caribbean.

Learn more at royalcaribbean.com/perfectday@cocokay.

With Celebrity Cruises, you're going to need a bigger bucket list. We can take you to over 300 destinations across 7 continents and offer authentic experiences in each one. Feel like a local on anything but ordinary excursions from the Great Barrier Reef in Australia to the glaciers of Alaska, from secluded beaches in the Caribbean to the Colosseum in Rome. Whichever destinations you've been dreaming about, we're here to take you there. And what really makes us different is our ships, which offers so much to explore along the way.

You'll never ask, are we there yet?

[Operator]

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to The Royal Caribbean Group 4th Quarter and Full Year 20 24 Earnings Conference Call. All participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

[Operator]

I would now like to introduce Blake Banyer, Vice President of Investor Relations. Mr. Banyer, the floor is yours.

[Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group]

Good morning, everyone, and thank you for joining us today for our Q4 2024 earnings call. Joining me here in Miami are Jason Liberty, our Chief Executive Officer Naftali Holtz, our Chief Financial Officer and Michael Bailey, President and CEO of the Royal Caribbean Brand. Before we get started, I would 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.

[Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group]

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.

[Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group]

Naftali will follow with a recap of our Q4, the current booking environment and our outlook for 2025. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Thank you, Blake, and good morning, everyone. I'm thrilled to discuss our exceptional 4th quarter and full year results, our our outlook for 2025 and the many exciting things happening at The Royal Caribbean Group. 2024 was an incredible year for us and the Q4 was no exception. We delivered a record 8,600,000 memorable vacations at very high customer satisfaction scores, achieved an 11.6 percent net yield growth, generated more than $5,000,000,000 of operating cash flow and returned the balance sheet to investment grade metrics. We achieved our trifecta financial goals 18 months ahead of schedule and at the same time we expanded capital allocation all while continuing to invest in the business to support our growth ambitions.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We also met our double digit carbon intensity reduction target, a full year ahead of schedule. These strong financial results set the foundation for a very bright future, which is truly just beginning for us. With our industry leading global brands, the most innovative fleet and private destinations and the best people, we remain focused on winning a greater share of the $2,000,000,000,000 vacation market. Our plan to capitalize on this opportunity continues to be grounded in our proven formula for success, moderate capacity growth, moderate yield growth and strong cost control. I want to thank the entire Royal Caribbean Group team for their passion, dedication and commitment that enables us to deliver the best vacation experiences responsibly and to drive exceptional financial results.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Before getting into the details, I would like to take a moment to discuss an exciting new chapter and our mission to deliver the best vacation experiences. Celebrity River Cruises, which we announced this morning will unlock exciting new opportunities for our guests, our business and our shareholders. Beginning in 2027, Celebrity River Cruises will provide yet another opportunity for guests to explore even more destinations with our leading brands. We placed an initial order for 10 transformative ships, which will serve as the foundation for this new Edge class inspired product. Our ambitions however go far beyond that.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We see river cruising as an exciting growth opportunity that aligns with our strategy of turning the vacation of a lifetime into a lifetime of vacations. Expanding our ecosystem of vacation offerings and broadening our reach into adjacent lines of businesses. River cruising is a sizable and attractive market that has experienced double digit growth over the last decade, driven by increasing demand from both seasoned cruisers as well as new customers. It is a very fragmented market that presents an exciting opportunity for us to win substantial market share. It delivers attractive APDs that we can capture while deepening customer loyalty within our family of brands.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

River Cruising is a complementary high margin, high ROIC business that fits nicely within our portfolio. The smaller scale of river ships and shorter build timelines allow us for faster deployment and return profiles. Celebrity River Cruises is a natural extension of Celebrity's premium ocean offering and appeals to a similar demographic of discerning travelers who value immersive destination focused experiences. River Cruises spend a disproportionate amount of their time and money on travel including more spend on all types of cruises. We have a remarkable opportunity.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Approximately half of our guests have either already experienced or intend to take a river cruise vacation and a majority of guests who would add an additional vacation to take a river cruise. Furthermore, celebrities' existing reputation for exceptional hospitality and unparalleled experiences will attract new demand from travelers who are curious about river cruising, but who haven't yet taken that leap. Just as we've set the standard of excellence in ocean cruising, we will continue to innovate and elevate in the river space. The quality and sophistication of our edge class ocean ships will bring cutting edge design, sustainable technologies and reimagined onboard and shore experiences that raises the bar for river cruising. This is an exciting time for the Celebrity brand as this news follows our recent agreement to order a 6th Edge class ship set to be delivered to Celebrity Cruises in 2028.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Edge 6 also known as XL2 will be the sister ship to Celebrity XL, which is gearing up for its inaugural sailing later this year. So now let's talk about 2024 results and 2025 outlook. I am proud of what we have accomplished in 2024. We delivered double digit yield growth and generated $500,000,000 more in revenue than we originally expected. Our strong performance was propelled by the flawless execution of our incredible team, which drove elevated demand across our brands.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We also continued our focus on driving durable margin expansion, resulting in 74% year over year adjusted EPS growth. We continue to invest in our future while strengthening the balance sheet, achieving our target of investment grade metrics and reaching mid teen ROIC. The year ended on a great note with revenue yields up 7.3% in the 4th quarter, earnings that were $0.20 better than our guidance and a strong book position for 2025 from both a pricing and volume standpoint. 2024 was another year of remarkable innovation as we ushered in a new era of vacations with the launch of Icon of the Seas, Utopia of the Seas and Silver Ray, while announcing and advancing several key private destinations that will further differentiate our leading portfolio of brands, including Perfect Day Mexico, Royal Beach Clubs and Paradise Island and Cozumel. We received exceptionally high guest satisfaction scores and attracted a record number of both new and loyal guests.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We continue to invest in our commercial and vacation experiences flywheel. In 2024, we expanded our capabilities across distribution channels to create a digital experience that connects the dots across all aspects of the consumer journey. Guests have been seamlessly planning and booking their dream vacations, reducing the amount of time to book a cruise by half. We launched over 300 new digital capabilities across channels in 2024, improving the overall experience and reducing friction points while increasing spend. We also infused AI into the guest journey to provide a better, more efficient experience and more personalized service.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

For example, our new in app chat saw a 35% increase in guest adoption that led to a 20% reduction in the customer service line on board. With 9 out of 10 guests indicating their intent to repeat, our new loyalty status match program allows our guests to earn loyalty status across all three brands, fostering long term relationships and rewarding loyal customers across our portfolio. Turning to this year, momentum continues in 2025 with bookings accelerating since the last earnings call, resulting in the best 5 booking weeks in the company's history. Bookings have continued to outpace last year across all key products. Our book position is in line with prior years at higher APDs, allowing us to further optimize pricing and yield growth as we continue to build the book of business for 2025.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

As our bookings for 2025 have ramped up since the last earnings call, our APD premium to last year has widened, underlining our continued focus on optimizing yield growth. Our commercial apparatus is firing on all cylinders and all channels are delivering quality demand above 2024 levels. Our direct to consumer channels are performing extremely well. We added 100 of new capabilities across our digital platforms last year as consumers' preference for digital engagement continues to grow. Our travel partners are also delivering meaningfully more bookings than last year at higher rates.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We continue to see particularly healthy demand from North America where about 80% of our guests will be sourced this year. Our brands global appeal and nimble sourcing model allows us to attract the highest yielding guests by positioning our ships in multiple markets around the world. Our brands lead in their respective segments and are very successful at capturing quality demand across sectors and sourcing from new consumer bases. As we think about consumer demand for 2025 and beyond, we look to both macro trends and data points from millions of daily interactions with our customers. We continue to see very positive sentiment from our customers bolstered by strong labor markets, high wages, surplus savings and elevated wealth levels.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

At the same time, they continue to prioritize travel experiences. American households are wealthier than ever with continued wage growth and low unemployment driving strong consumer spending. We see positive sentiment from our customers in a macro environment that favors experiences over things as leisure and travel spend continued to grow. Consumers plan to spend more on vacations and take more trips in the coming year and our guests over index in their intent to spend more on leisure travel. Consumers play significant value on visiting multiple destinations and this is even more important to millennial and Gen Z consumers, something that cruising is uniquely positioned to deliver on.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Cruise consideration is high with the biggest gains among millennials and younger travelers. Cruise remains an attractive value proposition and also leads in guest satisfaction compared to other vacation alternatives. We are very well positioned to benefit from these trends with our exceptional and leading portfolio brands, innovative and differentiated ships, exciting and inclusive destination experiences and leading commercial and AI driven capabilities. 2025 is shaping up to be another great year with 23% expected earnings growth and accelerated path towards robust cash flow generation. In 2025, we expect to grow capacity by 5% through the introduction of Star of the Seas and Celebrity Excel as well as the full year benefit of Utopia of the Seas and Silver Ray.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

New ships not only elevate our vacation experience and draw new customers to our brand, but also provide yield tailwinds and enhance overall profitability. We expect yields to grow 2.5% to 4.5% driven by the performance of our entire fleet, new and existing ships combined with our leading private destinations and strengthening commercial apparatus. Strong rates and load factors together with continued focus on margins and strategic capital allocation are expected to drive adjusted earnings per share of $14.35 to $14.65 which includes $0.65 of FX and fuel rate headwinds compared to our last earnings call. Our proven formula for success is working. Moderate capacity growth, moderate yield growth and strong cost control leads to enhanced margins, profitability and superior financial performance.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

For decades, The Royal Caribbean Group has been redefining what a vacation experience can be. It's clear that our success has been built on a foundation of differentiation, setting ourselves apart through innovation and excellence. We have led the way in delivering best in class ships that redefine possible. As we look ahead, we continue to redefine vacations through the ambition expansion of our private destination portfolio, the exciting entry into new lines of businesses like Celebrity River Cruises and the development of industry leading digital and AI capabilities. We relentlessly pursue an acute understanding of how today's families, couples and individuals want to spend their valuable vacation time, so that we can continue to develop the expanding ecosystem of vacation experiences that wildly exceed their expectations.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Our goal is to create seamless, personalized journeys across a portfolio of experiences from ship to private island to river cruises and beyond that inspire loyalty, deepen relationships and position us as a preferred choice for every kind of vacation. This is not just a strategy, it's a promise to redefine what travel means for our guests. It's about meeting them where they are, dreaming alongside them and turning the vacation of a lifetime into a lifetime of vacations. With this vision, we are poised to lead not just the cruise industry, but the broader world of travel into an exciting new era. Through it all, we remain committed to our See the Future vision, sustaining the planet, energizing communities and accelerating innovation.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

2024 was an exceptional year for our company marked by many milestones that set the stage for an even brighter future. We are continuously elevating what it means to deliver the best vacation experiences, inspiring ships, unparalleled private destination portfolio and globally trusted brands, all propelled by the best people. Royal Caribbean Group is redefining what people have come to expect from a vacation. As we embark on 2025, we remain focused on winning an even greater share of the broader vacation market and we are just getting started. And with that, I will turn it over to Naftali.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Naft?

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Thank you, Jason, and good morning, everyone. I will start with reviewing 4th quarter results. Our teams delivered another exceptional quarter that exceeded our expectations, resulting in adjusted earnings per share of $1.63 The outperformance compared to our guidance is driven by better revenue across our brands and products and strong cost performance despite a headwind from stock compensation due to increase in our share price. We finished the 4th quarter with net yield growth of 7.3 percent, 200 basis points higher than the midpoint of our guidance that was driven by stronger than expected APDs from both new ships and like for like hardware. We also saw both better pricing on ticket as well as better than expected onboard spend.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Net cruise costs excluding fuel increased 13.5% in constant currency. The increase in costs compared to guidance is entirely driven by a 300 basis points impact from higher stock based compensation due to the rise in the stock price. Adjusted EBITDA was $1,100,000,000 10 percent year over year growth and operating cash flow was $1,500,000,000 Now switching to our 2025 outlook. I will start by taking you through capacity and deployment for the year. With the introduction of Star, Excel and a full year of Utopia and Silver Ray, capacity is expected to increase 5.4% year over year.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

We have fewer dry dock days this year compared to 2024 contributing about 1 percentage point to capacity growth. This year we also have some of our biggest ships planned for dry dock and we also have restarted our modernization program that has more days for each dry dock. As a result, we have less drydock days than 2024, but more days than 2023. In terms of quarterly cadence, the Q1 has more drydocks than last year, negatively impacting capacity growth by 300 basis points. The 2nd and the third quarter are relatively flat to last year, while the 4th quarter will have fewer drydock days compared to last year, benefiting capacity growth by 500 basis points.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

As a result, APCDs are expected to grow around 3% in the 1st and third quarters, 6% in the 2nd quarter and 10% in the 4th quarter. New hardware in 2025 represents 4% of total capacity growth compared to 8% in 2024. As Jason mentioned, the year is off to a very strong start. Last quarter, we said the demand for 2025 is strong with book load factors in line with prior years and at higher rates allowing for further pricing and yield growth as 2025 bookings continue to ramp up and that's exactly what is happening. Since the last earnings call, we've continued to build load factors while also expanding our booked APD versus the same time last year.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

The Caribbean represents 57% of our deployment this year and capacity in the region is up 6% over last year, with the introduction of Star of the Seas and Celebrity Excel in the second half of the year. We continue to differentiate in the Caribbean market with our incredible ships and private destinations driving very strong performance. Over 70% of guests on these itineraries sailing with the Royal Caribbean brand will visit a private destination this year and that percentage will increase to 90% in 2027 with the opening of the beach clubs at Paradise Island, Nassau and Cozumel and Perfect Day Mexico. Caribbean bookings have been strong with ICON and Utopia continuing to perform well above expectations on top of strong performance of existing hardware. Europe will account for 15% of capacity and is up 5% versus last year.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

European sailings continue to perform very well on both rate and volume basis. Alaska is expected to account for 6% of total capacity. We have some of the best hardware in the region including Celebrity Edge, 2 Quantum Class ships and Silver Nova among others. Alaska demand has been very strong and continues to surpass our expectations. Now let me talk about our guidance for 2025.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Our proven formula for success, moderate capacity growth, moderate yield growth and strong cost discipline is expected to drive 23% earnings growth and higher cash flow generation this year. We expect yield growth of 2.5% to 4.5% balanced between new and existing hardware. Our 2025 yield growth outlook is on top of 11.6% growth in 2024 that was boosted by 4th quarter outperformance and put 40 basis point headwind on this year's growth metric. Full year net cruise costs excluding fuel are expected to be flat to up 1% as our focus remains to enhance margin as we continue to grow the business. The cadence of our cost growth varies throughout the year with second and third quarter costs expected to be higher than the 1st and fourth quarter driven by timing of dry docks, ramp up of costs related to our acquisition of the Costa Maya port and other destinations.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

We anticipate a fuel expense of $1,170,000,000 for the year and we are 60% hedged at below market rates. Based on current fuel prices, currency exchange rates and interest expense, we expect adjusted earnings per share between $14.35 $14.65 I would also note that this range includes $0.65 headwind from foreign exchange and fuel rates since the last earnings call when we shared our preliminary expectations for the year. We also expect 13% growth in adjusted EBITDA and 150 basis points growth in gross EBITDA margin. This positions us to accelerate our cash flow generation, which allows us to continue investing in game changing strategic initiatives, maintaining investment grade balance sheet metrics and expanding capital return to shareholders. We expect to invest $5,000,000,000 of capital into our key strategic growth initiatives as well as ensuring our assets are well maintained.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

We are set to deliver Star of the Seas in the 3rd quarter and Celebrity Excel in the 4th quarter with both ships having committed financing in place. Non ship capital is expected to be $1,600,000,000 with a significant portion related to our private destination portfolio, including the acquisition of the Costa Maya port that we announced last year, the Beach Club in Cozumel and the Beach Club in Nossa that is expected to open in the Q4 of this year. Now I will discuss our Q1 guidance. In the Q1, capacity will be up 3% year over year. More than 70% of our capacity will be in the Caribbean, 19% in Asia Pacific and the remaining capacity spread across several other itineraries.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Net yields are expected to be up 4.75% to 5.25% with growth coming from both new and existing hardware across all products. 1st quarter yield growth disproportionately benefits from both the timing of dry docks and new hardware, a full quarter of ICON in addition to Utopia and Silver Ray. Net cruise costs excluding fuel are expected to be up in the range of 1.6% to 2.1% and include 130 basis points impact from increased dry docks compared to the Q1 of 2024. Taking all this into account, we expect adjusted earnings per share for the quarter to be $2.43 to $2.53 Turning to our balance sheet. We ended the quarter with $4,100,000,000 in liquidity.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Our balance sheet is in a very strong position to support our growth ambitions while expanding capital allocation. At year end 2024, our balance sheet was unsecured and leverage was at low three times consistent with our goal of investment grade credit metrics. With the strong expected cash flow generation and increase in EBITDA, we expect to finish 2025 with leverage at mid to high two turns. We will continue to manage maturities and find opportunities to reduce cost of capital. 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 solid results.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

With that, I will ask our operator to open the call for a question and answer session.

[Operator]

We'll take our first question from the line of Brandt Montour with Barclays. Please go ahead.

[Brandt Montour, Analyst at Barclays Capital]

Good morning, everybody. Thanks for taking my question and congratulations on the strong 2024 results. The first question is about yields and your guidance. Just looking at the 3.5% midpoint of the yield guide, and I guess, Naf, you kind of want us to think about 40 basis points of tough comps from the Q4 upside. But just sort of level setting that versus the high single digit per diems that you reported in 2024, kind of help us think about we're trying to bridge that gap.

[Brandt Montour, Analyst at Barclays Capital]

And just maybe if you could help us think about the puts and takes this year versus last year, what you had last year as a tailwind on the new hardware side, what you have this year and how it sort of compares?

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Okay.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Well, Brent, thank you. Thanks for the question. And we hope all is well. I think to the first point, the strong demand we saw in the 4th quarter did kind of elevate the base comparable for us. And so we would be guiding north of or maybe slightly north.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

But we saw that rise happen in that close in demand, which is really great. We're also coming off of some very incredible comps, right? So 2023, we had a 13.5% yield improvement. Last year, we had 11.6% improvement. So it is a little bit more of a difficult comp.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And of course we also recovered our load factors a long time ago. And so that potential lift up from the load factors is not something that's an opportunity for us. But it is early in Wave and we've seen obviously incredible booking activity during Wave. Last week was our highest booking week ever for Wave. And so we are very encouraged in what we're seeing.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And I think the other thing that we're very encouraged on is that we're not only seeing improvement on new hardware, but also on like for like. And of course, we have some very incredible comps on Icon when we launched her, as well as Utopia, as well. So our guide of the 2.5% to 4.5% is based off of where we're booked today and the trends that we're seeing as always. And I think we feel confident in the yield guide and we're also very encouraged to be able to give a midpoint on our guidance of $14.50 considering all the headwind from FX and fuel that, been a row since the last call.

[Brandt Montour, Analyst at Barclays Capital]

Great. Thanks for that, Jason. And I should also say congratulations on the exciting announcement on entering the river market. My second question is about the river market. Obviously, you guys have done a lot of research on the existing market and where you think your place can be in that market.

[Brandt Montour, Analyst at Barclays Capital]

And so we all know there's a prominent competitor out there that qualifies as themselves as luxury, the per diems that they charge are luxury rates. Your celebrity brand in Ocean charges rates significantly below that commensurate with the broader premium Ocean market. So I guess the question is, do you foresee the celebrity brands sort of flooding in the river market below that luxury per diem general area? Because it sounds like, again, you used the word elevate, used the word cutting edge, it doesn't sound like you expect the product to sort of be second rate. So maybe you could provide a little more color around that.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Sure. Well, first, obviously, there's great competitors in that river space like the one you don't want to say, but I'll say Viking. I mean, Tour does an exceptional job in that space. It's also very fragmented market as well. And also I think it's important when you're comparing what Celebrity gets today versus what you might see what Viking gets today as an example.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

It's important to note that on the celebrity side, it's not an all inclusive product. So as you start adding in some of the inclusivity that comes with River, we expect those APDs to also elevate. The other thing when I talk about the elevating of the brand, at least in our point of view is there's a real incredible opportunity to take these beautiful small ships and through design, improving in culinary and entertainment, state rooms, etcetera, and really bring it up to the level of what you see on Edge, which to us is far superior to anything else that's in that space, that we're going to draw really high quality demand. At the end of the day for us, we have well over 8,000,000 guests a year. We have a database of 35,000,000 people who are continually vacationing with us.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And so it's great opportunity for us to use that flywheel to generate high quality demand. And of course with our loyalty program being able to make sure that people are being incentivized to stay within our ecosystem. And that's really what this is about is we're trying to meet our customers where they want to be on an experience standpoint. There is high trust in our brands that we're going to deliver the vacation experience that lives up to the marketing that's out there. And I think that's why we think this is a great space for us to go into.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And as I've said before in

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

the

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

past, we really focus on ourselves as being an experienced company. We're here to deliver those experiences. And we think the cruising platform is obviously where we really excel and we think that there is great opportunity for us to do this

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

well in the Riverside.

[Brandt Montour, Analyst at Barclays Capital]

Excellent. Congrats again on the quarter.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Thanks, Brent.

[Operator]

Our next question comes from the line of James Hardiman with Citi. Please go ahead.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

Hey, good morning. Thanks for taking my questions. I actually want to stay on that same page with the river cruise announcement. Just trying to get a feel for the offering and how it's going to be similar versus different to the Viking offering. But I guess first, let's just start.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

So 10 ships, you're

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

going

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

to start in 2027. I'm assuming all 10 ships won't be up and running by 2027. What's the shape of that ramp? And then as I just think about sort of what the offering is going to look like, are kids going to be allowed on the ships? Is it primarily U.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

S. Customers going to Europe? I'm assuming that there's going to be a big nightlife component given that sort of celebrities brand. Just trying to put some meat on these bums.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Okay. Okay. Well, also there's also going to be a lot to come, which I think is going to be great. On the Rivers side, our plan is to deliver a couple of ships, in 2027 and then it's about 4 a year. I'd also point out because we are very intentful in our words, the word put in front of it was initial order was 10 ships.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And so this is not a hobby for us, so we are going into this space. So I just wanted to point that out. And of course, 2027 when these ships come in, it's going to be an incredibly exciting year anyways for the company because we're going to have Icon 4, we're going to have a couple of river ships, we're going to have Perfect Day Mexico launching in 2027. We're going to have the Beach Club in Cozumel. We'll have a full year because that's going to launch in 2026.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And so there's a lot of great things that we're looking forward to in 2027. One of the things that I would say, I think it's one of the things that differentiates us is that we for decades, we have built out a set of brands that are globally sourced. And we source those guests from all over the world and our yield management tools which get more and more sophisticated each and every day allow us to source the highest yielding guests in the world. And so that so our sourcing can range from obviously today we're about 80% coming from the U. S, but we have times when we're 60% coming from the U.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

S. And so we have been flowed based off of those markets. And so we would expect our sourcing would generally be similar to what we're seeing on the ocean side of things. And so but I think it's important to remember these ships are not icon of the seaside, right? They hold about 180 passengers.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And so our ability to sell in market and attract high quality demand from a Royal brand, our Celebrity brand as well as our Silversea brand is going to be an incredible, tidal wave for us to be able to manage, our demand for this product. On the experience side, it will be similar to what you see on Celebrity. And so there are from time to time, there are kids that can be on Celebrity. But we think that there's a real opportunity to, as I said, elevate the aesthetics and the details and design of the ship, have more activities, whether that is on the culinary side or whether that is on the beverage side of things, whether that is with entertainment, whether that's with the state rooms, and how you can connect further from the ship to shore. And so you're able to kind of get an end to end intense experience with land as well as what can happen on the ship.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So we're really excited about it. We'll be talking more and more about it, about the design, like we always do. We like to tease and then build up on what it's going to be. And I could tell you in the 4 hours since we've announced this, we're just watching the number of the amount of interest from our travel partners, from our guests to get on one of our river boats as soon as possible is exceptional. And that comes down to I think which is what's most important is trust.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Our guests do trust us that we're going to deliver on this.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

That's great color and love the tease. I guess secondly, just on the CapEx front, I think you guided $20,000,000,000 to $5,000,000,000 Pretty big step up. I'm assuming we'll need to wait on the free cash flow front until the Analyst Day to get a more sort of unified outlook. But maybe is there any way to think about sort of CapEx requirements moving forward? I think we're looking at $3,400,000,000 new build, dollars 1,600,000,000 non new build.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

How should we model those going forward? I'm assuming the new build piece goes up with capacity, but then, non new build, there's a lot of non new build opportunities for you guys for sure. So how do we think about that $5,000,000,000 number and how it moves into 2026, 2027?

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

Hi, it's Naf.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

So I think if you kind

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

of think about what we have this year and kind of what we laid out in terms of our priorities, so you think about the ships that we have to deliver this year, both Star of the Season and Celebrity XL, compared to what we had last year. And remember, ICON last year did not actually deliver in 2024, it actually delivered in 2023. So that capital was counted in 2023. So you have the ship layout in terms of our deliveries, what we're expecting, and you should expect that to follow that. And I remind you that we do have committed financing for those when we order the ships.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

And so the $5,000,000,000 that I noted and it's in the release obviously is on a gross basis and we have the committed financing related to the deliveries as well as installment payment. In terms of non ship capital, we have maintenance capital and kind of the things that we do that should not change materially year over year. But we did lay out our priorities in terms of private destinations and as we ramp up our private destination effort and you see what we've announced, those are following kind of that cadence. And this year, we have particularly Costa Maya where we announced last year the acquisition of the port. That acquisition actually will close between end of Q1 to Q2.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

And then we obviously acquiring land and then we'll start the construction at some point. And then this year, we also expected to deliver the Beach Club in Nassau at the end of the year. So obviously, development capital there as well. So majority of that capital is going to be there. We're also restarting our modernization program.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

So we have one shift this year and then we'll share more details going forward around our program, but we do see an opportunity around that. All of that said, if you think about the size of the company and where we are, we delivered $6,000,000,000 of EBITDA last year. You kind of look at our guidance this year, we're going to deliver 13% more of EBITDA. And we made a significant progress around our balance sheet, reducing our interest expense, you see it below $1,000,000,000 You put that into account, you see that we're generating significant amount of cash flow. And our focus is to continue to expand margin as we grow the business that will accelerate cash flow and allow us to invest in our key priorities, maintain an investment grade balance sheet metric and also do capital returns.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

And so the size of the company and the generation of the cash flow really we feel is allowing us to achieve all those things.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

Makes a

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

lot of sense. Thanks, Nav. Thanks, Jason.

[Operator]

Our next question comes from the line of Steve Wieczynski with Stifel. Please go ahead.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Hey, guys. Good morning. So going back to the guidance for this year, I'm not going to sit here and harp on the fact that the yield guidance does look a little bit conservative to us. But if we think about the EPS guide, let's go over there. That's actually much better than I think we were expecting given the FX and the fuel headwinds.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

So just wondering if you guys embedded anything in there in terms of buybacks or debt refis or that excludes those potential accretions? And I guess saying that another way is, Jason, you talked about 14 handle comment, and probably to us that could have easily been a 15 handle without these headwinds right now. Is that kind of a fair

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

statement?

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes. Obviously, if you add the $0.65 to the $14.50 that would get you north of $15 I think what may have been a surprise was where our cost guide came out for the year. Our teams have worked exceptionally hard at continuing to leverage scale within our business. And so similar to the past, we do not contemplate capital returns in that guide.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So if we were to repurchase shares in which we our strategy has been to do that opportunistically, that would obviously be a tailwind on the earnings per share side.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Okay, got you.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

And then Yes, go ahead.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

I just want

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

to we always say that, right. Our formula is moderate capacity growth, moderate yield growth, strong cost control and you can see that those deliver significant performance. And so whatever is in the normal debt pay downs that's already in, our capital investments are already in and then any the dividends of course that we've announced that's already in, but any other things are not included.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Okay, got you. And then Jason going back to River real quickly. I mean obviously River is a much different animal versus ocean and one of those key differences is the fact that the operators in River need birthing rights to get access to certain ports. So just wondering if Celebrity has already secured those birthing rights or is in the process of getting some of those birthing rights? And then maybe is there an opportunity down the road to enter River as well with Silversea to kind of capture a little bit more of that higher end customer?

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Sure. Well, I think first, Steve, just to use your metaphor of an animal, it is a different animal, but it's still an animal. And so we I think we're we've grown to get comfort with the space, understanding how it works, different people to partner with in this space. Of course, we didn't just make this announcement without having the orders in place. We did not make this announcement without having the birthing in place.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And I also think that sometimes we always think about certain rivers inside of Europe, but there are also rivers around the world. And we're trying to make sure that we are being able to provide the experiences that our guests are looking for. As we build up this kind of engine for River under Celebrity, it will certainly provide opportunity for our ultra luxury guests to consider a river experience under Silversea. We're going to start off with celebrity. We're going to see that's where we think that there is great scale opportunity.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And then of course, we'll be looking to see if there's other ways to expand it for our other brands as it sees fit. But we have gone into this very prepared, very buttoned up. And again, as I said a few minutes ago, this is not a hobby for us. So we do plan to we are taking this extremely seriously and it's we want to make sure we can live up to delivering the best vacation experiences in the world and making sure we're doing that in a responsible way. And that's all heavily in the consideration of what we're doing.

[Steven Wieczynski, Managing Director at Stifel Financial Corp]

Okay. Got you. Thanks guys. Appreciate it.

[Operator]

Our next question comes from the line of Matthew Boss with JPMorgan. Please go ahead.

[Matthew Boss, Analyst at JPMorgan Chase]

Thanks and congrats on another great quarter. So, Jason, maybe 2 part question. On the strong start to 2025, any specific areas that you're seeing notable acceleration globally? And how are you optimizing the pricing relative to capacity? And then maybe just higher level, I guess what inning overall would you say we're in today on your market share opportunity in the $2,000,000,000,000 global vacation market?

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Okay, sure. Well, thanks, Matt. I think on the 2025 side, again, one of the I think the interesting trends we've now seen going into kind of 3 year our 3rd year here of coming out of the incident is that we see really strong demand across all of our products. And obviously having incredible assets like Perfect Day and ships like Utopia and ICON, the Caribbean are just drawing a different level of quality demand from all different generations and all different mixes of first time cruisers, first to brand as well as our loyalists. And so really strong demand in the Caribbean, continued elevation in Alaska and really across all European products, as well as in Southeast Asia and Australia, New Zealand and even in China.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So we're seeing an elevation or high demand across all those different products. And then in terms of markets, we're again, everyone's fighting over the highest where could the highest yielding guests come from? By fighting, I mean, our guests are fighting for based on our ships. We're seeing really good demand trends from Europe, as well as obviously the U. S.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Is exceptionally strong and North America is exceptionally strong. So there's not there's no area of kind of weakness. There's always a deployment here or there that we would maybe switch up, but that's heavy, heavy on the margin. Overall, we're seeing really strong demand across that. And then of course, all the different technology that we're now utilizing is just getting stronger and stronger on what I would describe as disruptive tech, whether that is using AI or Gen AI and other things to enhance the guest experience or to just get a better read on what we can be recommending to our guests, whether it's on pricing or whether it's on the guest experience.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

That's in the really kind of early innings of all of this. And I think that's why I think we continue to see just kind of outperformance in these different trends. It's tough to tell what inning we're in, but I would say that we are generally in the early innings of the opportunity that's in front of us.

[Matthew Boss, Analyst at JPMorgan Chase]

It's great to hear. Congrats again.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes. Thanks, Matt.

[Operator]

Our next question comes from the line of Robin Farley with UBS. Please go ahead.

[Robin Farley, Managing Director at UBS Group]

Thank you very much. I wanted to circle back to your river cruise launch. Can we get a sense of you've mentioned obviously your ambitions are much more than these initial 10 river ships in terms of how quickly you could order more. Is it fair to say given the length of time and lead time is not as long as you would need for an ocean ship, you can actually wait till you launch in 2027 to see what's working, what's not working before you order ships for sort of 2030 and beyond. Is that kind of what we should think about as the timeframe for additional orders?

[Robin Farley, Managing Director at UBS Group]

And then, second part of the question, can you give us just a rough sense of how the build per berth cost compares to maybe some of the ocean ships you've had delivered in the last year? Is it pretty comparable or less or more than that? And then squeeze in like a part 3 of it is just similarly on the yield, you mentioned obviously it's going to be more inclusive product, but if we think about your yield, which of course includes onboard and I assume a premium to your existing yield given that the majority of your fleet right now is the Royal brand and this will be celebrity and maybe even celebrity plus pricing and all of that, kind of a sense of what premium to your existing yield? Thank you.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Sure. Good morning, Robin. So on the timeframe side, what I would say is, no, you're not going to wait till 2027 to order more. This is our initial order. These each yard probably can produce about 4 of these a year.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

We're not going to get into when a cost per ship, obviously the cost per berth is going to be elevated. However, these are I mean relative to a cruise ship, they are a very small amount of money. And so our ability to scale into this, we could probably be the 2nd largest operator and it would be significantly less money than the Accel II ship that we just bought. So it's not something that has a high barrier of entry on a cost. But there is a high barrier in terms of the execution and making sure we can do this in a flawless way.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

As it relates to on the yield side, we would expect that this would be a yield tailwind to our business. We do expect that it's going to have at scale a similar, if not better margin profile and better ROIC profile. And then lastly, I would say it's only that will be a little bit different is usually the river boats do not operate year round. So there will be parts of the year where the ships are laid up. That's under the kind of the current model.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So we'll see just as we found a way to lift the shoulder seasons back in the day, we will obviously be studying that to see how we can make them as productive as we can during the off season when it's cold.

[Robin Farley, Managing Director at UBS Group]

Great. Thank you very much.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Thanks, Robin.

[Operator]

Our next question comes from the line of Connor Cunningham with Melius Research. Please go ahead.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Hi, everyone. Thank you. I'm just trying to understand the cost guide a little bit better. Obviously, a lot better for the full year, but can you just give a little a bit of the shape of how the year progresses? Does it just follow capacity?

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

And then what is not in it? You had a big headwind from stock based comp. Like I assume that's not in it this year. Just any thoughts around that? Thank you.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes. Hi, Connor. So yes, you're right. The cadence of the year really follows mainly the drydock cadence, right? And I spent some time in my prepared remarks walking through the capacity growth quarter over the quarter because that does impact the cost cadence as well.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Then remember, we also buy in Acosta Maya. It's going to be an operating port this year. It's going to close, as I said, towards the end of Q1, Q2. And so we don't have that cost because we do need to operate. It doesn't have APCDs.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Then as we ramp up some of our private destinations, mainly the Paradise Island and Nossa, obviously there are some costs kind of towards the end of the year. So those are mainly the real impact of the cost cadence throughout the year. And obviously, we will give guidance as kind of the year progresses for the next quarter. But as I said, the second and third quarter are going to be higher and then the 4th quarter is going to be benefiting from significant capacity growth.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Helpful. And then sorry to talk about River again. Maybe it's just a higher level question. I think that Viking obviously it goes after an older demographic. I think celebrity is younger.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

So if you could just talk about the demographic that you're looking at, because it just seems like when you talk about fragmented, it seems like there's an opportunity with a younger cohort rather than an older one. Just sorry to break the labor of the point, but just any thoughts there. Thank you.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes. I'm not sure if I would have expected so many questions on something that is just beginning and it will always be a small part of our broader business, but it's a big part of expand making sure that we match our customers where they want on a vacation experience standpoint. The average age of a celebrity guest is in their early to mid-50s. But obviously they have older clientele, they have younger clientele. I think the first off, I think the key thing is, again going back to the $2,000,000,000,000 market space, whether it's cruise or whether it's cruise in the river, I mean, we're a fraction of a fraction of that overall market, which to me is just incredible opportunity for us all to grab more and more share of all of this.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

And I think the other part is that, I think we feel very confident that this isn't about chasing Viking customers or another customer. This is about leveraging this incredible sort of business that we have, this incredible flywheel, this incredible leading brands in each one of their segments and making sure that we keep them inside of our ecosystem. And so we don't think there's like a demand challenge here. And I'm sure there'll be some demographic changes. But I think the real big difference here is more of where they're being sourced from and they're being sourced from a highly productive accelerating flywheel that we built and of course we're adding more and more things like enterprise loyalty on the reciprocity and so forth.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So it really incentivizes our guests and recognizes our guests to stay inside of our ecosystem. And that at the end of the day is what we're really trying to achieve and that results better lifetime value of the customer. We get more reps out of it and we get guests that are happy and supportive because they trust us.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Appreciate it. Thank you.

[Operator]

Our next question comes from the line of Ben Shakin with Mizuho. Please go ahead.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Hey, good morning. On the private destination, Nassau is opening in December. How do you think about pricing access to that opportunity? I asked because the Beach Club comes with a lot of benefits, beach, food, drink that are all inclusive, if I'm not mistaken, which is different than Perfect Day? And then kind of related to that, is there any way to think about the or quantify the volume of passengers annually that touch Nassau today?

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

And then I have one quick follow-up. Thanks.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Hi, Ben. Thank you for asking that question. I was kind of feeling lonely on this call. So it's Michael. Yes, we have a pricing strategy laid out.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

We'll be launching the product into the market opening for sale in April. So we'll be able to talk about our pricing in about 2 months' time. It's an all inclusive package. We have quite a lot of volume going into Nassau in total just for the Royal brand. It way exceeds the capacity of the Beach Club.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Our expectation is in the 1st full year of the operation of the Beach Club, we'll have approximately 1,000,000 guests going into the Beach Club for the experience. And we'll talk about the pricing later on, but I can't really comment on it with any detail during this

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

call.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Understood. And then obviously recognizing it opens late in the year, do the and I think Naf kind of alluded to this, but does the 25 net cruise cost include anything for Nassau that's worth highlighting? And then also on a net cruise cost basis, how is this similar maybe just talking anecdotally, how is this similar or different from CocoCay? On the surface, obviously, it's smaller, so presumably less headcount, but just any reason this would be more or less efficient than Cocoa on the cost side?

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Thanks.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

I mean, the big difference really will be volume. I think this year on for 'twenty five, CocoCay will be hosting 3,500,000 gas. So we get all of those scale economies that come with the operation. For NASA, the volume will be around $1,000,000 $1,500,000 when it's fully operational. So obviously, there's less scale opportunities, but it's still a very efficient operation.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

So its margins will be pretty attractive. It's going to be a very profitable business. It's also I mean, one of the major elements of the Beach Club, of course, is its proximity to our ships. And it's a product offering that we think is really needed in Nassau. So it's going to be a great guest experience.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

It's also incredibly complementary with CocoCay because we'll have a lot of short product that goes to Perfect Day on one day and the next day it'll be in the Beach Club. So it's like the greatest weekend in the history of cruising.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes, just to add that, in terms of operation, it's still a very accretive investment. Shouldn't expect this to be material difference. And then as we go through the cost towards the end of the year, obviously, as the brand is ready to open up the private destination, there's some opening and kind of ramp up costs there. They're going to touch towards the end of the year. And obviously, we'll be fully in the base in 2025 in 2026, sorry.

[Operator]

Our final question will come from the line of Ben Cipio with Cleveland Research. Please go ahead.

[Vince Ciepiel, Senior Research Analyst at Cleveland Research Company]

Thanks so much. I wanted to circle back on loyalty. Maybe you could comment on relating to share wallet, repeat booking behavior, crossover between brands? I know that I think it was maybe in the Q2 of this year, there was some changes with the program to be more inclusive across brands. Just kind of curious if there's anything quantifiable in the response that you've seen in the last roughly year now?

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

Yes. Well, I think we want to be generally muted in terms of how successful it is. But I will tell you it has been grossly successful in terms of the reciprocity program. 1 for our guests to recognize and you believe it or not, there are not as many as you would think they recognize that Royal Celebrity and Silversea were in the same house. And so I think just building that broader awareness and of course we have guests that when they're on Royal or traveling with their kids and grandkids and when they're not, they might be looking to travel on Celebrity or Silversea or maybe it's their kids and their adult and maybe older children are on Celebrity and they're not, and but when they're not with their children, they want to go on Silversea or whatever it might be.

[Jason Liberty, Chief Executive Officer at Royal Caribbean Cruises]

So bringing that awareness is one thing. Now that there's reciprocity, then it makes it a lot stickier for them to stay inside of our ecosystem because of all the benefits that they get coming with that. So I would I mean, I think we have been incredibly surprised at how quickly our guests have taken to that program. And I think it's one of many reasons why our flywheel continues to get faster and faster and we're getting significantly more repeat guests than we had planned for.

[Vince Ciepiel, Senior Research Analyst at Cleveland Research Company]

Thanks. And then thinking about kind of your expansion to Perfect Day Mexico, I think Western Caribbean is maybe 30%, 35% of the story in the Caribbean today. Just comment on where you think that could go over time as Perfect Mexico ramps? And then I thought it was really helpful commenting on, I think it was 3,500,000 guests, Coco, 1,500,000 eventually with the Beach Club in Nassau. Like the number of passengers you think Perfect Day Mexico could eventually support?

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

Hi, it's Michael again. I mean, obviously, we're thinking big. And we've got some big ships coming. We've got Icon class coming online pretty much one every year now. We've got Galveston and Texas and the opportunity regionally from Texas.

[Michael Bayley, President and CEO of Royal Caribbean International at Royal Caribbean Cruises]

We think that the ultimately the volume that we will take to Perfect Day in Mexico will far exceed what we're taking into CocoCay.

[Vince Ciepiel, Senior Research Analyst at Cleveland Research Company]

Thanks.

[Operator]

And I'll turn the conference back over to Naftali Holt, CFO for any closing remarks.

[Naftali Holtz, Chief Financial Officer at Royal Caribbean Cruises]

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 all 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 6 record breaking slides at Grill Island or finding the courage to conquer the crown's edge, a test of bravery like nothing you've ever dared dangling high above the ocean.

Participants

Executives

• Jason Liberty, Chief Executive Officer
• Naftali Holtz, Chief Financial Officer
• Michael Bayley, President and CEO of Royal Caribbean International

Analysts

• Blake Vanier, Vice President, Investor Relations at Royal Caribbean Group
• Brandt Montour, Analyst at Barclays Capital
• James Hardiman, Director - Leisure and Travel Analyst at Citi
• Steven Wieczynski, Managing Director at Stifel Financial Corp
• Matthew Boss, Analyst at JPMorgan Chase
• Robin Farley, Managing Director at UBS Group
• Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC
• Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.
• Vince Ciepiel, Senior Research Analyst at Cleveland Research Company