Jason Liberty
President and Chief Executive Officer at Royal Caribbean Cruises
Thank you, Michael, and good morning, everyone. I am proud to share our outstanding second quarter results and the continued upward trajectory of our business. As you saw in the press release this morning, our momentum continues. Demand for the incredible experiences our leading brands deliver continue to be robust. As a result, we achieved Trifecta 18 months early. We are reinstating a dividend, and we are raising our full year guidance.
Less than two years ago, we announced Trifecta, a three-year financial performance program that created the pathway back to what we internally call base camp. We said we would deliver triple digit adjusted EBITDA per APCD, double digit adjusted earnings per share and return on invested capital in the teens. Today, I'm delighted to share that we have achieved all three trifecta goals on a trailing 12-month basis, 18 months ahead of schedule. In addition, our leverage is now below three and a half times when excluding the impact of new ships that were delivered mid year.
With Trifecta accomplished and our balance sheet in a strong position, we are excited to broaden our capital allocation by reinstating a quarterly dividend of $0.40 per share. Capital returns that include a competitive dividend have always been and will continue to be a key pillar of our strategy to supplement our growth as we focus on delivering long-term shareholder value. I want to thank the entire Royal Caribbean Group team for their passion, dedication and commitment. Their efforts helped accelerate our path to reaching Trifecta, and will continue to ensure us to deliver the best vacation experiences responsibly while driving exceptional financial results.
Trifecta is an important milestone, but we are just getting started as our ambitions go well beyond it. We are excited by the large opportunity in front of us, as we seek to take a greater share from the rapidly growing $1.9 trillion vacation market. Our plan to capitalize on this opportunity is well grounded in a set of underlying strategies, the powerful foundation of our leading global brand and a proven formula for success, moderate capacity growth, moderate yield growth and strong cost discipline, and the best people in the world to execute on it all.
Now, moving on to our results. The second quarter exceeded our already elevated expectations. We have seen an incredibly robust booking and pricing environment across all our key itineraries, which is not only setting us up for success in the future periods, but also contributed to the outperformance in the second quarter. This, coupled with continued strength in onboard spend, which is heavily influenced by our pre-cruise commercial engine, drove the revenue and earnings outperformance for the quarter. In the second quarter, we delivered approximately 2 million vacations at exceptional guest satisfaction scores. Yields grew 13.3% compared to the second quarter of last year, which was almost 300 basis points above our guidance. The revenue outperformance, combined with approximately $0.15 and favorable timing of costs resulted in an adjusted EPS that was considerably higher than our guidance. Naftali will elaborate more about second quarter details and results in a few minutes.
The strong demand environment is also translating into higher revenue and earnings expectations for the balance of the year. We are increasing full year yield growth expectations by 115 basis points compared to our prior guidance, and we now expect adjusted earnings per share to grow 68% year-over-year. 2024 bookings have consistently outpaced last year throughout the entire second quarter and into July, despite the fact that we have significantly fewer staterooms left to sell, leading to higher pricing for all key products.
The North American consumer, who represents approximately 80% of our sourcing this year, continues to be robust, driving strong yield growth across all key products. In addition to strength in the Caribbean, European and Alaska summer itineraries are performing exceptionally well, and we have experienced greater pricing power than expected since our last earnings call, leading to increased expectations for yield growth. Our nimble sourcing model, coupled with our brand's global appeal and leading position in their respective segments, allows us to successfully capture quality demand across those segments sourced from new and younger consumer bases and attract the highest yielding guests.
With such strong momentum, 2024 is on track to be another exceptional year with double digit yield growth and significant earnings growth. We now expect full year net yield growth of 10.4% to 10.9%. Our yield outlook is driven by the performance of new and existing ships combined with our leading private destinations, a strong pricing environment, continued growth from onboard revenue and our accelerating commercial apparatus.
We increased our revenue expectations for the second half of 2024 and now expect to deliver mid-single digit yield growth in the back half of the year, which continues to be above our typical moderate yield growth expectations. Just as a reminder that this is on top of approximately 17% yield increase versus 2019 in the back half of 2023. We also continue to expect higher margins and higher earnings, with adjusted EPS expected to be between $11.35 and $11.45, and EBITDA margins that is over 300 basis points higher than last year.
As we look ahead, we remain focused on executing our proven formula for success, moderate capacity growth, moderate yield growth and strong cost controls which lead to enhanced margins, profitability and superior financial return. We continue to see a very positive sentiment from our customers, bolstered by a resilient economy, low unemployment, stabilizing inflation and record high household net worth.
Consumer preference continues to shift towards spend on experiences, with particularly prioritizing towards travel. Consumers have 10% more vacation days compared to 2019 and they are using half of that increase to travel. In fact, our research suggests that consumers are spending more on travel than any other leisure category, and that they intend to increase their travel spend in the next 12 months. Cruise remains an attractive value proposition, and cruise purchase intent is high and continues to strengthen.
Consumer financials remain healthy across demographics. The number of baby boomers reaching retirement age is expected to grow 30% to 73 million by 2030. Based on our research, retirees take 50% more vacation time than non-retirees. The baby boomer generation also holds 50% of the $156 trillion of U.S. wealth, and they are expected not only to spend more on travel, but also to transfer $72 trillion of their wealth to other generations over the next two decades, including traveling together. We are already benefiting from that active and real time wealth transfer through multigenerational travel across our brands.
Our research shows that younger generations, millennials and younger, are also benefiting from the 10% increase in leisure time compared to 2019, and that they intend to allocate more of this time on travel than any other leisure category. This attractive traveler continues to gain share within our customer base at a faster pace than any other generation, and today one of every two customers is a millennial or younger. Their travel needs and behaviors vary across trip length and type, so the differentiated experiences offered by our incredible brands resonate extremely well with these next generations of cruisers.
Our addressable market is growing, and we are attracting more customers into our vacation ecosystem. New to cruise customers are up double digits versus last year, and at the same time we are seeing stronger repeat rates. Once booked, guests are quickly engaging with us and buying significantly more onboard experiences per booking than in the second quarter of last year, both earlier and at meaningfully higher APDs, translating into higher satisfaction rates and higher onboard spend.
Putting customers at the center of our orbit has been critical to our success and allows us to meet guests for all of life's moments, transforming the vacation of a lifetime into a lifetime of vacations. A key differentiator for us on this journey is our hardware, where we are constantly innovating. This quarter, we took delivery of Utopia of the Seas, the ultimate weekend getaway, a ship positioned to be another game changer for our short Caribbean product. Our short Caribbean cruise product is an important entry point for new to cruise and new to brand, with nearly seven in 10 guests falling in these categories, and always skewing more towards younger customers.
Younger consumers find this product particularly appealing. In fact, approximately 40% of guests who fall in this demographic have indicated that they intend to book a short vacation in the next 12 months. Moreover, 90% of guests who sail on our short product intend to cruise again, with roughly half planning to return for a longer cruise.
We also launched Silver Ray, which continues to redefine the ultra-luxury segment. Since introducing the Nova class last year, Silver Nova and Silver Ray have attracted a higher mix of younger guests than the rest of the fleet. We have an exciting lineup of new ships on order, including celebrity cruise's Celebrity Xcel, which launches in late 2025 and Royal Caribbean's Star of the Seas, debuting in mid-2025, the third Icon class ship in 2026 and the 7th Oasis class ship in 2028.
We also continue to lead the vacation industry with exciting new experiences on our ships and our portfolio of private destinations. Perfect Day at CocoCay continues to perform exceptionally well and we are reaching important milestones on Royal Beach Club Paradise Island, opening in 2025 and Royal Beach Club in Cozumel, Mexico, opening in 2026. These new experiences uniquely position us to continue taking share from land-based alternatives.
As we deepen our relationship with our guests, this quarter's launch of our Enterprise Loyalty Status Match program is an important step in integrating our brands, rewarding our guests for staying within our family of brands, and making travel planning even more seamless. In just two months since the program launched, we have seen a significant increase in enrollment across all of our brands and positive feedback from our loyal fan base. Once customers booked their dream vacation, over 90% utilize new features and enhancement on our apps. Notably, more than 70% of guests are making pre-cruise purchases before they sail, and they spend more than double compared to those who only make purchases on board.
Finally, our sustainability ambitions help inform our strategic and financial decisions daily, supporting our mission to deliver the best vacation experiences responsibly. We remain committed to our See the Future vision, sustaining the planet, energizing communities and accelerating innovation. Our recent Maritime Decarbonization Summit on board Utopia of the Seas underscores our commitment to reaching net zero emissions by 2050 through industry-wide collaboration. More than 30 ship owners, shipbuilders and technology and energy providers convened to catalyze advancements in necessary technological solutions and alternative fuels. We are optimistic about this important step in unifying our industry and fostering an environment for advancing quality and scalable, sustainable solutions.
In summary, our business continues to perform exceptionally well, and we are very pleased with our performance, achieving Trifecta early and reinstating the dividend. This sets us up well as we seek to take share from the rapidly growing $1.9 trillion vacation market. With our strong platform, our proven strategies, we are creating a lifetime of vacation experiences for our customers while delivering long-term shareholder value and strong financial results.
And with that, I will turn the call over to Naftali. Naf?
