Royal Caribbean Group had an incredible 2024. The cruise line has officially recovered from the Covid pandemic and reinstated its dividend.
That once seemed impossible given the level of debt the company took on to survive its nearly 18-month shutdown.
But passengers have come back, and the cruise line has exceeded its 2019 profits and passenger levels. CEO Jason Liberty shared his thoughts on the upcoming year during his company’s third-quarter earnings call.
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“While still very early in the planning process, we anticipate earnings in 2025 to start with a $14 (per share) handle. We continue to see a very positive sentiment from our customers in a macro environment that favors growing demand for experiences and vacations. American households are wealthier than ever, with continued wage growth and low unemployment driving strong consumer spending,” he said.
Liberty said that leisure spending has grown faster than other categories, with travel growing even faster than other leisure segments, and he expects that to continue.
“Our research suggests that this trend will continue over the next 12 months, with leisure travel spending growing by more than any other leisure category. Millennials, families, and active cruisers are all over-indexing on both leisure travel and, specifically, cruise travel. Cruise remains an attractive value proposition, and cruise purchase intent remains high,” he shared.
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Royal Caribbean has new ships, and destinations coming
Liberty was not the only member of Royal Caribbean’s executive team to share insights into 2025. CFO Naftali Holtz also offered his own look at what’s coming for Royal Caribbean Group (RCL) in the new year.
“Now I will share insights for 2025, which, while still very early, is shaping up to be another exciting year. 2025 capacity is expected to be up 5% as we introduce Star of the Seas in the third quarter and Celebrity Xcel in the fourth quarter as well as benefit from a full year of Utopia and Silver Ray. Capacity is most pronounced in the second and fourth quarters due to timing of new ship deliveries and dry docks,” he said.
The company plans to increase its bet on on its biggest market.
“We are growing Caribbean capacity about 5% in 2025, and it will represent about 57% of our deployment,” he added.
That growth will be supported by a new added-fee destination, albeit not for most of 2025.
“We expect the opening of Royal Beach Club Paradise Island in Nassau at the end of 2025, which will benefit our 2026 Caribbean itineraries,” the CFO shared.
Holtz also shared where the rest of the fleet would be deployed.
“European itineraries will account for 15% of our capacity, Alaska will account for about 6% and Asia Pacific will account for 11%. As Jason mentioned, our booked load factors are in line with previous years and at higher APs (average prices). Our book position is exactly where we want it to be to further optimize our yield profile and deliver on our formula for success, moderate capacity growth, moderate yield growth, and strong cost discipline,” Holtz added.
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A look at Royal Caribbean’s 2025 costs
Holtz also provided some insight into the company’s expected costs for 2025.
“Moving to costs. Our focus remains to manage costs as we seek to grow our margins. In 2025, we expect to have lower dry dock days compared to this year, but still higher than 2023, partially due to longer dry dock days for several planned modernization projects of our existing ships,” he added.
Allure of the Seas is heading into drydock in the first quarter, where it is expected to receive over $100 million in improvements. That will include Playmakers sports bar replacing Sabor and the addition of Mason Jar.
Holtz is confident in the year ahead.
“Overall, we expect disciplined cost growth consistent with our proven formula, and we will provide more details during our fourth-quarter earnings call. Taking all of this into account, we expect adjusted earnings per share to start with a $14 handle,” he said.
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Holtz also shared information on the company’s finances.
“Turning to our balance sheet. We ended the quarter with $3.9 billion in liquidity. Over the last two years, we have made significant progress in strengthening the balance sheet. And this quarter, we reached a key financial milestone by returning to a fully unsecured capital structure,” he explained.
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In Q3, Royal Caribbean refinanced $3.5 billion in debt to lower interest rates.
“Also, this quarter, we opportunistically exchanged $827 million of our outstanding convertible bonds for cash and shares. This transaction allowed us to address a 2025 debt maturity, while also effectively buying back 5.1 million shares at an attractive weighted average price of $154 per share. Our strong balance sheet position allows us to further support our growth ambitions and expand capital allocation while delivering strong cash flow and maintaining investment-grade balance sheet metrics,” he added.
Cruise-line stocks generally are having a good year. Norwegian Cruise Line Holdings (NCLH) shares are up 34.3%. Shares of Carnival Corp. (CCL) , parent of Carnival Cruise Line, are up 44.6%.
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