While the US economy might have a few question marks, Royal Caribbean doesn't see any slowdown on its end.
Royal Caribbean Group released its first quarter results and blew past expectations and raised its full-year guidance.
The results indicate the company is seeing strong demand for its products, reinforcing the trope of experiences over products.
"Our strong first quarter results are a testament to the enduring appeal and attractive value proposition of our leading brands and the incredible vacations they deliver," said Jason Liberty, Royal Caribbean Group President and CEO.
Royal Caribbean Group’s first quarter results point to a company thriving, fueled by record bookings, improved margins, strategic investments, and newly regained investment-grade financial strength.
First quarter by the numbers
Royal Caribbean Group saw good indicators all around for its products and showed a healthy return in the quarter.
- Report Q1 earnings: $2.70 EPS vs guidance, $2.71 Adjusted EPS.
- Total revenues of $4.0 billion, Net Income of $0.7 billion.
- Adjusted EBITDA $1.4 billion — margin strength is key.
About 2.2 million guests took a cruise with Royal Caribbean Group in the quarter, which is a 9% increase year over year.
Record breaking demand
The first few months of any year is known as "WAVE season" because it acts like an ocean wave carrying bookings throughout the rest of the year.
This was a very good WAVE season for Royal Caribbean, and that continued into April. Bookings in April still stronger than last year, showing momentum is sustained.
The company reported "record bookings during WAVE season."
"Bookings for 2025 have remained on track, cancellation levels are normal, and we continue to see excellent close-in demand," said Liberty.
Even in April this held true, "during April, the company's bookings were greater than the same period last year, including continued strength in close-in bookings"
Executives continue to believe that consumers are spending on experiences (vacations) over material goods.
How Royal Caribbean is pulling this off
Royal Caribbean Group's formula is a mix of cruise fares rising and people willing to pay them.
That pricing power is evident in onboard revenue and pre-cruise purchases, "Guest spending onboard and pre-cruise purchases continue to exceed prior years driven by greater participation at higher prices."
Strong close-in demand at higher prices is what they've reported in this quarter. Plus, continuous investment in adding new ships and private destinations generate higher interest among consumers.
There is quite a line-up of big projects coming soon:
- 7 new cruise ships by 2028
- Increasing from 2 to 7 exclusive destinations by 2027
- Celebrity Cruises River launching in 2027
Cost control and investment upgrades
Another factor helping the company this quarter is its strict adherence to cost controls.
"Our strong balance sheet allows us the flexibility to continue to expand capital return to shareholders, invest in growth and innovation, and maintain investment grade balance sheet metrics in a range of macroeconomic environments," said Naftali Holtz, CFO.
During the quarter, the company was upgraded to investment grade by S&P Global Ratings. Plus, they exercised significant debt reduction and share buybacks.
On top of that, they have a good amount of cash on hand, with $4.5 billion in cash and available credit.
"This quarter, we continued to opportunistically reduce debt, while lowering cost of capital and recapturing a portion of our Covid-era share dilution," Holtz added.
Hinting at a strong year to come
Royal Caribbean Group isn't making any bold predictions for the year, but they are seeing good signs to come.
The company increased its full year 2025 Adjusted EPS guidance from$14.55 to $15.55. The increase in earnings expectations is driven by the better than expected revenue performance in the first quarter and the benefit of currency exchange rates and lower fuel costs for the remainder of the year.
"With our industry-leading brands, state-of-the-art ships, exclusive destinations, and a fortified balance sheet, we will continue dreaming and innovating to win a greater share of the growing $2 trillion global vacation market," Liberty said.
While there are economic doubts for many companies, Royal Caribbean's results show cruising is one luxury people are willing to prioritize.
