Royal Caribbean Group said that booking rates have accelerated since April, driven by last-minute reservations.

“Our second quarter results exceeded expectations mainly driven by stronger-than-expected close-in demand,”  said CEO Jason Liberty in an earnings call. “Bookings have accelerated since the last earnings call, particularly for close-in sailings.”

The company delivered over 2 million vacations in the quarter, a 10% increase year-over-year. Half of its customers were millennials or younger.

The results let the Miami-based cruise giant raise its annual profit forecast on Tuesday, banking on resilient demand for its luxury destinations as the cruise operator reported its second quarter with the highest margins in about 20 years.

“We continue to see engaged and excited consumers with roughly 75% intending to spend the same or more on leisure travel over the next 12 months,” Liberty said.

“At the same time, more than half of consumers tell us they are booking closer to their departure date than they used to. And for the people who intend to travel over the next 12 months, the majority have not yet booked.”

Loyalty News Coming

Cruise lines don’t do as good of a job at making their loyalty program and co-branded credit cards drive direct bookings as major hotel groups do. That said, Liberty wants Royal Caribbean to do better, after having integrated all of its brands into one rewards program last year.

Liberty acknowledged the company’s co-branded credit card “is tied today to our loyalty program, but not in the way that fits our ambition.”

He said passengers would see “something very meaningful coming out of that very, very soon” as the company works with its credit card provider.

“The number of loyalty members that are sailing with us has now inched up to 40%,” Liberty said. “Our loyalty members who spend 25% more per trip.”

“Nearly 50% of onboard purchases are now coming through the mobile app compared to one-third at the end of 2023.”

“Our guests are very focused on recognition and also being incentivized for the spend and loyalty that they provide,” the CEO said. “Especially on the loyalty program side, we are very tuned into and have a lot of plans on what things our guests and our brands feel are a value to them that would result in them behaving even more loyal to us.”

The executive framed loyalty as closing the gap with hotels and resorts in attracting guests at a comparable price point.

“If somebody goes outside our ecosystem to another cruise competitor or somebody else on land, then we should look at that as a fail,” Liberty said. “Every one percentage point [of market share stolen from hotels] is worth a tremendous amount of money.”

Cost Pressures Loom

Royal Caribbean’s performance comes as the industry faces pressure from rising costs. The company expects expenses to climb about 230 basis points in the third quarter, driven partly by higher fuel costs linked to escalated Middle East tensions.

Higher tariffs could also impact shipbuilding and supply costs, keeping cruise operators on edge.

Capacity Expansion

Royal Caribbean has been investing heavily in new ships and private destinations to attract both seasoned cruisers and first-time customers. The company took delivery of Star of the Seas earlier this month and expects Celebrity Excel to launch by year’s end.

The cruise line anticipates capacity increases of 5.5% in 2025 and 6% in 2026 as it adds seven new ships over the next few years.

The expansion includes private beach destinations like Royal Beach Club Paradise Island, which opened for bookings with what Liberty described as “incredibly strong” early demand.

In late 2027, it will debut Perfect Day in Mexico, a private destination that’s approximately the size of the Magic Kingdom in Orlando in footprint, though with much fewer guests.

Getting Better at Upselling

Royal Caribbean has proven adept at getting customers to spend beyond their initial cruise fare.

Onboard and other revenue rose 9.5% to $1.3 billion in the quarter. Guest spending onboard the ships and pre-cruise purchases are still above the prior year’s levels despite higher overall pricing.

“Customers who purchase onboard experiences before their cruise spend about 2.5 times more than those who do not buy pre-cruise,” Liberty said.

Results

• Net income was $1.2 billion, up from $854 million. Total revenue grew 10.4% from the same period a year ago to $4.54 billion.

• Net yield grew 5.2%, outpacing the company’s projections by 70 basis points.

• For 2025, the company expects net yield growth between 3.5% and 4%, supported by new ships and continued success at its private destinations.

• “Looking back on the 1H, our data indicates that cruise operators held prices throughout March/April and moderated pricing only marginally for the 4Q/1Q during May/June,” wrote Brandt Montour in a report for Barclays.

• “Nothing wrong with cruising, for right now. But the key is: for right now. Royal Caribbean seems to be a bit more cautious about Q3, said Tracey Ryniec, stock strategist at Zacks Investment Research. “They are not allotting for further yield growth, even though it may happen.”

Royal Caribbean Group CEO Jason Liberty will speak on stage at Skift Global Forum in New York City in September.