Royal Caribbean Cruises Ltd. (RCL) Q2 2026 Earnings Report, Transcript and Summary

Good morning. My name is Morgan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to introduce Mr. Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Good morning, everyone, and thank you for joining us today for our second quarter 2026 earnings call. Joining me here in Miami are Jason Liberty, our Chairman and Chief Executive Officer; Naftali Holtz, our Executive Vice President and Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand. Before we get started, I'd 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. 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. Naftali will follow with a recap of our second quarter, the current booking environment and our outlook for 2026. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. This morning, we reported second quarter results that exceeded our expectations, along with an increase in our full year guidance that reflects the continued strength in demand for our leading vacation brands. Revenue in the second quarter grew 6% year-over-year. Earnings were 8% higher than guidance, and we returned over $600 million of capital to investors through dividends and share repurchases. Our flywheel is accelerating. Demand for our vacation experiences continues to strengthen, driven by a healthy experience-seeking consumer and exceptional execution from the team, which is delivering Net Promoter Scores averaging the low to mid-70s. We see continued commercial momentum as guests are booking in greater numbers, supported by our industry-leading technology and loyalty platforms. From my perch, it is clear that the differentiated offerings across our leading brands are driving strong demand, enabling higher pricing, increasing retention amongst our most valuable guests, and encouraging greater onboard and vacation spending. The further connectivity between our brands through loyalty, data and technology, combined with new destination experiences like Celebrity River, are fueling our vision of transitioning from a vacation of a lifetime to a lifetime of vacations. Since our April earnings call, the ongoing conflict in the Middle East has modestly weighed on bookings for some of our deployment in the near term, which primarily impacts the third quarter. Although booking trends improved after the initial disruption, the conflict has persisted longer than anticipated, influencing consumer destination preferences and resulting in more modest yield growth for Europe sailings this summer. As a result, we are reaffirming our yield guidance for the year of 1.75% to 2.25% as we grow our capacity 6.6% to deliver approximately double-digit improvement in absolute revenue and double-digit improvement in earnings per share for 2026. Given the interest in Mahahual, Mexico, one of our many destination projects, let me provide an update before discussing the results. Mexico has been a key destination partner since our inception and has played an important role in helping us fulfill our mission of delivering the best vacation experiences responsibly. Our commitment to Mexico and the destinations we visit is stronger than ever. This includes the great community of Mahahual, where we continue to maintain a constructive dialogue with community leaders and public officials as we work to develop a tourism destination that will create long-term opportunities for the region, for Mexico, and for our guests. Recent public comments by the Mexican administration acknowledge the community support for development. The government is continuing to engage with community stakeholders to better understand their perspectives, a process that will take some time and is expected to affect our previously planned time line. We remain heavily engaged with key stakeholders to create sustainable tourism that includes lasting environmental, economic and social benefits for the region, including investments in critical infrastructure to protect the local environment. We will provide additional updates on this project as appropriate. With that, let me dive into the second quarter results and updated outlook for the year. In the second quarter, we delivered 2.4 million incredible vacations at industry-leading guest satisfaction scores. Capacity increased 5% year-over-year and total revenue grew 6%. Net yields were up 1.2%, which was 100 basis points higher than our guidance, driven by better-than-expected close-in demand, including strong onboard revenue, primarily for Caribbean products. Costs also came in favorably, primarily due to timing, and we also benefited from better-than-expected performance from joint ventures and balance sheet management. As a result, adjusted earnings per share was $0.33 higher than our guidance. These results reflect the continued appeal of our vacation experiences, diversified portfolio and disciplined execution. Naftali will elaborate on our results and outlook in a few minutes. Turning to the demand environment. As I noted before, we continue to see engaged consumers who prioritize travel and experiences. Travel remains the #1 leisure category where consumers intend to spend more, and they are increasingly seeking vacations as a way to relax, unwind and escape. The ongoing geopolitical situation has affected near-term travel plans for some consumers, primarily preferring closer destinations over international trips due to the cost of air travel. Consumers tell us that they are booking closer in due to flexibility and ease, which is reflected in the strong close-in booking volumes we have been seeing. Our book position is in line with prior years at record pricing for both 2026 and 2027. In addition, onboard spending and pre-cruise purchases continue to exceed prior years. These trends are supported by our digital channels and our growing ability to connect guests with the experiences most relevant to them at the right point in their vacation journey. The response to Legend of the Seas and to the Royal Beach Club in Paradise Island and Santorini has been excellent. These new experiences showcase how expanding our fleet and destinations offer even more reasons for guests to vacation with us. Consumers are becoming more deliberate about their spending, yet they still prioritize quality leisure time, which aligns with our differentiated portfolio and the compelling combination of experiences, choices and value we offer. Now, let me provide an updated outlook for 2026. We expect net yield growth of 1.75% to 2.25% for the full year. While the prolonged conflict in the Middle East has modestly impacted Mediterranean sailings, which are heavily weighted to Q3, we continue to expect full year yield growth across our key products, including the Caribbean. We also remain committed to expanding margins by continuously identifying efficiencies through prioritizing spend and leveraging technology and AI without compromising the quality of the guest experience. We expect another year of strong earnings growth and cash flow generation. Full year adjusted earnings per share is expected to grow 14% and be in the range of $17.73 to $17.87. Our scale, industry-leading margin profile and strong cash flow generation allows us to continue to invest in our future and return capital to shareholders. Let me now turn to the progress we are making against the long-term strategic initiatives and how we are bringing our connected vacation platform to life. Across our portfolio, we are strengthening engagement with our guests across the vacation journey, creating more opportunities to serve them across brands, destinations and occasions. Royal ONE is our new co-branded card that allows guests to earn and redeem rewards across our brands. Since its launch in April, it has been exceeding expectations, driven by higher sign-ups and cardholder spend. We are seeing Royal ONE cardholders spend more on our vacation experiences than non-cardholders, and they are twice as likely to sail multiple times. We are seeing similar momentum from Points Choice and Status Match, which has generated over 0.5 million new loyalty enrollments. These loyalty enhancements give guests greater freedom to engage with us across our brands without sacrificing the recognition they have earned. That flexibility is contributing to sustained growth in cross-branded bookings and bringing us closer to our goal of serving guests across the lifetime of vacations. Technology is helping us make those relationships more relevant at every interaction. More than 90% of our guests now use our app, where monthly active users have increased fivefold since 2019, and more than half of our onboard revenue was purchased before embarkation. That engagement provides a richer understanding of what our guests value, and allows us to deliver more personalized recommendations while making the vacation easier to plan and enjoy. These capabilities enable a more personalized itinerary across dining, entertainment and destination experiences, real-time recommendations that connect guests with the next experience they are most likely to enjoy and a digital vacation passport that brings together preferences, loyalty recognition and rewards across all 3 brands. We are also expanding the experiences that bring guests into the ecosystem. The debut of Legend of the Seas brought the Icon Class to Europe for the first time. Equally important, we continue to invest in the ships our guests already know and love through Royal Caribbean's ongoing amplification program, Celebrity Cruises' Solstice Series revitalization and continued investments to elevate the luxury experience across the Silversea fleet. These enhancements strengthen the guest experience, improve return on existing assets and create even more reason for guests to vacation with us more often. Our ships are platforms for experiences that cannot easily be replicated elsewhere. Taken together, our brands, ships, destinations, loyalty programs and digital capabilities are increasingly operating as a connected system. Each interaction gives us the opportunity to better understand the guest so that we can improve their experience. This creates a strong reason to vacation with us again and again, supporting greater frequency, higher lifetime value and attractive returns. In fact, this year, we have seen repeat guest mix increase year-over-year even as we continue to grow our platform and attract guests who are new to cruise and new to brand. Finally, supporting communities has always been a core part of our strategy. This quarter, we published our annual community impact report, highlighting our positive impact in over 85 communities worldwide and reaching over 3 million individuals through investment and partnership. Mahahual exemplifies our commitment. As part of our ongoing investment in the community, we're planning a new community center that will offer a modern, accessible gathering space for all residents. Such initiatives create lasting value for local residents and support the region's long-term growth and vitality. In summary, demand for our brands remains strong, and we expect another year of double-digit earnings growth. We continue to capture a greater share of the growing vacation market while investing in our future and returning significant capital to shareholders. While still early in our booking and planning cycle, we are encouraged by the elevated booking activity and year-over-year pricing improvements we are seeing for 2027. We fully remain committed to delivering the best vacation experiences responsibly, resulting in record-breaking Net Promoter Scores. All of this, combined with strong cost and capital discipline, further bolsters our expectations on delivering Perfecta next year. And with that, I will turn the call over to Naftali. Naf?

Thank you, Jason, and good morning, everyone. I will start by reviewing second quarter results. Adjusted earnings per share were $4.21, $0.33 higher than the midpoint of our guidance and driven by higher revenue, lower costs and favorability below the line, including joint ventures. We delivered 6% more vacations and achieved a net yield growth of 1.2% compared to last year. The continued expansion of yields and capacity resulted in a total revenue growth of 6% for the quarter. Yields for the quarter were 100 basis points above our guidance, driven by stronger and accelerated close-in demand compared to our expectations in April, particularly in the Caribbean. We have seen consumers choosing to book closer to the vacation time, mainly driven by flexibility and ease. Net cruise costs per APCD, excluding fuel, were up 3.9% year-over-year, about 90 basis points better than expected, driven by the timing of our costs shifting to the second half of the year. Adjusted EBITDA was $1.8 billion, EBITDA margin was 38% and operating cash flow was $1.9 billion. As Jason mentioned, our book position is strong and in line with prior years at record prices for 2026. While still very early, booking trends for 2027 are encouraging and pacing ahead of historical levels, including for itineraries where demand was impacted by geopolitical events this year. Consumers' desire for memorable experiences with our leading brands drives strong demand for our vacation experiences. Our capacity is growing 6.6% this year with the Caribbean representing the same deployment mix compared to last year, while Europe is slightly down. We plan deployment to optimize margin and operating income, and the mix this year creates slight headwinds to yields, especially in the third quarter. The Caribbean represents 57% of our capacity this year and 44% in the third quarter. Our competitive position in the region is strong, supported by our industry-leading ships, destinations and experiences. This allows us to deliver incredible vacations and record Net Promoter Scores and grow yields even with elevated industry capacity in the region. Europe will account for 14% of capacity for the year and 28% of capacity in the third quarter. Europe demand is strong. We did, however, experience a modest and near-term impact on 2026 bookings since the last earnings call, primarily due to the prolonged geopolitical activity that is driving our reduced yield outlook for the remainder of the year. Lastly, Alaska is expected to account for 5% of total capacity and 13% in the third quarter. Now let me talk about our guidance for 2026. Net yields are expected to grow 1.75% to 2.25%. Together with capacity growth of 6.6%, total revenue is expected to grow 9% as we continue to grow both yields and capacity. As I mentioned, our yield guidance compared to April is impacted by prolonged region-specific global events affecting select itineraries. For the full year, net cruise costs, excluding fuel, are expected to be approximately flat, consistent with our prior guidance, reflecting ongoing efficiency improvements and prudent cost management without impacting the guest experience. As I mentioned on the last call, the first half's cost growth is expected to be higher than the second half, driven by timing of dry docks and other year-over-year comparisons. We expect fuel expense to be $1.3 billion for the year, and our consumption for the remainder of 2026 is 58% hedged at significantly below market rates. Additionally, when prices subsided in June, we opportunistically hedged more for 2027. Based on current fuel prices, currency exchange rate and interest expense, we expect adjusted earnings per share between $17.73 and $17.87. While our operating assumptions remain largely unchanged, we've benefited from an improved outlook from our joint ventures and expenses below the line. More importantly, our confidence in the business remains high, supported by strong demand, a healthy book position, disciplined cost management and continued execution against our strategic priorities. We expect continued cash flow growth, enabling us to increase margins, invest in strategic initiatives, maintain solid investment-grade balance sheet metrics and return capital to shareholders. Now let me discuss our third quarter guidance. In the third quarter, capacity is expected to be up 8.5% year-over-year and net yields are expected to be roughly flat. As I mentioned earlier, deployment mix changes and global events have created yield headwinds in the third quarter. Looking ahead, we anticipate yield growth during the fourth quarter to reaccelerate. This growth is expected to be driven by a more favorable year-over-year comparison, deployment mix and the timing of dry dock scheduling compared to last year. While this provides a 2-point benefit to fourth quarter yields, there is a similar headwind to yields in the third quarter. Net cruise costs, excluding fuel, are expected to decrease in the range of 1.1% to 1.6% in constant currency. Taking all this into account, we expect adjusted earnings per share for the quarter to be between $6.26 and $6.36, a double-digit year-over-year growth. Turning to our balance sheet. We ended the quarter with $6.9 billion in liquidity and leverage below 3x, consistent with our goal of solid investment-grade metrics. In July, we increased, through the accordion feature, the revolving credit facility capacity by $250 million to a total capacity of $6.6 billion. We maintained strong access to diverse capital funding sources that support our robust liquidity and growth aspirations as well as shareholder returns. During the second quarter, we paid $404 million of dividends and repurchased 0.8 million shares. We have $805 million remaining under our current share repurchase program authorization. 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 strong results. With that, I will ask our operator to open the call for a question-and-answer session.

Your first question comes from Matthew Boss with JPMorgan.

Congrats on a nice quarter. Jason, could you speak to the continued strength in onboard spending? I know historically, this has been a key lead indicator for the health of your consumer. And can you elaborate on 2027 booking and pricing trends across regions?

Sure. Thanks for the question, Matt. I hope all is well. I think on the onboard side, I think there's a combination of things. One, as you pointed out, we're seeing about 180,000 people on any given day spend. And so seeing elevated spend while they're on a ship is obviously a good sign or a good indicator of the health of the consumer, or at least our guests that sail with us each and every day. I think also what's very beneficial, and we commented, is our ability to help our guests identify what they want to do on the ship prior to them getting on. So our investments in the technology and then the data to help curate well ahead of time allows our guests to book what they want to do and also to basically get the first day of their cruise back, so they're not spending their time trying to identify what there is to do. The combination of those things has resulted in a very strong trend of onboard revenue continuing to rise. I would also comment that when we look at where our guests have spent on an elevated basis, you've seen an increase in spend in beverage, as an example, and shore excursions. So seeking those experiences were higher than we had anticipated or we had seen in previous periods. On 2027, obviously -- first to start off, we're in July, so it's early. But we have seen a very strong demand for 2027. So as we said, they're at historical, which are very, very high volumes. So our booking volumes are in a great place. And of course, we're trying to optimize our yield, not trying to just be better than historical levels, just to be better than historical levels. We feel very good about our book position, and that's all at higher rates. And that's across the portfolio of products that we offer. So we feel good about 2027, which is also why we reaffirmed our view on reaching Perfecta by the end of next year.

Your next question comes from Steve Wieczynski with Stifel.

Jason, I want to ask about the Caribbean. From our seat, it's pretty clear. I think we could say that a few of your peers have accelerated promotions in that market. And as we think about whether that is -- whether we think about the fourth quarter and the next year, wondering if you've seen any impact from the uptick in promotions and if that has started to impact your ability to take price in that market? And if you haven't seen an impact from those promotions, would it be fair to assume that without the European headwinds you guys have encountered this year, you would have been able to raise your yield guidance for the year?

Sure. Thanks for the question, Steve. I'll start with the latter part. That's absolutely correct. I mean Europe was off to an incredible start at the beginning of the year. And obviously, the results of geopolitical activity in the region and the impact on fuel, et cetera, did curtail to a degree the demand for Europe. Now that's not to say that European yields are down. European yields are still very good for this year, but they are less than what we had expected to. And so to the point, we would have raised the back half of the year, if not for those activities. I think on the Caribbean side, I know this has been one of the main stories or concerns for the year. I think all -- whether it's cruise competitors or vacation competitors, we're all dealing with a different set of cards. But I think the reality for the Caribbean is, while we have increased our Caribbean capacity for 2026, what we have seen is that demand for differentiated assets, which we bring to the table with our ships and with our destinations, you combine that with what we've been able to do across loyalty and other technology-related things, has resulted in us getting more reps out of our customers that are higher-margin guests. And so I think that allows us maybe to be a little bit less insulated from what our competitors are doing. But for us, we're in a very good position for the Caribbean for the balance of the year, and we continue to see strong demand going into next year.

Steve, it's Michael. I've just got to add on the Caribbean that, of course, we opened the Royal Beach Club earlier in the year, and that's our #1 top-rated experience in the Bahamas to date in Nassau, and it is incredibly popular. It's really a great product, a new product that we've introduced. You combine that with Perfect Day, we're just shy of 4 million guests going to Perfect Day in 2026 with 2 Icon-Class ships and the third one coming in the fourth quarter back from Europe with the Oasis Class on the short product itineraries. I mean we really -- to Jason's point, we have a phenomenal brand with Royal Caribbean and with the sister brands, and we've got these unbelievable products that really do set Royal Caribbean apart from our competition.

The last point, just to add a little bit more into it, because I think it's important because I think we're quite deliberate about these things, is that when you're delivering, especially in the Caribbean, Net Promoter Scores that are in the mid-70s, which is unicorn territory, we are incredibly intentional, obviously, about the vacation experience that we're delivering. But while -- obviously, our costs have been very strong. Our cost management has been very strong. We have continued to lean in and invest in the product and in the vacation experience. And that is resulting in establishing incredible trust with our guests, which also fuels the repeat rate. And experiences are -- our customers value them, but they also want to ensure that they're going to get what they expect. And I think we're seeing that through the Net Promoter Score, which is a great indicator of not just they had a great time, but also a great advocacy and they're sharing that with their friends and family, which is driving very strong demand.

Your next question comes from Lizzie Dove with Goldman Sachs.

I just wanted to put kind of a finer point on Matt's question on 2027. With 4Q, what you've implied, it's a strong exit rate. You've got 2 years of easier comps. Caribbean next year, I think, should be more benign. I think Carnival's pulling maybe mid-single-digit capacity out of the system versus maybe there's some of the long tail of what we've seen with the Middle East this year. And so, I guess, all of that -- those puts and takes, how do you think about whether this is setting up to be potentially an above algo year?

Well, I don't know, Lizzie, if I would say the comps are easy. I mean we've had substantial yield growth over the past several years. Obviously, we are doing things, whether it's on the product, the experience. We're adding great hardware now as we've added Legend. We're bringing new destinations online. We're bringing River online. So there's a lot of, I think, great tailwinds going into 2027. I think it's too early, obviously, to think through exactly what the yield handle will be for next year. But we continue to believe that we drive tremendous shareholder value with moderate yield growth, strong cost control and being very discerning about how we invest our capital and how we return capital to shareholders. But there are a lot of tailwinds, but it's -- we don't plan for perfection.

Your next question comes from Robin Farley with UBS.

Just wanted to get a little bit of color around the 2027 commentary. Just sort of the 2 things looking to clarify. You talked about pacing being up, which sounds like a little bit more of an incremental comment. So I'm wondering if load factor, like, on the books is up and maybe the strategy is not to have it up at this point, but just kind of wondering where load is compared to this time last year. And then also price on the books for '27. The release sort of talked about record or didn't necessarily imply that price on the books is up for '27 at the moment. But I think something in Jason's opening remarks mentioned. So if you could just clarify also whether record for 2027 means up year-over-year compared to the same time last year?

Yes. So Robin, it's Naf. We feel very good about how it's pacing. It is early, like Jason said, it is July, but we booked very well and at higher prices. So we feel pretty good about next year.

Yes. And Robin, I think the comment on the load factor standpoint, which is at an elevated level on a comparable basis as well, but it's more or less in line where we have been booked on a load factor basis. Now as Naf said, that's at -- when I -- we used the term record pricing, which means higher pricing than we saw in the previous period. So that's all very positive news. But I think one of the points I just want to stress again, when we think about load factor or book position, is we have built very sophisticated AI-driven models that help us each and every day, or really every second of every day, manage about 20 million and growing price points to optimize our yield. And so we're focused on obviously driving as much revenue as we possibly can. But where we are today, we're at an elevated level slightly, but we're not looking to be -- we're happy with being a couple of points below, a couple of points above as these tools have found themselves to be incredibly predictable and successful in helping us generate higher revenue.

Your next question comes from Brandt Montour with Barclays.

So recognizing that the Mexico time line is a bit in question, the question is, does that affect your target of Western, Eastern Caribbean sort of 50-50 split in '28, '29 time range? And if that is -- if that does have to be changed, what is your capability of sort of managing any shifts? Or does there need to be any sort of change to that split?

Yes. Brandt, I think, first off, the answer is we'll see if there will be any impact to that. I think we're -- as I said in my commentary, we're not really in a place to comment on the status of that development. But I mean, what I would say is we are generating very strong demand out of home ports like Galveston and Tampa and South Florida for cruising in the Western Caribbean that we believe we'll be able to deliver that with a set of different vacation experiences and destination experiences that we think will be highlighted by Mahahual and Cozumel, et cetera. So I think that there might be some changes in deployment on the margin. That's not our expectation today, but there might be. But we're not worried about the ability to generate growing yields off of that capacity.

Your next question comes from James Hardiman with Citigroup.

So maybe just walk us through the last few months and what you've seen with respect to demand. Obviously, as of your last call, it seemed like the geopolitical headwind had begun to dissipate. But then one of your competitors talked about a step back in May and then some improvement in June. Curious if you guys would generally agree with those shape of events and sort of what, if anything, you could tell us about July. I think more than anything, people are just sort of looking for the exit rate or the most recent data point as some barometer of where this is all headed.

Well, I think the commentary that was made by, I believe it was Carnival that you're referring to, I think that's generally what we saw as well. Like when we came into our call, we had seen a great rebound in the month of April from some of the geopolitical noise that was happening before that. And then a few weeks after the call, you saw some -- and again, I want to just stress, we're talking about things that are highly on the margin. Like it's -- these are small little changes that can have some small change to our revenue and booking environment. So we saw a little bit of that in May. But we saw really most of June and certainly in July, a very strong demand environment. We're seeing strong volumes and we're seeing, as we've commented on the pricing here now for 2026 and into 2027. So there's some geopolitical noise that's out there. There's some -- always some ebbs and flows that happen in the booking activity. But across our products, we see strong demand from our consumers.

Your next question comes from Sharon Zackfia with William Blair.

I seem to recall you were working on a project to kind of enhance onboard spending with the app while passengers are on board with some sort of rollout next year. I don't recall if that's still the time line. And maybe if you can refresh our memory on kind of how to make the spending more frictionless once on board in a digital mechanism.

Yes. Well, we are -- I mean, we're very fortunate that we sit on a mountain range of high-quality data, and we have millions and millions of interactions with our guests. So we're getting better and better at identifying what our guests are looking to do and then personalizing that. And so some of that, as it relates to inside of the app, you'll start to see in early next year. And these tools get smarter and smarter. We're doing this in a way that is really to help enhance the guest experience. And so it's important that we have the tools tuned in to be able to learn and also to curate or put in front of them what is relevant to them.

Just maybe to add one thing. Of course, we're focused on across the journey. So this is one piece, and there's other pieces that we're working on to simplify the way people explore and understand the options that we offer and making sure this throughout the booking journey is frictionless.

Your next question comes from Conor Cunningham with Melius Research.

There's been a lot of questions around the '27 bridge, but I was actually hoping to maybe get a little bit more near term. Just the implied fourth quarter obviously steps up from 3Q, and I know there's been a lot of moving parts. So I was just hoping that you could kind of give the puts and takes around what you're assuming there. I know you're not explicitly guiding to it. But just from a demand standpoint, comp standpoint, product, anything that could be helpful in driving confidence in that exit rate, given it's so important to the 2027 bridge?

Sure. So let me give you a couple of the pieces. And of course, we're not guiding to it. But as we say, every quarter, and it's hard to compare it quarter-over-quarter versus last year, there's so many moving pieces, right? So one, you have the timing of new ships, deployment changes, dry dock days, capacity, the changes in mixes between Caribbean and Europe. So all of those are impacting quarter-over-quarter. And this year, obviously between the third and the fourth quarter, it's an opposite impact. So I mentioned in my prepared remarks, around 200 basis points headwind to the third quarter and the same, similar, I guess, tailwind to the fourth quarter is how I would describe it.

Your next question comes from David Katz with Jefferies.

If we're seeing this the right way or our math is right, it appears that average itinerary length is getting just a little bit shorter. And I wanted to just get your perspective on the degree to which that's intentional or strategic in some way and how we should think about the implications of that.

Yes. Well, we've -- obviously, there's been investments on our destinations where our guests are seeking to visit places like Perfect Day and the Royal Beach Clubs, et cetera, and that allows us to offer a more elevated short product. And so the question is why are we doing that? We're doing that is because the consumer, especially keep in mind, half of our guests are millennials or younger now. Their profile for a vacation today as they -- as their kids start to get older, et cetera, they start going in and getting married and moving towards that direction. In their current state, they like to take shorter vacations, like to do them more frequently. But they tend to spend the same amount of money that they would spend on a short vacation as they would on a long vacation. And so we have developed and curated a series of products, especially in the short Caribbean space. That's a little bit shorter than the normal 7-night. And that's generating very high demand. It's not only are we delivering a product that they're looking for, but it's also from the onboard side, it's a product that, they're great weekend getaways or just general getaways that we're getting. And that's why you're seeing the investments -- further investments in more of these, the Royal Beach Clubs. We're putting better assets there, and that's all reeling in higher frequency and new to cruise, which is feeding the future.

And David, just to add, it's Michael. On our short product, which we've been growing year-over-year and which is proving to be very successful to all of the points that Jason raised, we've never walked away from the classic 7-night itinerary, which is unbelievably popular. So when you think about Icon Class and then also the new Icon Class Legend in the Mediterranean coming back into the Caribbean, we've got a huge lineup of products in the classical 7-night, particularly in the Caribbean, which is unbelievably popular for the families. So I think we've seen great success with short product, but we also continue to see great success with the new ships coming online and going straight into the Classic 7-night Caribbean.

And just last thing, if you kind of look at our deployment mix, it's -- short this year versus last year on a mix basis is not significantly higher than just the capacity growth. So we do have that growth, but then also other products as well.

Your next question comes from Vince Ciepiel with Cleveland Research.

Great. Thanks for all the color on bookings and unpacking the geopolitical impact. You had acknowledged that it had some impact here on '26 yield. At this point, 2027 sounds like it's in a really great spot. You noted very strong demand in June and July despite a recent uptick with everything going on in the Street recently. So just kind of curious, like, do you think cruise bookers are becoming desensitized to the situation? It's kind of becoming old news? Or is it just more of a mix thing where you're booking more Caribbean right now? Just would be curious to your take on why you think the recent trend has been so much stronger.

Well, I think there's a series of things going on. I mean -- first off, I think, when we think kind of further out, these geopolitical events have had little to no impact on guests that are thinking 6 months down the road. They could impact more on what they're trying to do 3 to 6 months. They might be a little bit hesitant longer term, within 12 months when they're looking at airfare, right, because airfare is typically published within about a 12-month period of time. But that stuff is typically just noise. And I think we have seen time and time again now that our business is incredibly resilient. Our consumer is resilient. When things are happening around the world, I don't -- I think the term desensitized because I don't think people are looking to be desensitized or ignore what's happening. But I think that as things get resolved or moved into a different place, or maybe it becomes a little bit more of a new normal, they're then back and focused on what is critically important to them, and building memories and experiences with their friends and family are at the very highest of their priority list. And I think that's why we see a very resilient consumer across all of our brands, which are all different segments, obviously, that are out there. It might change a little bit about this year, I might instead go to this location versus that location. But again, this stuff is very much on the margin. There's very high demand for Europe, very high demand for the Caribbean and Alaska on our brands. And I think as long as we're delivering on what we -- what our guests expect us to be doing, they're willing to trust their vacation with us, which you see in the bookings on a volume and on a rate basis as we look at the build for 2027.

Your next question comes from Trey Bowers with Wells Fargo.

I actually wanted to pivot next kind of a bigger picture question. When one of your big competitors in River talks about that business, they talk about how important it is to drive the ocean business. And as you guys get closer to launching in Europe, just curious longer term, how you think the introduction of Celebrity River might impact the long-term pricing dynamics of the Celebrity ocean brand?

Sure. Well, first, I think when we think about River for Celebrity, obviously, we have high, high ambitions there. We have this incredible database or a set of customers that trust their vacation experience with us and have been seeking an elevated experience on River. And especially for our Celebrity customers, we're effectively miniaturizing an Edge-class ship and putting it on River. And that look and feel of the ship and the experience is what they're looking for. And now when you go deeper and you elevate that on land, where our guests -- where our goal is for our guests to be able to walk away with a story on these different locations, that drives a lot of just organic demand for us. And with that, we're seeing pricing that is higher than what we see in the competitive set for River. Now over time, we expect that all this will be great tailwinds to our yields for our Celebrity brand and for our other brands, again, as we get more and more reps in our ecosystem and our goal of this lifetime of vacations. And we're seeing that -- and I think it's in the early stages. We're seeing that today. We're seeing more repeat -- those repeat guests spend 20% to 25% more. And now for us to be able to offer them more -- another vacation experience that is typically not a substitute, it's an additional vacation, we feel very encouraged by that level of demand that we're seeing.

We also see a lot of interest from the Royal Caribbean guests for Celebrity River, which is really great news. I mean it's been very positive the response to this new product.

Your next question comes from Jamie Rollo with Morgan Stanley.

Could you please talk a little bit about where you are on maximizing per diems rather than pricing to fill? And should we expect load factor to soften a little in Q3 given the slowdown you noted? And also, might we expect booked load factors to soften over the next 6, 12 months if we continue to see this demand shift to later booking?

Sure. Well, I think first on the pricing side, Jamie, we -- every day, price integrity is very top of mind for us. And we're in generally a fortunate position where our guests appreciate the vacation experience we're offering and they're willing to consider moderate price increases that we have been putting out there. There are times, like we talked about geopolitically, that there are things that could be in play that we might not take that same level of load factor while maintaining price integrity. But for the most part, when we look at -- on a book load factor basis, and we've seen this very much so over the past, call it, 2 to 4 weeks or 3 to 4 weeks, is we see really high demand going out. So our load factor position, we're managing that to its optimal level, putting us in a position to be able to raise prices into the future.

Your next question comes from Xian Siew with BNP Paribas.

You talked about strength in close-in bookings in the quarter. And I was just wondering, is there anything you could point to in terms of what you're doing to help drive the close-in demand? I know you mentioned people are maybe just waiting closer to, but anything you're doing in particular to try and stay in front of that consumer? And then in terms of close-in bookings, is there anything we should think about in terms of maybe repeat guests versus new to cruise? Or is it kind of a similar mix as overall?

Yes. Well, I'll just start off on the latter. I mean there's definitely been an increase in the repeat cruise. So we're getting more reps out of our guests. And I think that helps in short- and long-term demand for our business. One of the things we commented in our remarks, because obviously, we're talking with our guests all the time, we have seen, I mean, really for the past 3 or 4 years, close-in demand coming in higher than we had expected it to, as we have made it a lot easier to book closer in than in the past. And our guests appreciate flexibility and optionality. And the flexibility is important because they're -- maybe they haven't decided whether they're going to go away in 2 weeks or 6 weeks or whatever it might be. And the ability for them to capture that from time to time because they're also dealing with very limited inventory is something that we continue to see elevate. So we like -- I mean -- and also the close-in demand. If you followed our business 10 years ago and before, we would typically have to discount for close-in demand. And today, for close-in demand, we're able to increase our pricing, so we're happy to harvest that.

That concludes our Q&A session. I will now turn the conference back over to Naftali Holtz, EVP, CFO, for any closing remarks.

Thank you all for your participation and interest. Blake will be available for any follow-ups. We wish you all a great day.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.