Royal Caribbean Banks on Favorable Market Demand Amid High Costs

Royal Caribbean Cruises Ltd. RCL is capitalizing on strong demand and robust booking trends, supported by strategic innovations and the launch of segment-leading new ships. The company has emphasized strategic investments in digital platforms, fleet expansion, private destinations and enhanced guest experiences — all of which have contributed to positive customer sentiment.

Other industry players that share space with RCL, including Carnival Corporation & plc CCL, Norwegian Cruise Line Holdings Ltd. NCLH and OneSpaWorld Holdings Limited OSW, are also benefiting from favorable market conditions and sustained demand for discretionary spending. The sector is currently experiencing heightened consumer enthusiasm, reflected in stronger booking patterns and a clear shift toward premium offerings.

However, Royal Caribbean’s prospects are somewhat hindered by the increased fuel costs and uncertain macroeconomic environment.

What Makes RCL Stock Attractive?

Robust Demand: Royal Caribbean continues to benefit from extraordinarily high demand. Since the last earnings report, bookings have increased, especially for close-in sailings, which reflects consumers' rising demand for leisure travel. In the second quarter, the company achieved a load factor of 110% — two percentage points higher than last year — driven by contributions from new ships as well as like-for-like improvements across existing itineraries, reinforcing the sustained strength of demand for its brands.

Additionally, onboard spending and pre-cruise purchases continue to outpace prior years, supported by strong digital channel performance. Consumer intent remains resilient, with 75% of travelers planning to maintain or increase leisure spending over the next year and more than half booking closer to departure. Younger demographics, particularly millennials and Gen Z — now comprising over half of the customer base — are increasingly choosing cruises for milestone celebrations, reinforcing sustained demand momentum.

New Ship Addition: Royal Caribbean’s expanding fleet continues to be a key growth driver. In the near term, the company will launch Celebrity Xcel in the fourth quarter of 2025, following the recent delivery of Star of the Seas.

Looking ahead, RCL maintains a robust pipeline of seven new ships scheduled for delivery through 2028, ensuring sustained momentum and moderate capacity growth. This includes Legend of the Seas in 2026, the Icon 4, the launch of the first Celebrity River cruise ship in 2027, and finally, the seventh Oasis 7 and the next-generation Celebrity Edge-class vessel Edge 6 in 2028. These new builds are designed to lead in innovation, elevate guest experiences and align with evolving customer preferences.

Strategic Expansion of Destination: Royal Caribbean is strategically expanding its portfolio of exclusive, high-yield destinations to elevate guest experiences and further differentiate its brand offerings. The company plans to launch its Bahamas-based Royal Beach Club in late 2025, followed by Royal Beach Club Cozumel in 2026 and the large-scale Perfect Day Mexico in 2027. In addition, Royal Caribbean has strengthened its destination footprint through the completed acquisition of the Port of Costa Maya and begun development. These prime, purpose-built destinations are designed to deliver consistent long-term returns, strong yields and exceptional guest appeal.

Factors Hindering Growth

High Costs & Expenses: Amid ongoing market uncertainties, Royal Caribbean continues to operate with an elevated cost structure, posing risks to profitability and future earnings growth. In the second quarter of 2025, net cruise costs excluding fuel increased 2.1% year over year. While this was below prior guidance — due to the deferral of certain expenses into the second half — the financial impact remains, merely postponed. Management has confirmed that approximately 230 basis points of cost growth in the third quarter will be driven by the timing of Star of the Seas delivery and the carryover of deferred second-quarter expenses.

Looking ahead, net cruise costs excluding fuel are expected to rise by 6% to 6.5% in the third quarter, with further inflationary pressure anticipated from investments in new private destinations such as Royal Beach Club Paradise Island and the recently acquired Costa Maya port. Additionally, the company projects full-year fuel expenses of $1.14 billion, adding to overall cost challenges.

A Brief Review of Other Players

Carnival Corporation: The company is benefiting from resilient travel demand, stronger booking trends, higher onboard spending, and disciplined cost management. Carnival is also prioritizing fleet optimization, new ship launches and targeted marketing investments to capture rising global demand. It surpassed its 2026 SEA Change financial targets 18 months ahead of schedule, with adjusted EBITDA per Average lower berth day (ALBD) growing 52% and adjusted return on invested capital (ROIC)  increasing more than 12.5% in less than two years.

Norwegian Cruise Line: The company’s prospects are supported by strong consumer demand, solid onboard spending and benefits realized from strategic growth initiatives. Bookings were strong across all three brands, driving advance ticket sales to a record $4 billion at the end of the second quarter of 2025. Also, the company's focus on fleet management strategy, including new ship additions and existing fleet enhancements, is encouraging for its long-term prospects. NCLH is investing in systems to support top-line growth.

OneSpaWorld: Strong customer demand, high onboard spending and the company's ongoing expansion of its health and wellness offerings are all contributing to its growth prospects. By extending medi-spa services, IV Therapy and Acupuncture, and next-generation treatments like Thermage FLX and CoolSculpting Elite, as well as by adding new cruise line partnerships and renewing important alliances, OSW expanded its fleet strategy and achieved over 20% growth in these areas. In the second quarter of 2025, revenues rose 7% year over year, and adjusted EBITDA was up 13% with continued strong and predictable cash flow generation.

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