Several weeks of softened demand for Mediterranean and Mexican Riviera cruises prompted Royal Caribbean Group to reduce the top end of its 2026 net yield forecast.
Net yield is now expected to grow between 2.3% and 3.3% this year rather than the 2.1% to 4.1% presented last quarter.
During Royal Caribbean Group's Q1 earnings call on Friday, CEO Jason Liberty said the Mediterranean is still looking "great," just not as strong as the company had anticipated before the Iran war, when demand for Europe cruises from North Americans was "off the charts." After several weeks of softened demand, bookings have since turned a corner, he said.
Cartel violence in Puerto Vallarta on Feb. 22 affected demand for Mexican Riviera cruises departing from California homeports.
Nevertheless, the company's first quarter featured a record Wave season. Net revenue was $4.5 billion, an 11% increase year over year. Net income was $950 million, up from $736 million a year earlier.
"The consumer backdrop remains healthy, and demand for our vacation experiences continues to be strong," Liberty said.
Onboard spending is "well above prior years," he added.
The company hedges about 59% of its fuel purchases, but increased fuel costs have been "the most notable impact from recent geopolitical events," said CFO Naftali Holtz.
It expects fuel prices to increase its costs this year by about 62 cents per share, Liberty said.
Guest loyalty rises
Repeat guests now represent 40% of Royal Caribbean Group bookings, up from what had historically been a third of bookings, Liberty said. Those guests tend to spend about 25% more than first-timers, he said.
Cross-brand bookings have "increased significantly" since the company introduced a cross-brand loyalty program structure, the CEO said. The program, Points Choice, launched for sailings departing on and after Jan. 30 and enables guests sailings with Royal Caribbean, Celebrity or Silversea to designate the loyalty points earned on a cruise to any of the three brands.
Regarding private destinations, Perfect Day Mexico is on track for a late 2027 opening and Royal Beach Club Cozumel is expected to open in early 2028, Liberty said.
The Icon of the Seas will homeport in Galveston beginning in August 2027.
Between the new destinations and the deployment of an Icon-class ship in Texas, the company expects to "own" the
Galveston market for Caribbean cruising, said Royal Caribbean International CEO Michael Bayley.
"The combination of the hardware, the brand and the destination, we believe, is going to be a massive accelerator for overall financial performance," he said.