Good morning. At this time, I would like to welcome everyone to the Royal Caribbean Group First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. I would now like to turn the conference over to Mr. Blake Vanier, Vice President

investor relations. The floor is yours. Good morning, everyone, and thank you for joining us today for our first quarter 2026 earnings call. Joining me here in Miami are Jason Liberty, our chairman and chief executive officer, Naftali Holtz, our chief financial officer, and Michael Bailey, president and CEO of the Royal Caribbean brand. Before we get started, I would 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 first 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 first quarter results that exceeded our expectations, along with a record wave season that reinforced the continued strength in demand for our leading vacation brands. Revenue grew 11% year over year. Earnings were 11% higher than guidance, and we returned $1.1 billion of capital through dividends and share buybacks. Our performance reflects consistently strong execution by our teams and the compelling value proposition and differentiated experiences our brands offer consumers who continue to prioritize experiences. The consumer backdrop remains healthy and demand for our vacation experiences continue to be strong. Across our portfolio, we see consistent engagement from guests, strong booking volumes, and onboard spending that remains well above prior years. Before diving into the first quarter results, I want to briefly touch on recent geopolitical developments starting with the Middle East. From an operational standpoint, two of our 2E cruise ships sailing in the Middle East region were directly impacted by the conflict and therefore had to temporarily pause operations. Both shifts have since safely repositioned out of the area and are heading to the Mediterranean, where they will welcome guests beginning in the middle of May.

The most notable financial impact from the Middle East conflict has been on fuel costs.

While we are approximately 60% hedged for 2026, fuel prices at current spot levels are expected to increase costs by roughly $0.62 per share this year. In addition to fuel, we saw a short-term moderation in demand trends for 2026 for high-yielding Mediterranean sailings, which modestly impacted our outlook for the upcoming summer season. The softer booking trends lasted for a few weeks, but we have now turned a corner and are experiencing improved demand for the limited inventory we have remaining for Q2 and Q3 sailings. Lastly, we experienced some disruption in demand for select West Coast Mexico itineraries driven by travel disruption concerns during the quarter. Demand trends for other products remain largely consistent with our expectations. Overall, our diversified portfolio and discipline operating model position us well to manage through these dynamics while remaining focused on delivering exceptional vacation experiences, accelerating growth, and executing our long-term strategy with conviction. We expect to drive another year of double-digit revenue and earnings growth,

supported by a strong book position, fortified balance sheet, and robust cash flow generation.

I want to thank our crew members and shoreside teams around the world. Their passion, focus, and commitment to our guests are the foundation of our success and continue to set our company apart. Now, turning to the results. We experienced another record wave season, highlighting the continued strong demand environment for our leading and trusted brands. Our book position is strong and remains within optimal prior yield ranges at record prices. During the quarter, we delivered over 2.5 million unforgettable vacations at industry-leading guest satisfaction scores. Revenue grew 11% year-over-year, and net yields grew 2%. Cost came in very favorably, and we saw better than expected performance from our joint ventures. As a result, adjusted earnings per share was 37 cents higher than our guidance. These results reflect the continued appeal of our vacation experiences, diversified portfolio, and discipline execution. Natali will elaborate on Q1 results shortly. We closely monitor consumer behavior through millions of daily interactions on our commercial platform and with 170,000-plus guests on our ships every day. What we see is a consistently engaged consumer who prioritizes vacations and seeks quality, variety, and value, which is exactly what we deliver. Based on our most recent research, our consumers remain very healthy, supported by excess cash, strong employment trends, and a continued preference for consuming experiences over purchasing things. Travel remains a top priority, ranking as the number one leisure category where consumers intend to spend more. 31% of consumers say traveling more is a top priority for the next year, ranking behind only physical health and finances. Our vacation offer, compelling value, flexibility, and choice relative to alternatives. This continues to be reflected in the level of interest and engagement we see across our brands and the continued strength in onboard spending.

Now let me provide an updated outlook for 2026.

Revenue is expected to grow roughly double digits year over year, and net yield is expected to grow 1.5% to 2.5%. We continue to expect yield growth across our key products, including the Caribbean. As we enter the year, we saw strong demand for Europe, which are high-yielding itineraries, and that strength was embedded in the outlook we provided in January. Due to the geopolitical events affecting itineraries in the Mediterranean and the west coast of Mexico, we've adjusted our full-year net yield expectations. Our overall outlook for the itineraries remains largely aligned with our January guidance. We also remain committed to enhancing margins through rigorous cost discipline, continuously identifying efficiencies across operations by prioritizing spend and utilizing technology and AI without compromising the quality of the guest experience. We are expecting another year of strong earnings growth and cash flow generation. Full-year adjusted earnings per share is expected to grow double digits and be in the range of $17.10 to $17.50. This includes $0.74 per share from fuel headwinds, as well as lower income from joint ventures. We are also on track on our Perfective Performance Program, targeting a 20% compound annual growth rate in adjusted earnings per share through 2027 and a ROIC in the high teens.

Our large-scale leading margin profile and strong cash flow generation

allow us to continue advancing strategic investments into our future while enhancing growth with capital return through competitive dividends and opportunistic share repurchases. Our vacation ecosystem integrates the best brands and ships, unique destination experiences, and technology platforms wrapped around a loyalty program that connects it all. I want to spend a moment on how technology and AI are shaping the way we operate and how guests experience our vacations. Disruptive technology and AI have been embedded in our business for years, particularly in the area that require complex, real-time decision-making at scale. As these technologies advance rapidly, we are continually discovering new ways to accelerate their integration throughout our ecosystem, making it easier for us to deliver amazing experiences and for guests to keep vacationing with us. Across our digital booking channels, guest engagement has undergone a fundamental shift since 2019. Digital penetration of bookings has more than doubled over that period, with most of that growth coming through our app. Monthly active users for the app are five times higher than 2019 levels, with adoption over 90%, confirming mobile as a way guests increasingly plan and manage their vacation. Today, more than half of onboard revenue is booked before guests ever step onboard, with the vast majority of those purchases made digitally. Guests are engaging earlier, planning more intentionally, and personalizing their vacations in ways that were simply not possible a few years ago.

Our focus is on a unified intelligence layer

that delivers seamless, relevant experiences and supports meaningful enhancements throughout the vacation journey from dreaming and booking to onboard experiences and service to post-cruise engagement. What differentiates us in this space is not access to tools, but the combination of a deep understanding of our guests, a fully integrated digital ecosystem, the ability to deploy these capabilities across a multi-day end-to-end vacation experience, and the commitment to excellence and innovation. Our ships are floating cities where we design and operate every guest touchpoint across numerous activities for a prolonged vacation period. That level of integration creates conditions where disruptive technology and AI enhance our moat in ways that are very difficult to replicate. We are deploying these capabilities in a disciplined manner, measuring performance, reacting to guest feedback, and then scaling what works. We are in the early innings, and as we develop the capabilities further, it reinforces a flywheel that compounds over time. We also continue to make meaningful progress in other strategic initiatives. Our loyalty program is designed to better recognize and reward our guests, driving higher engagement, increased frequency, and repeat travel. Since launching initiatives to drive cross-brand awareness in 2023, including our Industry First Status Match Program in 2024, which allows guests to enjoy equivalent status across our brands, cross-brand bookings have increased significantly, reinforcing the strength of our connected ecosystem. We recently launched our new Royal One co-branded credit cards, which further expand and strengthen our loyalty ecosystem, building our recent enhancements like points choice and status match. The Royal One credit card is the most powerful way for our guests to earn rewards across our brands, allowing them to accumulate points faster and to redeem those points seamlessly across our ecosystem. Since 2019, cardholder accounts more than doubled, and as we continue to enhance the value proposition and deepen integration across brands, we believe there's an opportunity to double it again. We also recently announced orders for ICON 6 and ICON 7, reflecting the success of the ICON platform and our confidence in its ability to consistently deliver industry-leading guest experiences and returns. We continue to innovate the ICON series to maintain high satisfaction scores and superior economics. Following the launch of Royal Beach Club Paradise Island last year, we recently opened the Royal Beach Club Santorini. Demand for the Beach Club has been very strong. Developed with local stakeholders, it's the centerpiece of our ultimate Santorini day, offering guests an elevated way to experience the island. We are also advancing the Royal Beach Club in Cozumel, now expected to open in early 2028, and are actively progressing Perfect Day Mexico and Costa Maya, expected to open in late 2027 and ramp up in early 2028. Together, these initiatives are differentiating our experiences and are nicely accretive to yield growth. Finally, the upcoming delivery of Legend of the Seas, our third Icon Class Ship, is another exciting opportunity for us. Consumer receptivity is remarkable. It is in a very strong book position with prices higher than those that we saw for Icon and Star. In summary, demand for our brands continues to be very strong, and we expect another year of double-digit revenue and earnings growth. We are executing decisively key initiatives as we look to win a greater share of the large and growing vacation market. With that, I will turn it over to Naf Tali.

Thank you, Jason, and good morning, everyone. I will start by reviewing first quarter results. Adjusted earnings per share were $3.60, $0.37 higher than the midpoint of our guidance, and 33% higher compared to last year. The outperformance was driven by better-than-expected revenue, lower costs, and better performance from our joint ventures. In the first quarter, we delivered 12% more vacations than last year. Notably, we observed an increase in the number of young guests, mainly millennials and younger demographics, as well as an increase in repeat guests compared to the previous year. We finished the quarter with net yield growth of 2%, which was above the high end of our guidance range. Yield performance was supported by all key itineraries and improvements in gross margin. Net cruise costs, excluding fuel, performed better than expected, driven primarily by continued cost discipline as we find more efficient ways to deliver the vacation experience without compromising the product. Adjusted EBITDA was approximately $1.7 billion, representing an EBITDA margin of 38%, an increase of more than 300 basis points year over year. Operating cash was $1.8 billion, an increase of 13%. As Jason mentioned, we had a record wave season, and our booked load factor is within historical ranges and at record APDs, reflecting strong demand for our vacation experiences and a healthy consumer. The Caribbean represents 57% of our deployment this year and 50% of capacity in the second quarter. Caribbean yields are expected to be positive for the year, even with elevated industry capacity, reflecting the continued strength of demand and the differentiation of our product. Our competitive position in the region is further supported by our industry-leading hardware and destinations, including the introduction of Legend of the Seas into the Caribbean in November following its redeployment from Europe, Europe, as well as the continued benefit from the new Royal Beach Club at Paradise Island. Europe will account for 14% of capacity for the year and 18% of capacity in the second quarter. Bookings for the high-yielding Mediterranean itineraries, which began the year on an exceptionally strong trajectory, moderated following recent geopolitical developments late in the first quarter, partially driven by increased air travel costs, airline capacity reductions, and flight disruptions. These factors mainly affect the second and third quarters when these high-yielding itineraries represent a larger share of deployment. In recent weeks, bookings for Mediterranean itineraries have been rebounding. Bookings for West Coast of Mexico itineraries, which represent 5% of capacity, also moderated during the quarter reflecting geopolitical related considerations specific to that region. Lastly, Alaska is expected to account for 5% of total capacity and 9% in the second quarter. Now, let me talk about our guidance for 2026. Our proven formula for success, moderate capacity growth, moderate yield growth, and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation this year. Capacity is expected to grow 6.7% for the year, with first and third quarters growing at a higher rate than the second and the fourth. Net yield is expected to grow one and a half to two and a half percent. Our yield guidance compared to January is influenced by recent region-specific geopolitical developments affecting the Mediterranean and west coast of Mexico, which are mostly pronounced for the second and third quarters. Otherwise, expectations for the rest of the portfolio remain similar to January. As Jason noted, we continue to see very engaged consumer, which supports strong quality demand for both ticket and onboard. Furthermore, we have been investing in enhancing our commercial capabilities to remove friction and enable guests to book the best experiences for the vacation needs. As a result, we continue to see over 70% penetration in our pre-cruise booking engines with over five items purchased per booking and a year-over-year increase in spend per night. For the full year, net cruise costs, excluding fuel, are expected to be approximately flat, or 50 basis points better than our prior guidance, reflecting ongoing efficiency improvements and prudent cost management without impacting the gas experience. While we manage our costs more on an annual basis, the cadence of our cost growth varies throughout the year. As I mentioned on our last call, the first half cost growth is expected to be higher than the second half, driven mainly by timing of dry docks and other year-over-year comparison factors. The most notable impact from recent geopolitical events is on our fuel costs. We expect fuel expense to be $1.35 billion for the year, and our forward consumption for the remainder of 2026 is 59% hedged at significantly below market rates. Our guidance is based on spot rates, as we always do. However, fuel expense would be approximately 4% lower if rates were based on the forward curve. Based on current fuel prices, currency exchange rates, and interest expense, we expect adjusted earnings per share between $17.10 and $17.50. Our earnings guidance includes a $0.62 headwind from fuel rates for the remaining of the year, as well as a $0.12 headwind from lower expected earnings contribution from TUI Cruises. We expect to continue to increase cash flow generation, allowing us to grow margins, continue investing in our strategic initiatives, maintaining solid investment-grade balance sheet metrics, and expanding capital return to shareholders. Now, I will discuss our second quarter guidance. In the second quarter, capacity will be up 4.9% year-over-year. Net yields are expected to be up approximately 0.2% in constant currency. Year-over-year comparison elements including increased dry dock days and impact from geopolitical events contribute almost 200 basis point headwind to yields in the quarter. We also expect a similar impact from these factors on third quarter yields. Net cruise costs excluding fuel are expected to be up in the range of 4.6 to 5.1 in constant currency. This quarter has almost 400 basis points of cost headwinds related to additional dry dock days and year-over-year comparisons, as well as increased costs, mostly related to crew travel, resulting from air travel disruption and reduced capacity. Taking all this into account, we expect adjusted earnings per share for the quarter to be $3.83 to $3.93. Earnings are impacted by almost $1 from the items I just mentioned for the quarter, including lower earnings contribution from 2D Cruises. Turning to our balance sheet, we ended the quarter with $6.9 billion in liquidity and leveraged below three times, consisted with our goal of solid investment grade metrics. During the quarter, we accessed the capital markets through a $2.5 billion investment-grade bond offering. The transaction was well-received and was significantly oversubscribed, reflecting continued strong institutional demand and confidence in our credit. Net proceeds were used to refinance existing indebtedness, including near-term maturities. Also during the quarter, we've repurchased 2.9 million shares for a total of $836 million. This reflects our strong financial position and commitment to capital allocation priorities where we continue to invest in growth while also returning capital to shareholders. We have $1 billion remaining under our current 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.

We will now begin the question and answer session. If you would like to ask a question, press star then the number 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from Steve Wyszynski with Stiefel. Your line is open.

Good morning, and thanks for all the colors so far. So, Jason, as we think about the rest of the year, we obviously have your second quarter yield guidance, and I have to assume based on Nof's comments that your third quarter yields are going to look somewhat similar to your second quarter, given the exposure you have to Europe. So, you know, then if that's true, that would imply your fourth quarter yields are going to be growing, you know, let's call it somewhere in that mid single digit range to kind of get you into that 2%, you know, midpoint.

So, you know, wondering what gives you the confidence the fourth quarter could grow that much.

And I guess then that actually to me would imply that without the European headwinds you guys encountered, you know, you guys would have actually been able to raise your full year yield guidance. Am I kind of thinking about that all the right way?

Yes, Steve. Well, first, thanks for the question, and hello to everybody. But I think that's exactly the way to think about it. So the year is a little bit of a smiley face in terms of yield, and that's really impacted, as we said, by our commentary on the Mediterranean, and to a lesser extent, the deployment to the west coast of Mexico. If you kind of like just kind of zoom out in the beginning of the year, demand from North Americans to go to Europe was really kind of off the charts, which is very much taken into our guidance. And so when the activities started to occur in the Middle East, you saw some level of moderation in demand for the Mediterranean. And when you think about it through the course of the year, you know, we're obviously more pronounced with those itineraries in Q2 and Q3 and very little in Q4. And so as it points to all of our products are doing very well. But by the way, Europe is doing well. It's just that it's less than what we had anticipated while the other ones are doing well. And so, when you look at, one, our book position in Q4, which, of course, has less of the MED product, but is in a very strong book position at very strong rates. You look at the comps with Legend, and we have an E0 comp in Q4. That's why we feel, you know, very good about the fourth quarter of this year. And, by the way, we feel good about Q2 and Q3. It's just that, you know, we did see that moderation, and we have – and fortunately, that has now turned the corner over the past several weeks. But we have, you know, just less inventory to sell to be able to take that price.

Next question comes from Matthew Boss with J.P. Morgan. Your line is open.

Great, thanks. So, Jason, maybe if we take a step back. So despite geopolitical developments and the elevated industry capacity in the Caribbean, your yield guide at the high end this year stands at two and a half constant currency. So maybe could you speak to the drivers of durable growth multi-year, which seem intact here, regardless of the macro, and just how you see the company set up today relative to pre-pandemic?

Sure. Well, first, I just want to just touch on the capacity in the Caribbean. You know, that has been, I think, much more of an outside looking in observation or concern than it actually has been for our company. The reality of it is, you know, we own the Caribbean, especially the Royal Brand owns the Caribbean. We have, you know, the best assets in the world in the Caribbean. And of course, we have Perfect Day. Now we have the Royal Beach Club. And all those in those islands also attract an elevated amount of demand and people's willingness to pay more to have those those elevated experiences. And so I think when we when we look at our business, our brands are positioned in and we think the perfect segments for them. They are the leaders in those segments. They're supported by these great ships and they are they are supported by these destinations in which we continue to add on to. So I think we're positioned very well, and I think that our expectation is, you know, we'll continue to generate high-quality demand. And one of those points on high-quality demand, which I commented in my script, is we're getting more and more repeat customers inside of our ecosystem. So, you know, at this point, about 40% of our customers are coming from our current customer base. And historically, that was a third, a third, a third. And so I think that's a reflection of all the things that we're doing around loyalty, all the investments we've made on AI and other technology that helps curate and engage with our guests are highly effective. And, of course, the tools that we have around pricing, et cetera, allows us to kind of meet our guests where they're looking to go and also what they're willing to pay. And that is creating more and more reps and more and more high-quality demand, you know, for us. And I think, you know, we say this all the time, you know, the leisure marketplace is, you know, $2.1, $2.2 trillion. This industry is a very small sliver, but this industry today is a core vacation experience. It's core to people's vacation considerations. It's no longer kind of a, well, let me consider a cruise. Cruise is very mainstream. And I think that's why, you know, you're seeing a lot of durability in demand for cruise. And you couple that with the reality that we still traded about a 15% plus discount to land-based vacation also kind of helps inflate us around some of this noise.

Your next question comes from Brant Montour with Barclays. Your line is open.

Great. Great. Thanks for taking my question. I just wanted to circle back on the third quarter and the med, and just maybe if you could put a bit of a finer point on it. How much do you have left to book at this point in the year? How much damage do you think was done over the last few weeks? And what are you sort of baking into your forward guidance in terms of how the conflict plays out and how bookings play out from here yeah well well well Matt when I

first start off is I don't think I would describe the book we had a record wave period so I wouldn't describe it as damage I would probably describe it as you know the booking trends that we saw for the Mediterranean you know in the in the early in the early parts of wave and when we gave guidance and even to the point where you know we of course we we put all that into the 10k all of our knowledge, was just at levels that we had not seen before. And it moderated as we got out of the month of February with the activity happening in the Middle East, driven by really two things. One of it was people's concern about vacation disruption, but more importantly is the cost of air went up by more than 40%. It's now moderated down to like 15%. And so it was getting to a point where, you know, cost of a flight was more than the cruise. But that, you know, that kind of settled out. And, of course, you know, we did have to, you know, to address that demand. But where we sit there today, you know, we're at the end of April. There's very little inventory left to sell for the quarter, and there's still very little inventory to sell for the third quarter. But, you know, of course, we are continuing to actively manage this environment. And if we, you know, we see things continue to accelerate, you know, that could be, you know, a positive light for, you know, this quarter and Q3.

Your next question comes from James Hardiman with Citi. Your line is open.

Hey, good morning. Thanks for taking my questions. So I wanted to sort of zoom in on the idea that we're turning the corner. Obviously, you know, the weeks following the initial geopolitical disruption were probably the worst. But maybe some indication of where we stand today in terms of the booking trajectory versus where we were in February before a lot of this started. I don't know if we're fully back or we're just heading in that direction. And then as we think about sort of the 2Q and 3Q, we're saying that's most pronounced. I'm just curious if that's because those are what's next or whether consumers are comfortable booking beyond the third quarter and into 2027, assuming that, you know, this disruption will go away or we'll sort of worry about that when we get to that point in time.

Yeah, sure. So, James, just so we're clear on tenses, we are not turning the corner, we have turned the corner. Now, you know, I don't know what, you know, there's always, you know, statements that can be made and that can change the hearts and minds of the consumer, but the moderation that we saw has turned. It's just that we have limited inventory that's in place. We do not see this at all showing up next year in people's booking behaviors. And, of course, we have guests that are starting to book next year, you know, clearly. And we're talking about a specific product. And so our commentary around, you know, the Caribbean and other products, you should hear as is very good. And you should hear that bookings for Europe are very good. They are just a little bit less than we had anticipated when we started the year based off of high-quality demand and really strong pricing.

And, James, just one other thing on, you know, we used the word moderation because that's what we saw. We didn't see a dip and then it's a return. It wasn't a very strong trajectory. And even, you know, following that, we saw that there's no potential to even accelerate. And so there was a moderation. At any time, the bookings were still good.

Your next question comes from Lizzie Dove with Goldman Sachs. Your line is open.

Hi, good morning. Thanks for taking the question. I was wondering if you could maybe give us a refresh on Perfect Day Mexico. You mentioned it's opening late 2027, ramping 28. Could you maybe share some more details on the cadence of that ramp and then, you know, just bigger picture, your latest thinking around the long-term, you know, structural yield growth opportunity there in the western caribbean market and particularly around you know the galveston texas penetration opportunity hi lizzie i'll talk a little

bit about um construction and cadence um obviously we are incredibly excited with perfect day mexico we have a lot of support for the project from um from the government in mexico and the project is proceeding. We obviously have announced, I think we've said that we'll be having a soft opening in Q4 27. As we move into 28, we'll be fully opening the whole experience, which is in many ways very similar to often how we open up big attractions or big events or new ships, for example. So the project's generally on track and its impact in terms of the region, particularly out of galveston and particularly as it relates to the texas and the regional market is is we believe incredibly significant we literally will have the biggest best most attractive destination experience for that whole gulf region and if you look at the opportunity that exists in texas it's a market which is much larger than florida and its penetration rate is much lower than florida So we're expecting to, I guess I'm going to use this word, we're expecting to own the Texas market as it relates to cruising into the Caribbean and Perfect Day Mexico combined with Royal Beach Club and Cozumel will be the centerpiece of that combined with, of course, our icon class ship. So the combination of the hardware, the brand, and the destination, we believe is going to be a massive accelerator for overall financial performance for the business. So we're very excited about that. The project is really exciting. I mean, I think what we've got planned is epic in its nature. It's really going to be a stunning experience. So we're very much looking forward to bringing that alive over the coming couple of years. We did have some issues, I think it was reported, there were little blips in the radar as it relates to environmental issues that have now been resolved, and all of that is now behind us, so we're continuing on track.

The only last point I just want to add on it, because we are super excited about it, but I always think it's an important point to make. The pictures and the videos you've seen of it, that is what it's going to look like. So we will very much live up, hopefully maybe even exceed all the incredible marketing around it. So we're very excited. And as Michael said, it's owning the Texas market. It's also increasing a catchment area for the drivable market. And it's also going to unlock, we think, more potential in the west, really kind of west of the Mississippi, as the cost to get to Houston and so forth is less than other parts of the country. So we're super excited about it, and it's not that far away.

Your next question comes from Robin Farley with UBS. Your line is open.

Thanks. I had a question on yields, but also just a quick follow-up. Michael's comment may have just answered it, but it sounded like Mexico. there had been a little bit of a pause in construction because that environmental stuff so just want to clarify if michael's comment means that construction is you know resumed in mexico there um yes and then great thank you thank you and then the um the other question was just sort of thinking about next year and um you know if it's the 200 basis points and back to q2 two three sounds like you know the entire 100 basis point change is um is maybe a mid single digit sort of shift in where you had expected um european yields to come to come in this year um is it fair to assume that you would kind of fully expect that to come back in 2027 when we're kind of thinking ahead to you know um the impact this year being kind of um you know not necessarily um coming out of next year just help us to size that thank you yeah i i you know the the comment

about the the european one is is um you know there are other things that were already known around um some of the structural aspects of it right so um there was just more because of the geopolitical but the bottom line is that you're right this this is for this year we don't see those issues for next year and we see also the bookings as jason mentioned are strong for next year we don't see the consumers uh being impacted that it's really a near term for

Q4 right now for Q2 and Q3. Your next question comes from Zan Su with BNP Paribas. Your line

is open. Hi, guys. Thanks for the question. You talked about the co-branded credit card and several changes to the loyalty program and also how repeat guests are kind of wondering what do you think is kind of the implications of that in terms of how they could impact net yield growth, maybe repeat guests are booking further ahead, maybe they spend more on onboard, to kind of any learnings on how, you know, higher repeat penetration could be a benefit and where repeat go. Thank you.

Yeah, sure. Thanks, Anne, for the question. Yeah, so first off, I think we should, you know, when we look at our repeat guests, one, you know, they tend to sell on us more often. That's not a surprise. But they also tend to spend about 25% more than New to Cruise or First to Brand. The NudaCruz index is a little bit higher when you get because of the short product. And that has introduced very high-yielding NudaCruz consumers for us. But effectively, what we are trying to do, and it kind of goes to the saying that we've said, is to go from a vacation of a lifetime to a lifetime of vacations. And so we're trying, that's a reason why we're getting into River, is we effectively want to use this platform of ours that our guests love and our guests trust to keep them inside of our ecosystem. And so when you look at things, whether it's the points choice or whether it's the ability for our guests to sail on any of our brands and get recognized and get their points associated with that, or now you're having a co-branded card that now covers all three of our brands, it's effectively things to continue to incentivize and recognize our guests to stay inside that. And then we look for making sure we have the experiences that they're looking for and that we're elevating the experiences and we're bringing new experiences like River online so that they continue to travel with us. And that unlocks your great lifetime value of the customer. It makes us more efficient because it helps leverage ultimately our platform. At the same time, we also need to make sure we have the tools so that we're going to market and we're connecting with them in the way that they want to. And that's why we have significantly evolved our digital capabilities. Our guests are able to see where they are in their loyalty journey. Our guests are able to engage with us at any point in their dreaming or their vacation journey. And all these things kind of come together to have this kind of commercial apparatus and ecosystem to ultimately get more and more of our

guests are repping inside of our ecosystem and maybe just to add one more thing if you kind of put everything that jason just said together it's really for us looking at the customer lifetime value right and so in addition for them having more frequency with us shortened duration between the cruises higher spend lower acquisition cost is also another way to do it and we believe we we'll also be able to serve them better because we know them better and, you know, we make sure that we tailor the vacation they need with all the tools we have. So it's kind of all cut part

together of the customer lifetime value. Your next question comes from Kevin Koppelman with

TD Cowan. Your line is open. Great. Thanks a lot. I had a question on North American customers and and higher airfares can you talk at all you know have you seen um any any consumer behavior change at all kind of reacting to the higher airfares in north america for your north america itineraries and uh how do you see consumers ability to kind of swallow those airfare increases as they're

getting to ports as the year goes on thanks hi kevin uh we've seen you know there's a slight impact, obviously, because when the airfares go up, it does have an impact. The great thing is, is we've got a phenomenal global infrastructure. So, for example, if you look at the European product and itineraries, when airfare goes up or it spikes, and as Jason mentioned, it kind of spiked up and then it started to fall back down again, then what we see is we see an increase in European customers booking if there's a slight decrease in US, North American customers, which really does moderate itself out as the situation calms down. So I think that the benefit of our infrastructure, our global infrastructure from a sales and marketing perspective and brand presence has been really quite effective and always has been in these times when we see, you know, fluctuating air costs.

Yeah, and just to – I think one thing I just want to add is, you know, the North American consumer as we see it And as we commented in our remarks, is very strong, at least for our customers in terms of where their balance sheets are, where their level of employment is, their balance sheets, et cetera. And their propensity to vacation and their propensity to cruise with us is really, I mean, at the highest levels that we have seen in the past. What can create, you know, outside of the comments we made about U.S. consumers maybe getting a little bit concerned about flight costs to Europe, which have now settled down, what was actually probably impacting them more domestically was just friction in the travel experience, right? And so it was the long lines at the airports and so forth. People will go through, well, can I just drive there or maybe wait until this kind of settles down, which can sometimes impact some of the close-in business. Fortunately, as you can see in our first quarter results, while we saw some of that, but we also saw the consumer breakthrough on that. And we saw a little bit more of our drivable markets kind of lift up.

Your next question comes from Andrew DeDoro with Bank of America. Your line is open.

Hi, good morning, everyone. One, how do you think of rolling in new hedges in this high fuel environment? And then second, just on unit costs, you continue to do a really nice job here. I guess my question is, at what level of capacity growth would we start to see maybe more inflationary type NCCX fuel growth and say, I don't know, 2% to 3% range? Just curious your thoughts up there. Thank you.

So, first on fuel, as I mentioned, we did see higher fuel costs, obviously not surprising. And the way we manage our hedging program, and we are hedged 60% for the year, we're hedged literally less than 50% already at pre-conflict prices for next year and 25 roughly for 28. So we continue to methodically add hedges and make sure that we manage volatility through the course of a longer period of time. So we'll continue to observe. We feel very good where we are, and we'll continue to observe that and add where it makes sense. So that's on the fuel side. On the cost side, we subscribe to our formula. So we say our formula is moderate capacity growth, moderate yield growth, strong cost control. And so we subscribe to that formula and we want to maintain a spread between our yield growth and our cost growth. And our focus is to make sure that first that we deliver the best vacation experiences. So we are very maniacal about making sure that we don't touch the guest experience and actually enhancing that. And with that also comes yield growth, et cetera. So we're doing that. And then at the same time, we always find ways to do things better. And technology today helps us a lot. And so it could be through a supply chain, as an example, or other areas that we can just achieve more with these tools. And so we're utilizing those tools. And that obviously comes to the benefit of the cost. So, you know, that's kind of how we manage the business.

Yeah, and, Andrew, one other point I just want to make is that, I mean, at least like, you know, talking for the Royal Caribbean group, you know, our business is growing in perpetuity. So, you know, we're adding a ship or two, you know, every single year for the foreseeable future. And so, I think the combination of the technology that Naf talked about, which is, you know, pervasive and the opportunities are always existing, but it's also just, you know, our responsibility to embrace, you know, as our business scales. And when you have that capacity growth coming in, you know, there's always going to be a little bit of some headwinds on it when you're introducing new destinations, as an example. but because there's no APCDs associated with it. But for the most part, you know, we look at that as, you know, and our groups challenge themselves on how do we scale our

groups as capacity grows. Your next question comes from Sharon Zakvia with William Blair.

Your line is open. Hi, thanks for taking the question. I guess I wanted to follow up on cost. Are you making any itinerary changes given higher fuel, either currently or looking out to 27, 28? And then obviously net cruise costs are coming in a bit lower. Is there anything you've pulled back on this year in terms of initiatives or spend that we should think of as deferring to 27? Or is this just harvesting some of those efficiencies that you just referred to?

Yeah, so let me be very clear. When we talk about guest experience, itineraries are the key. key part of it? And so the answer is absolutely not. We have great ship experiences, we have amazing destinations, and we want to maintain that quality of the experience. So the answer is we have not modified anything because of higher fuel costs. We always do, right? I mean, this is not new, but we always try to find other ways to investments into energy efficiency, just better utilization of technology for how we use fuel. But that's not impacting the guest experience. And your second question was about deferment, and the answer is no as well. As I said, all the things that we're doing is we're finding better ways in a sustained way, because then that's not really improving costs. This is just deferring. So we're finding sustained ways to operate the business more efficiently while, again, ensuring that the guest experience remains

Your next question comes from Vince Sapil with Cleveland Research. Your line is open.

I just wanted to dig a little bit more into yield outlook for the year. Maybe comment on how you think new hardware, you have Star, Excel contribution, Paradise Island, RBC Santorini, a lot of exciting new products out there, how they might be contributing to the yield growth overall versus the like-for-like impact. And then also on a regional basis, I think you had mentioned or used the term that Europe was doing well, I think was the quote. Is it fair to assume that Europe yields will grow this year, or kind of what does the guide assume?

I just want to, on the Europe question again, Europe is going to do very well this year. It is just less well than we had anticipated it was going to do a few months ago. And when answering, you know, like what's driving yield, the answer is it's all of it. Whether it's like for like, whether it's, you know, you're having a more of a year of star, you know, legend is coming on. It's the ramping up because we're still very much in the, you know, we ramp up these destinations very thoughtfully to make sure that the guest experience is at the very highest level. And so the answer is all of it is going well. And there is, again, the one-time realities of the med doing a little bit less well than we had anticipated, but still great. There is the realities that the West Coast of Mexico had some hiccups. We generally think that is also a one-time situation, which provides for great tailwinds into 2027.

that concludes our Q&A session I will now turn the conference back over to Naftali Holt CFO for closing remarks we thank you all for your participation and

interest in the company Blake will be available for any follow-ups we wish you

all a great day this concludes today's call thank you for attending you may now disconnect and have a wonderful rest of your day