Royal Caribbean ‘s decision to launch river cruises may not have a huge effect on the cruise line’s bottom line, but it surely continues to be a sensible move that might be disruptive to the industry, in line with several Wall Street analysts. The corporate announced Tuesday it has ordered 10 ships for its latest river cruise segment, launching in Europe. The primary Celebrity cruises are expected to set sail in 2027 and the corporate will begin taking bookings this 12 months. The expansion news got here at the identical time Royal Caribbean posted an earnings beat for its fourth quarter . “We have now really positioned ourselves from moving from a vacation of a lifetime to a lifetime of vacation — and river suits very well inside that,” CEO Jason Liberty said on CNBC’s ” Money Movers ” Tuesday. RCL 1Y mountain Royal Caribbean The move comes at a time when the cruise lines have been experiencing increased demand. The industry was the last to recuperate from the Covid pandemic, but once it did, it has been having fun with strong pricing and booking momentum. Also they are are seen as a less expensive alternative to land-based vacations, in addition to a play on the aging population — since older generations prefer to spend their money on leisure activities, like cruising. Growing the ecosystem Wells Fargo estimates 10 river ships could add about $75 million to the cruise line’s earnings before interest, taxes, depreciation and amortization — or 1% of its total. That makes it seem more like a complementary offering than a “needle mover,” said analyst Daniel Politzer, who has an chubby rating on the stock. He raised his price goal to $297, implying about 11% upside from Friday’s close. Still, the addition could have big implications for Royal Caribbean — and the cruise industry, some analysts argued. “River will at all times be a small contributor to revenue for RCL, but that is probably not the purpose,” said Barclays analyst Brandt Montour in a note Tuesday. “RCL sees River as a crucial addition to its customer offering and subsequently its broader customer ecosystem, which adds to its already growing network effect.” Royal Caribbean has about 8 million to 9 million guests a 12 months and about half of them are focused on river cruises, said CEO Liberty. The brand new cruises will allow the corporate to be sure they stay contained in the Royal Caribbean brand, he said. “They do not have a look at it as an alternative to ocean cruising,” Liberty said. “They appear at it as an extra vacation.” The river cruises have the same margin and return profile as Royal Caribbean’s ocean voyages at scale, he noted. Goldman Sachs called the chance “compelling” and sees it as an “an initial level in RCL’s technique to take a bigger share of the holiday ecosystem (together with private islands, beach clubs and latest hardware).” The brand new enterprise must also not preclude any buybacks given the low capital expenditure outlay, the firm’s analyst Lizzie Dove wrote in a note Tuesday. “The river business is anticipated to have a better return profile than Ocean, because the ships are estimated to hold ~180 passengers and can only cost ~30mn per ship or ~$300mn total on our estimates,” she said. Dove, who rates the stock a buy, raised her price goal to $305, suggesting more than14% upside from Friday’s close. Analysts also see the potential for disruption as Royal Caribbean launches and eventually expands its river cruise offerings. “To us, RCL’s commentary was particularly confident and aggressive around not only going after meaningful market share, but bringing a higher-end, modern product that sounded to us as if it can be disruptive enough to change the competitive landscape throughout the River market,” Barclays’ Montour said. Royal Caribbean’s river cruises are expected to serve the same demographic to its ocean brand and supply an experience commensurate with Celebrity’s premium positioning, he said. Montour, who has a buy rating on the stock, boosted his price goal to $308. That means 16.5% upside from Friday’s close. Impact on Viking Goldman sees Royal Caribbean’s foray into European river cruises as a key overhang to competitor Viking . “RCL’s scale just isn’t to be underestimated, with > 8.5 million passengers per 12 months to cross-sell into Celebrity river cruises (vs. VIK’s annual passengers of < 700k)," said Dove, who has a neutral rating on Viking. However, Bank of America said there are still a lot of unknowns about Royal Caribbean's offerings. "There are many things we don't know about RCL's river business such as ship size, where they have docking rights, how many ships they plan for Europe, and the specific product offerings," analyst Andrew Didora wrote in a Thursday note. "What we do know is there is a massive addressable market of baby boomers (110M people in the US > 55 years old by 2030 with net price over $1M), and Viking likely carried lower than 700,000 passengers this 12 months,” he added. Didora is maintaining his buy rating on Viking and neutral rating on RCL, given the latter’s valuation. Royal Caribbean’s stock has already gained nearly 16% to date this 12 months, after moving 78% higher in 2024 and rallying 162% in 2023.
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