Royal Caribbean stock is a buy despite tariffs, possible recession

Royal Caribbean has been on an impressive run since it turned the corner after its 2021 Covid comeback. It took some time to get back to pre-pandemic booking levels, but the cruise line has exceeded its 1999 levels and seems incredibly well-positioned to grow going forward.

Currently, nearly all Royal Caribbean and Celebrity Cruises are sailing at 100% or greater capacity. Pricing remains incredibly high for the new Icon of the Seas, while its sister ship, Star of the Seas, will sail from Port Canaveral this summer, with similarly high advance demand.

Related: Royal Caribbean now enforcing a rarely charged fee

The cruise line has also been using its newest ship, Utopia of the Seas, to sail short 3-4 day sailings out of Port Canaveral and will move another newer ship, Wonder of the Seas, to those same itineraries out of Miami.

Using top-tier hardware for short sailings was a controversial choice, but it has driven new cruisers to sea. Those passengers are seeing Royal Caribbean's (RCL) best, and it's luring them to longer sailings. 

Everything about Royal Caribbean's business has been pointing up, but its stock has been dragged down by overall market fears and President Donald Trump's tariffs. Shares closed on April 3 at $188.65, down $22.93 from the previous day's close. They're also down another 5.65% ($10.65) in premarket trading.

That's a buying opportunity for buy-and-hold, long-term investors.

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Royal Caribbean has recession insurance   

While Royal Caribbean's stock was dragged down by the overall market sentiment that Trump's tariffs may cause a recession, the cruise line has a lot of insurance against that. Cruises are booked much earlier than most kinds of trips.

Many people book a cruise more than a year out with heavy penalties (or even complete forfeitures for canceling). They also have the option to pay for cruises over time, which makes the financial hit feel smaller than booking a theme park or other traditional family vacations.

If the stock market continues to drop or the economy shows some weakness, new bookings may slow down, but Royal Caribbean is booked so far in advance that only a protracted recession would truly hurt the company (and even that might only have a limited impact).

CEO Jason Liberty explained the company's booking position during its fourth-quarter earnings call.

"Turning to this year, momentum continues in 2025, with bookings accelerating since the last earnings call, resulting in the best five booking weeks in the company's history. Bookings have continued to outpace last year across all key products," he shared. 

He noted that passengers are paying more per day (APD).

"Our book position is in line with prior years at higher APDs, allowing us to further optimize pricing and yield growth as we continue to build the book of business for 2025. As our bookings for 2025 have ramped up since the last earnings call, our APD premium to last year has widened, underlining our continued focus on optimizing yield growth," he added.

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Cruising remains a good value

When you book a cruise, you get not only your cabin but also unlimited food, entertainment, and many other amenities. Yes, there are add-ons you can (and probably will) buy, like drink packages, WiFi, and shore excursions, but it's still a much better deal than the traditional a la carte vacation. 

Liberty pointed out during the earnings call that the American economy is healthy overall. 

"American households are wealthier than ever with continued wage growth and low unemployment driving strong consumer spending. We see positive sentiment from our customers in a macro environment that favors experiences over 'things' as leisure and travel spending continue to grow," he said.

Related: U.S. government raises warning for Nassau and Freeport, Bahamas

He sees vacations as being something more consumers are unwilling to give up.

"Consumers plan to spend more on vacations and take more trips in the coming year, and our guests over-index in their intent to spend more on leisure travel. Consumers place significant value on visiting multiple destinations, and this is even more important to Millennial and Gen Z consumers — something that cruising is uniquely positioned to deliver on," he added.

Yes, the Trump tariffs are a concern for the overall economy, and they could lead to a downturn. That's not likely to have a major impact on Royal Caribbean, making the current dip an optimal time to buy into a company that has seen its share price steadily improve since July 2022.

(The Arena Group will earn a commission if you book a cruise.)

Make a free appointment with Come Cruise With Me's Travel Agent Partner, Postcard Travel, or email Amy Post at amypost@postcardtravelplanning.com or call or text her at 386-383-2472.