First, a bit of context… I first looked at cruise lines in 2020 and got my face ripped off, short. When you’re short something that goes against you, in a fund structure built on majority alpha shorts, you have a problem and you learn businesses very well, very quickly.
I do not own the stock today, but the industrial logic is sound and the quick envelope math is getting compelling. Need to find room in portfolio to add. Reserve the right to add in near future.
The deal
RLC closed Monday at $250, Sandals rumors hit Tuesday, deal signed Wednesday, stock ~10% since. Oil and rates also not helpful today. ~$61bn market cap paying $3bn for 50% of Sandals and Beaches Resorts… but they lost ~$6bn in market cap… safe to say some big shareholders were caught off guard….
Why buy a Caribbean beach resort
Share of wallet! RCL’s deal deck states they take 20-25% of its own guests’ five-year vacation spend. The ships are already full, and they’ve shown a consistent ability to fill new berths (2 new ships in ‘26, 1 in ‘27, 3 in ‘28, and entering river cruises). So the next dollar has to come from the same household’s other trips.
Structure… 50/50 board, equity method so JV debt stays off RCL’s balance sheet, Morgan Stanley committed financing, close early 2027, accretive to 2027 earnings per RCLWallet is the constraint.. 110% load factor in 2Q26, 57% of 2026 capacity in the Caribbean
Missing trip type is beach all-inclusive… ~30% overlap between RCL guests and Caribbean resort travelers over 2yrs, booked as an extra trip rather than a swap
Faster growth segment… Caribbean all-inclusive spend $9bn in 2019 to $16bn in 2025 for 11% CAGR, against RCL capacity of 4-7% guided for 2027-29
Best asset based in basin… 18 resorts and 6,155 keys, 7 of them in Jamaica, 3 more Beaches coming
Founder family wanted sale for some time, founder’s son Adam Stewart stays executive chairman
RCL paid ~10x forward EBITDA, which is ~$600mm for the whole company and ~$97K per key. Hyatt (H) paid 8.5-9.5x stabilized ‘27 EBITDA in 2025 for Playa’s management contracts, with no beachfront. RCL itself trades at 9.6x CY27E EBITDA pro forma… so what’s the big deal? This is likely accretive to their mid-teens ROIC over a few years. And what happens if they get to know the asset and buy in the whole thing as they did before (SilverSeas).
Where the multiple sits
Assume the world doesn’t end, oil and rates don’t stay here forever, boomers keep spending their interest income on cruises, and mass AI job losses don’t occur… backsolve from target 12x ‘27 EBITDA and the market is paying for $7.1bn of 2027 EBITDA. That is 8% below the $7.7bn this year’s guide and 15% below ‘28 consensus. The sell-side is actually quite good at modeling cruise lines and typically takes forward curves for fuel and have a good view into booking curves and yields out several quarters. Let’s assume the world doesn’t end and that consensus is a good starting point, which I firmly believe it is… the market is now giving them no credit for potential upside from the deal… le’ts walk through that below. Better yet, RCL says 2027 bookings are “pacing ahead of historical levels” at higher prices and 53% of 2027 fuel is hedged at $405/t. A 2027 net yield guide below +1% in February changes it.
