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Item 1. Business

2021-02-26 compared with 2020-02-25 · 349 added, 244 removed, 484 unchanged (55% of the section changed)

We are the world's second largest cruise company.

We are a global cruise company.

We control and operate four global cruise brands:

Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises (collectively, our "Global Brands").

We also own a 50% joint venture interest in the German brand TUI Cruises and a 49% interest in the Spanish brand Pullmantur (collectively, our "Partner Brands").

We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), that operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands").

Together, our Global Brands and our Partner Brands operate a combined total of 61 ships in the cruise vacation industry with an aggregate capacity of approximately 137,930 berths as of December 31, 2020.

Our ships operate on a selection of worldwide itineraries that call on more than 1,000 destinations on all seven continents.

Our ships operate on a selection of worldwide itineraries that call on approximately 1,000 destinations on all seven continents.

In addition to our headquarters in Miami, Florida, we have offices and a network of international representatives around the world, which primarily focus on sales and market development.

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We believe that our commitment to build state-of-the-art ships and to invest in the maintenance and upgrade of our fleet to, among other things, incorporate many of our latest signature innovations, allows us to continue to attract new and loyal repeat guests.

We believe cruising continues to be a popular vacation choice due to its inherent value, extensive itineraries and variety of shipboard and shoreside activities.

In addition, we believe our brands are well-positioned globally and possess the ability to attract a wide range of guests by appealing to multiple customer bases allowing our global sourcing to be well diversified.

On January 19, 2021, we announced that we entered into a definitive agreement to sell the Azamara brand, including its three-ship fleet and associated intellectual property, to Sycamore Partners for $201 million.

The transaction is subject to customary conditions and is expected to close in the first quarter of 2021.

Royal Caribbean was founded in 1968 as a partnership.

Its corporate structure has evolved over the years and, the current parent corporation, Royal Caribbean Cruises Ltd., was incorporated on July 23, 1985 in the Republic of Liberia under the Business Corporation Act of Liberia.

The disruptions to our operations resulting from the COVID-19 pandemic (“COVID-19”) have had, and continue to have, a material negative impact on our financial condition and results of operations.

The global efforts to contain the spread of the disease have resulted in travel restrictions and created significant uncertainty regarding worldwide port closures and availability.

As part of the global containment effort, we implemented a voluntary suspension of our Global Brands' cruise operations beginning March 13, 2020, which has been extended through at least April 30, 2021, for most of our cruise operations.

As of February 23, 2021, four of our ships were operating with guests onboard.

On and effective as of October 30, 2020, the U.S.

Centers for Disease Control and Prevention ("CDC") issued a Framework for Conditional Sailing Order (the “Conditional Order”) that will conditionally permit cruise ship passenger operations in U.S.

waters under certain conditions and using a phased approach.

The Conditional Order will remain in effect until the earlier of (1) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, (2) the rescission or modification by the CDC Director of the Conditional Order based on specific public health or other considerations, or (3) November 1, 2021.

See Business - Regulation for further details on the Conditional Order.

Our resumption of operations will include a staggered return of the fleet to service, which will include:

• Bringing the fleet from layup status to fully operational;

• Bringing crew back to an appropriate staffing level and expected reduced load factors for a period of time;

• Implementing health and safety protocols on ships as they resume operations and while protocols are required.

We are working with both the CDC and the Healthy Sail Panel ("HSP"), formed in June 2020 by us and Norwegian Cruise Line Holdings Ltd.

and composed of leading experts in relevant fields, including epidemiology, infectious diseases, public policy and regulation, engineering and general health safety, to prepare and develop our plan to meet the framework for the Conditional Order.

While the Conditional Order represents an important step in our return to service, many uncertainties remain as to the specifics, timing and costs of administering and implementing the requirements of the Conditional Order, some of which may be significant.

Further, the Conditional Order contemplates that the CDC may issue additional requirements through technical instructions or orders as needed and that the phases described above will be further determined based on public health considerations, including the trajectory of the pandemic and the ability of cruise ship operators to successfully employ measures that mitigate the risk of COVID-19.

Based on our assessment of these conditions or for other reasons, we may determine it necessary to further extend our voluntary suspension of our Global Brands’ cruise sailings which currently extends through at least April 30, 2021, for most of our cruise operations.

We have undertaken several proactive measures to mitigate the financial and operational impacts of COVID-19, including significant reduction of capital expenditures and operating expenses as well as the issuance of debt and shares of our common stock.

Given the current environment, we intend to continue to prioritize and bolster liquidity through cash conservation and additional financing sources, which may include the issuance of new debt (including convertible debt), refinancing of existing debt, amortization deferrals under our export-credit backed debt facilities and issuance of common stock, to ensure that we are well positioned for recovery.

Additionally, we agreed with certain of our lenders that we will not pay dividends or engage in stock repurchases until the end of the third quarter of 2022.

Management's Discussion and Analysis - Critical Accounting Policies and Recent Developments:

COVID-19 and Note 1.

General to our consolidated financial statements under Item 1.

Financial Statements for further details on the impact of COVID-19 on our financial condition and results of operations.

Our Global Brands

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Although each of our Global Brands has its own marketing style, as well as ships and crews of various sizes, the nature of the products sold and services delivered by our Global Brands share a common base (i.e., the sale and provision of cruise vacations).

Our Global Brands also have similar itineraries as well as similar cost and revenue components.

In addition, our Global Brands source passengers from similar markets around the world and operate in similar economic environments with a significant degree of commercial overlap.

Our Global Brands also offer similar itineraries as well as similar cost and revenue components.

The itineraries of Global Brands are subject to resumption of our operations and local restrictions.

In addition, our Global Brands have historically sourced passengers from similar markets around the world and operated in similar economic environments with a significant degree of commercial overlap.

As a result, we strategically manage our Global Brands as a single business with the ultimate objective of maximizing long-term shareholder value.

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We believe that the quality of the Royal Caribbean International brand allows it to achieve market coverage that is among the broadest of any of the major cruise brands in the cruise vacation industry.

Royal Caribbean International’s strategy is to attract an array of vacationing guests by providing a wide variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, Bahamas, Bermuda, Canada, the Caribbean, Europe, the Panama Canal and New Zealand, with cruise lengths ranging from two to 19 nights.

Royal Caribbean International’s strategy is to attract an array of vacationing guests by offering a wide variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, Bahamas, Bermuda, Canada, the Caribbean, Europe, the Panama Canal and New Zealand, with cruise lengths ranging from two to 24 nights.

Royal Caribbean International offers multiple innovative options for onboard dining, entertainment and other onboard activities.

Because of the brand’s ability to deliver extensive and innovative product offerings at an excellent value to consumers, we believe Royal Caribbean International is well positioned to attract new consumers to cruising and to continue to bring loyal repeat guests back for their next vacation.

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Royal Caribbean International operates 26 ships with an aggregate capacity of approximately 87,150 berths, including the brand's newest ship, Spectrum of the Seas , which entered service in April 2019.

Additionally, as of December 31, 2019, we have six ships on order with an aggregate capacity of approximately 32,400 berths.

These ships consist of our fifth Quantum-class ship, which is scheduled to enter service in the fourth quarter of 2020, our fifth and sixth Oasis-class ships, which are scheduled to enter service in the second quarter of 2021 and the fourth quarter of 2023, respectively, and the first three ships of a new generation, known as our Icon-class, which are expected to enter service in 2022, 2024 and 2025, respectively.

Royal Caribbean International operates 24 ships with an aggregate capacity of approximately 84,200 berths.

Additionally, as of December 31, 2020, Royal Caribbean International has six ships on order with an aggregate capacity of approximately 32,400 berths.

These ships consist Odyssey of the Seas , which is expected to be delivered in early 2021, Wonder of the Seas and our sixth Oasis-class ship, which are expected to be delivered in the first quarter of 2022 and the second quarter of 2024, respectively, and the first three ships of a new generation, known as our Icon-class, which are expected to be delivered in the third quarter of 2023, and the second quarters of 2025 and 2026, respectively.

The expected delivery dates for all of our ships on order are subject to change in the event of shipyard construction delays.

Risk Factors for further discussion on the impact of COVID-19 on shipyard operations.

Celebrity Cruises

Celebrity Cruises is positioned within the premium segment of the cruise vacation industry.

Celebrity Cruises’ strategy is to target affluent consumers by delivering a destination-rich, modern luxury experience on upscale ships that offer, among other things, luxurious accommodations, refined design-forward spaces, high-standard service and fine dining.

Celebrity Cruises offers a range of itineraries to destinations, including Alaska, Asia, Australia, Bermuda, Canada, the Caribbean, Europe, the Galapagos Islands, Hawaii, India, New Zealand, the Panama Canal and South America, with cruise lengths ranging from two to 19 nights.

Celebrity Cruises operates 14 ships with an aggregate capacity of approximately 26,220 berths, including the brand's newest ship designed for the Galapagos Islands, Celebrity Flora , which entered service in the second quarter of 2019.

Additionally, as of December 31, 2019, we have three ships on order with an aggregate capacity of approximately 9,400 berths.

These ships consist of three Edge-class ships, which are expected to enter service in the second quarter of 2020 and the fourth quarters of 2021 and 2022, respectively.

Azamara is designed to serve the up-market segment of the North American, United Kingdom and Australian markets.

The up-market segment incorporates elements of the premium segment and the luxury segment, which is generally characterized by smaller ships, high standards of accommodation and service and exotic itineraries.

Azamara's strategy is to deliver distinctive destination experiences through unique itineraries with more overnights and longer stays as well as comprehensive tours allowing guests to experience the destination in more depth.

These destination experiences include over 1,700 pre and post-voyage land programs.

Azamara offers a variety of itineraries to popular destinations, including Asia, Australia/New Zealand, Northern and Western Europe, the Mediterranean, and South America with cruise lengths ranging from three to 26 nights.

Azamara operates three ships with an aggregate capacity of approximately 2,100 berths.

Celebrity Cruises is positioned within the luxury segment of the cruise vacation industry.

Celebrity Cruises’ strategy is to target affluent consumers by delivering a destination-rich experience on upscale ships that offer, among other things, luxurious accommodations, refined design-forward spaces, world-class service and culinary excellence.

Celebrity Cruises offers a range of itineraries to destinations, including Alaska, Asia, Australia, Bermuda, Canada, the Caribbean, Europe, the Galapagos Islands, Hawaii, New Zealand, the Panama Canal and South America, with cruise lengths ranging from two to 18 nights.

Celebrity Cruises operates 14 ships with an aggregate capacity of approximately 29,220 berths, including the brand's newest ship Celebrity Apex , which was delivered in the first quarter of 2020.

Additionally, as of December 31, 2020, we have two ships on order with an aggregate capacity of approximately 6,500 berths.

These ships consist of two Edge-class ships, including Celebrity Beyond and a fourth ship in the class, which are expected to be delivered in the second quarter of 2022 and in the fourth quarter of 2023, respectively.

In addition, as of December 31, 2020, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship with capacity of approximately 3,250 berths, estimated for delivery in 2025, which is contingent upon completion of certain conditions precedent and financing.

Silversea Cruises

On July 31, 2018, we acquired a 66.7% equity stake in Silversea Cruise Holding Ltd.

("Silversea Cruises"), an ultra-luxury and expedition cruise line.

Silversea Cruises, formed in the early 1990's, is positioned as a luxury cruise line with smaller ships, high standards of accommodations, fine dining, personalized service and exotic itineraries.

Silversea Cruises delivers distinctive destination experiences by visiting unique and remote destinations, including the Galapagos Islands, Antarctica and the Arctic.

Silversea Cruises operates eight ships, with an aggregate capacity of approximately 2,450 berths offering cruise itineraries generally ranging from six to 25 nights.

As of December 31, 2019, Silversea Cruises has five ships on order with an aggregate capacity of approximately 2,400 berths.

Two ships are scheduled to enter service in the third quarter of 2020, another in the third quarter of 2021, with the remaining two ships scheduled to enter service in the first quarters of 2022 and 2023.

Silversea Cruise Holding Ltd.

("Silversea Cruises") is an ultra-luxury and expedition cruise line.

On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own (the "noncontrolling interest") from Heritage Cruise Holding Ltd.

("Heritage").

As a result of the acquisition of the noncontrolling interest, Silversea Cruises is now a wholly owned cruise brand.

Silversea Cruises, formed in the early 1990s, is positioned as an ultra-luxury cruise line with smaller ships, high standards of accommodations, fine dining, personalized service and exotic itineraries.

Silversea Cruises delivers distinctive destination experiences by visiting unique and remote destinations, including the Galapagos Islands, Antarctica and the Arctic with cruise itineraries generally ranging from six to 24 nights.

Silversea Cruises operates nine ships, with an aggregate capacity of approximately 3,350 berths, including the brand's newest ships Silver Origin and Silver Moon , which were delivered in the second and fourth quarters of 2020, respectively.

As of December 31, 2020, Silversea Cruises has three ships on order with an aggregate capacity of approximately 1,750 berths.

The ships are expected to be delivered in the fourth quarter of 2021, and in the first quarters of 2023 and 2024, respectively.

On January 19, 2021, we announced that we entered into a definitive agreement to sell the Azamara brand, including its three-ship fleet with an aggregate capacity of approximately 2,100 berths and associated intellectual property, to Sycamore Partners for $201 million.

The transaction is subject to customary conditions and is expected to close in the first quarter of 2021.

Our Partner Brands

Our Global Brands are complemented by our 50% joint venture interest in TUI Cruises, which is specifically tailored for the German market and our 49% interest in the Spanish brand Pullmantur, which is primarily focused on the Spanish and Latin American cruise markets.

We account for our investments in our Partner Brands under the equity method of accounting and, accordingly, the operating results of these Partner Brands are not included in our consolidated results of operations.

Our Global Brands are complemented by our interest in TUIC, our 50%-owned joint venture that operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands").

TUIC is a joint venture owned 50% by us and 50% by TUI AG, a German tourism company, which is designed to serve the contemporary and premium segments of the German cruise market by offering products tailored for German guests.

All onboard activities, services, shore excursions and menu offerings are designed to suit the preferences of this target market.

TUI Cruises operates seven ships, with an aggregate capacity of approximately 17,700 berths as of December 31, 2020.

Additionally, TUI Cruises has three ships on order with an aggregate capacity of approximately 11,100 berths, that are expected to be delivered in the second quarter of 2023, the third quarter of 2024 and the first quarter of 2026, respectively.

On June 30, 2020, TUIC acquired Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG for approximately €1.2 billion, or $1.3 billion, as of the purchase date.

Hapag-Lloyd Cruises operates two luxury liners and two smaller expedition ships, with an aggregate capacity of approximately 1,360 berths as of December 31, 2020.

Refer to Note 1 .

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Financial Statements and Supplementary Data for further details.

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TUI Cruises is a joint venture owned 50% by us and 50% by TUI AG, a German tourism company, which is designed to serve the contemporary and premium segments of the German cruise market by offering a product tailored for German guests.

All onboard activities, services, shore excursions and menu offerings are designed to suit the preferences of this target market.

TUI Cruises operates seven ships, with an aggregate capacity of approximately 17,600 berths as of December 31, 2019, including the brand's newest ship, Mein Schiff 2 , which entered service in January 2019.

Additionally, TUI Cruises has three ships on order with an aggregate capacity of approximately 11,100 berths, that are scheduled to enter service in the second quarter of 2023, the third quarter of 2024 and the first quarter of 2026, respectively.

On February 7, 2020, TUI Cruises entered into an agreement to acquire Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG.

Hapag-Lloyd Cruises operates two luxury liners and three smaller expedition ships.

The transaction is subject to regulatory approval and customary closing conditions.

The Pullmantur brand is a joint venture owned 49% by us and 51% by Cruises Investment Holdings S.A., an affiliate of Springwater Capital LLC.

Pullmantur operates in the contemporary segment of the Spanish and Latin American cruise markets and is designed to attract Spanish-speaking families and couples and includes Spanish-speaking crew, as well as tailored food and entertainment options.

The three ships operated by Pullmantur have an aggregate capacity of approximately 6,050 berths.

Zenith was sold to a third party in January 2020.

To offset the decrease in capacity to the Pullmantur brand, commencing in the second quarter of 2021, we expect to charter Grandeur of the Seas to Pullmantur.

Cruising is considered a well-established vacation sector in the North American, European and Australian markets and a developing sector in several other emerging markets.

Industry data indicates that market penetration rates are still low and that a significant portion of cruise guests carried are first-time cruisers.

We believe this presents an opportunity for long-term growth and a potential for increased profitability.

The following table details industry market penetration rates for North America, Europe and Asia/Pacific computed based on the number of annual cruise guests as a percentage of the total population:

Year North America (1)(2)

Pullmantur Holdings S.L ("Pullmantur Holdings") is a joint venture owned 49% by us and 51% by Cruises Investment Holdings S.A., an affiliate of Springwater Capital LLC.

In 2020, Pullmantur Holdings and certain of its subsidiaries filed for reorganization under the terms of the Spanish insolvency laws due to the negative impact of the COVID-19 pandemic on the companies.

Refer to Note 8 .

Other Assets to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information regarding Pullmantur's reorganization filing and its impact to the Company.

The cruising industry has been considered a well-established vacation sector in the North American, European and Australian markets and a developing sector in several other emerging markets.

Although the industry is currently experiencing challenges brought on by the COVID-19 pandemic, we believe that cruising will continue to be a popular vacation choice in the long-term due to its inherent value, extensive itineraries and variety of shipboard and shoreside activities.

As part of the global effort to contain the spread of COVID-19, the Company and other industry participants voluntarily suspended operations in March 2020, resulting in a limited number of cruises being taken in the past year.

As a result, representative information of market penetration and other indicators are not available for 2020.

For the five year period prior to 2020, industry data indicated that market penetration rates were still low and that a significant portion of cruise guests carried in those years were first-time cruisers.

We believe this presents an opportunity for operational and financial recovery and long-term growth for the industry when it resumes operations.

The following table details industry market penetration rates for North America, Europe and Asia/Pacific for the five years prior to 2020 computed based on the number of annual cruise guests as a percentage of the total population:

North America (2)(3)

Europe (2)(4)

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___________________________________________________________________

(1) Historically, we have reported annual comparable information for relevant comparisons to other periods.

The 2020 suspension of global cruise operations as a result of COVID-19 does not allow for a meaningful comparison to prior years' information and as such the 2020 data has been excluded from this table.

Our estimates are based on a combination of data obtained from publicly available sources including the International Monetary Fund, United Nations, Department of Economic and Social Affairs, Cruise Lines International Association ("CLIA") and G.P.

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Australia and New Zealand) regions.

We estimate that the global cruise fleet was served by a weighted average of approximately 579,000 berths during 2019 with approximately 354 ships at the end of 2019.

As of December 31, 2019, there were approximately

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67 ships with an estimated 159,000 berths that are expected to be placed in service in the global cruise market through 2024, although it is also possible that ships could be ordered or taken out of service during these periods.

We estimate that the global cruise industry carried approximately 30.0 million cruise guests in 2019 compared to approximately 28.5 million cruise guests carried in 2018 and approximately 26.7 million cruise guests carried in 2017.

The following table details the growth in global weighted average berths and the global, North American, European and Asia/Pacific cruise guests over the past five years (in thousands, except berth data):

Year Weighted-Average

Royal Caribbean Cruises Ltd.

Total Berths (2)

The global cruise fleet was served by a weighted average of approximately 579,000 berths during 2019 with approximately 354 ships at the end of 2019.

As of December 31, 2019, there were approximately 67 ships with an estimated 159,000 berths that were expected to be placed in service in the global cruise market through 2024, not taking into account ships taken out of service or ordered during these periods.

We believe that, starting in 2020, cruise ships in the industry were taken out of service at an accelerated rate and new ship orders were deferred due to global cruise operation restrictions resulting from the COVID-19 pandemic.

The global cruise industry carried approximately 30.0 million cruise guests in 2019 and approximately 28.5 million in 2018.

The following table details the growth in global weighted average berths and the global, North American, European and Asia/Pacific cruise guests for the five years prior to the impact of COVID-19 in 2020 (in thousands, except berth data):

Weighted-Average

Royal Caribbean Group Total Berths (3)

North American Cruise Guests (2)(4)

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___________________________________________________________________

(1) Historically, we have reported annual comparable information for relevant comparisons to other periods.

Our estimates of the number of global cruise guests and the weighted-average supply of berths marketed globally are based on a combination of data that we obtain from various publicly available cruise industry trade information sources.

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North America

Industry cruise guests are primarily sourced from North America, which represented approximately 47% of global cruise guests in 2019.

Industry cruise guests have been primarily sourced from North America, which represented approximately 47% of global cruise guests in 2019.

The compound annual growth rate in cruise guests sourced from this market was approximately 4% from 2015 to 2019.

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The compound annual growth rate in cruise guests sourced from this market was approximately 24% from 2015 to 2019.

The recent coronavirus outbreak and the resulting measures taken by China and other countries to move aggressively to contain the disease, including travel restrictions, have resulted in the cancellation of several of our cruises in Southeast Asia and modification of several itineraries in the region.

In addition, we have imposed several measures to protect our guests and crew, including denying boarding to those that have traveled from, to or through mainland China or Hong Kong.

See Outlook for further discussion.

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We compete with a number of cruise lines.

Our principal competitors are Carnival Corporation & plc, which owns, among others, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises and Seabourn;

Our principal competitors are Carnival Corporation & plc, which owns, among other brands, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises and Seabourn;

Disney Cruise Line;

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Cruise lines also compete with other vacation alternatives such as land-based resort hotels, internet-based alternative lodging sites and sightseeing destinations for consumers’ leisure time.

Interest for such activities is influenced by political and general economic conditions.

Companies within the vacation market are dependent on consumer discretionary spending.

Operating Strategies

Our strategic emphasis on People, Profits and Planet has led us to focus on the following principal operating strategies:

The COVID-19 pandemic, related restrictions and general economic conditions have significantly affected companies within the vacation market which may result in a changed competitive landscape by the time we return to service.

Operating Focus

Our principal operating strategies remain consistent with our historical strategies, yet have been affected by the vast impact that the COVID-19 pandemic has had, and will continue to have, on our Company's operations.

While our cruise operations remain suspended, we have and will continue to prioritize those operating strategies that reduce our capital and operating expenditures, enhance our liquidity and support the healthy and safe return to cruising globally for guests, crew and the communities visited, including for some time after we resume cruise operations.

Our Company's operating focus is as follows:

• protect the health, safety and security of our guests and employees,

• support the healthy return of cruising globally along with our industry partners, including national and local governments and regulators, the communities in which we operate, other cruise companies, shipyards, our guests and trade partners,

• focus on cost control and efficiency, ensure adequate cash and liquidity, manage our capital expenditures and our balance sheet, with the overall goals of sustaining our operations and being well positioned for recovery, and, in the long-term, maximizing our return on invested capital and shareholder value,

• protect the environment in which our vessels and organization operate,

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• increase the awareness and market penetration of our brands globally,

• focus on cost efficiency, manage our operating expenditures and ensure adequate cash and liquidity, with the overall goal of maximizing our return on invested capital and long-term shareholder value,

• strategically invest in our fleet through the upgrade and maintenance of existing ships and the transfer of key innovations, while prudently expanding our fleet with new state-of-the-art cruise ships,

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overseen by the Safety, Environment and Health Committee of our board of directors and informed by a Maritime Advisory Board of experts.

Support the healthy return of cruising

We continue to work and collaborate with the Healthy Sail Panel, epidemiological and policy experts, health authorities and various governments around the globe to ensure a healthy and safe return to cruising for guests, crew and the communities visited.

We work in close partnership and communication with our contracted shipyards to carefully address our newbuild delivery delays and work towards a safe and effective shipyard working environment in the midst of COVID-19.

We have established flexible cruise pricing and booking programs (e.g.

Cruise with Confidence, Best Price Guarantee and all-inclusive pricing) that present our guests with options and value as we anticipate our return to service.

The travel agency community has been a vital partner in our success, and we are committed to assist the industry during this challenging time with essential financial relief (e.g., the RCL CARES program).

Focus on cost control and efficiency, capital expenditure reductions, adequate cash and liquidity and managing of our balance sheet

We have taken significant actions to reduce operating and capital expenses during the suspension of our global cruise operations.

Given the current environment, we continue to prioritize and bolster liquidity through cash conservation and additional financing sources while managing our balance sheet to ensure that we are well positioned for recovery.

We are focused on leveraging our scale and shifting our resources behind our Royal Caribbean International, Celebrity Cruises and Silversea brands.

Additionally, we agreed with certain of our lenders that we will not pay dividends or engage in stock repurchases until the end of the third quarter of 2022.

We are focused on maintaining a strong liquidity position, a balanced debt maturity profile, and returning to investment grade credit metrics.

We believe these strategies enhance our ability to achieve our overall goal of maximizing our long-term shareholder value.

Protect the environment

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This includes reducing our carbon footprint through the energy and carbon efficiencies included in the design of our new capacity, our ongoing energy management program on our existing fleet and the development of new technologies.

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Our long-term partnership with the World Wildlife Fund focuses on greenhouse gas reduction strategies, sustainable food supplies, sustainable destinations and guest education on ocean conservation issues, including climate change, which supports onboard conservation efforts such as our reduced use of plastics and increased sourcing of sustainable seafood.

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We foster diversity and inclusion among our broad employee base.

Refer to the Human Capital section below for further information.

Consumer engagement

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We rely on various programs and technologies during the cruise-planning, cruising and after-cruise periods aimed at increasing ticket prices, onboard revenues and occupancy.

We have and continue to strategically invest in onboard projects on our ships that we believe drive marketability, profitability and improve the guest experience.

We have and expect to strategically invest in onboard projects on our ships that we believe drive marketability, profitability and improve the guest experience.

Global awareness and market penetration

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In addition, our Global Brands target repeat guests with exclusive benefits offered through their respective loyalty programs.

We sell and market our Global Brands, Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises, to guests outside of the United States and Canada through the combined efforts of internationally focused internal resources and a network of approximately 80 independent international representatives located throughout the world covering more than 183 countries.

Historically, our focus has been to primarily source guests

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for our Global Brands from North America.

We continue to expand our focus on selling and marketing our cruise brands to guests in countries outside of North America by tailoring itineraries and onboard product offerings to the cultural characteristics and preferences of our international guests.

We sell and market our Global Brands, Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises, to guests outside of the United States and Canada through the combined efforts of internationally focused internal resources and a network of independent international representatives located throughout the world.

Historically, our focus has been to primarily source guests for our Global Brands from North America.

We will continue to expand our focus on selling and marketing our cruise brands to guests in countries outside of North America by tailoring itineraries and onboard product offerings to the cultural characteristics and preferences of our international guests.

In addition, we explore opportunities that may arise to acquire or develop brands tailored to specific markets.

Passenger ticket revenues generated by sales originating in countries outside of the United States were approximately 38% of total passenger ticket revenues in 2019, 39% in 2018 and 41% in 2017.

Passenger ticket revenues generated by sales originating in countries outside of the United States were approximately 35% of total passenger ticket revenues in 2019, and 39% in 2018.

International guests have grown from approximately 2.5 million in 2015 to approximately 2.6 million in 2019.

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Risk Factors - “ Conducting business globally may result in increased costs and other risks” for a discussion of the risks associated with our international operations.

Cost efficiency, operating expenditures and adequate cash and liquidity

We have adopted a number of strategies to control our operating costs and will continue to do so in 2020.

For example, we have adopted numerous initiatives to reduce energy consumption and, by extension, fuel costs.

These include the design of more energy-efficient ships as well as the implementation of more efficient hardware, including improvements in operations and voyage planning as well as improvements to the propulsion, machinery, HVAC and lighting systems.

The overall impact of these efforts has resulted in an approximate 35% improvement in energy efficiency from 2005 through 2019 and we believe that our energy consumption per guest is currently the lowest in the cruise industry.

In order to sustain our competitive advantage, we will continue to seek to lead with innovative technologies and commit to achieve our short and long-term sustainability goals.

We are focused on maintaining a strong liquidity position, investment grade credit metrics and a balanced debt maturity profile.

We believe these strategies enhance our ability to achieve our overall goal of maximizing our long-term shareholder value.

Fleet upgrade, maintenance and expansion

We place a strong focus on innovation, which we seek to achieve by introducing new concepts on our new ships and continuously making improvements to our fleet through modernization projects.

Fleet upgrade and maintenance

We place a strong focus on innovation, which we seek to achieve by introducing new concepts on our new ships and continuously making improvements to our fleet through modernization projects and key technological improvements.

Several of these innovations have become signature elements of our brands.

For the Royal Caribbean International brand, we introduced the “Royal Promenade” (a boulevard with shopping, dining and entertainment venues) and interior balconies on the Oasis class ships and a two-level family suite on Symphony of the Seas .

For the Royal Caribbean International brand,

we introduced the “Royal Promenade” (a boulevard with shopping, dining and entertainment venues) and interior balconies on the Oasis class ships and a two-level family suite on Symphony of the Seas .

For the Celebrity Cruises brand, we enhanced many of the brand's design features through the introduction of the Solstice class ships.

More recently, with the introduction of Celebrity Edge , we introduced the "Magic Carpet" (a cantilevered, floating platform that reaches a height of 13 stories above sea level and can serve as a dining venue, full bar and platform for live music) and newly designed staterooms with an "Infinite Veranda" where, with the touch of a button, the veranda becomes part of the entire living space.

In 2018, the Royal Caribbean International and Celebrity Cruises brands announced the "Royal Amplified" and "Celebrity Revolution" modernization programs to upgrade vessels across their fleet.

As part of these modernization programs, we incorporate certain innovations included in our newer ships to some of the ships in the remaining fleet.

The process of integrating some of our latest innovations into our older vessels allows us to create a greater level of consistency of product across our fleet.

As part of the newbuild and modernization programs, we also seek to bring innovations in the areas of safety, reliability and energy efficiency to our fleet.

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In addition, we regularly evaluate opportunities to order new ships, purchase existing ships or sell ships in our current fleet while ensuring that we remain focused on the returns we generate on invested capital and maintaining a high level of discipline on capital spending and operating leverage.

In the current environment of high industry

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demand, we have placed new ship orders earlier than we have historically done as well as more aggressively sought to sell older capacity.

We have undertaken measures to mitigate the financial and operational impacts of COVID-19, such as the reduction of our capital expenditures by delaying or deferring newbuild deliveries and the modernization of our ships.

The expected capital expenditures for 2021 are $2.1 billion and are mostly related to newbuild projects which have committed financing.

During 2021, the Company expects the delivery of Odyssey of the Seas and Silver Dawn during the first and fourth quarter, respectively.

In 2022, the Company has two ship deliveries scheduled, both with committed financing:

W onder of the Seas and Celebrity Beyond .

Excluding the newbuilds, the capital expenditures for 2022 will depend on the Company’s schedule to return to operation.

Moreover, COVID-19 has impacted shipyard operations which has resulted in delivery delays for newbuilds.

The exact duration of the ship delivery delays is currently under discussion with the impacted shipyards.

During 2020, we disposed of Celebrity Xperience, Majesty of the Seas and Empress of the Seas.

Additionally, we entered into a definitive agreement to sell the Azamara brand which includes three vessels:

Azamara Journey, Azamara Quest and Azamara Pursuit .

These six ships represent approximately 5.2% of our 2019 capacity.

During 2020, we also disposed of the following ships which were previously chartered to Pullmantur:

Zenith , Monarch, Horizon, Sovereign.

Markets and itineraries

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We are focused on obtaining the best possible long-term shareholder returns by operating in established markets while growing our presence in developing markets.

New capacity allows us to expand into new markets and itineraries.

New capacity has allowed us to expand into new markets and itineraries.

Our brands have expanded their mix of itineraries while strengthening our ability to further penetrate the Asian and Australian markets.

The acquisition of Silversea Cruises added more than 500 new destinations allowing us to expand and enhance our selection of exotic itineraries.

As we plan for our brands' return to service, we are developing new and attractive itineraries that will allow us to resume our operations on a staggered basis.

We are also responding quickly to changes in market demand, as observed in our new bookings.

Destination experiences and port facilities

Additionally, in order to provide unique destination experiences to our guests, we are investing in our private land destinations.

Additionally, in order to provide unique destination experiences to our guests, we have invested in our private land destinations.

For instance, in 2018, we announced Perfect Day Island Collection, an initiative to develop a series of private island destinations around the world.

The first island in the collection, Perfect Day at CocoCay, opened in Spring 2019 and includes a wide range of attractions, such as a water park, zip line and wave and freshwater pool.

The second island in the collection, Perfect Day at Lelepa, is scheduled to open in 2022 and will offer its own unique experience.

In 2019, we also announced the launch of a Royal Beach Club initiative to bring the unique features and cultures of each destination to life.

The first will be Royal Beach Club in Antigua, launching 2021.

In an effort to secure desirable berthing facilities for our ships, and to provide new or enhanced cruise destinations for our guests, we actively assist or invest in the development or enhancement of certain port facilities and infrastructure, including mixed-use commercial properties, located in strategic ports of call.

For instance, a new homeport cruise terminal of approximately 170,000 square feet was completed at PortMiami in Miami, Florida in 2018 and we are building a new homeport cruise terminal in Galveston, Texas of approximately 140,000 square feet to be completed in 2021.

As a result of the operational disruptions caused by the COVID-19 pandemic and in an effort to bolster our liquidity, we have delayed previously announced Perfect Day site openings and are reassessing their timing as well as the timing of our complementary Royal Beach Club offering portfolio.

We are also reassessing our investment in other destinations.

In an effort to secure desirable berthing facilities for our ships, and to provide new or enhanced cruise destinations for our guests, we have actively assisted or invested in the development or enhancement of certain port facilities and infrastructure, including mixed-use commercial properties, located in strategic ports of call.

For instance, a new homeport cruise terminal of approximately 170,000 square feet was completed at PortMiami in Miami, Florida in 2018.

We have delayed the expected completion of our new homeport cruise terminal in Galveston, Texas until 2022.

Generally, we collaborate with local, private or governmental entities by providing management and/or financial assistance and often enter into long-term port usage arrangements.

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Technology is a pervasive part of virtually every business process we use to support our strategic focus and provide a quality experience to our customers before, during and after their cruise.

Technology also plays a critical role in the measures and protocols that we have developed and will continue to develop to mitigate COVID-19 on our cruise ships.

For example, through the deployment of our innovative electronic safety drill ("Muster 2.0") program, we have added convenience, allowed for physical distancing, and improved our guests experience regarding the mandatory safety briefing.

Additionally, through the in-app messaging technology we are enhancing guest check-in to support education, testing and screening information prior to embarkation, and to support onboard detection contingency scenarios and protocols, and most importantly promote the health and safety of guests and crew.

In past years, we have continued to integrate digital capabilities into our operations and have increased our focus in bringing in data analytics and artificial intelligence into our processes.

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In concert with our destination focus, our island technology solutions are now enabling our guests to remain connected with WiFi access, order food and beverage as well as take advantage of all the island based activities with the same ease as onboard our ships.

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Investments in our core platforms, as well as the trade and direct distribution channels, are delivering the benefit of more modernized solutions with scalability and faster self-service response times while also deploying new features such as flight packages and additional promotional offer capabilities.

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We also provide trained customer service representatives, call centers and online training tools.

At the onset of the COVID-19 pandemic, we launched the RCL CARES program which provided dedicated financial guidance as travel advisors navigated government relief benefits, including small business loans and the Paycheck Protection Program.

During December 2020, we announced the Pay it Forward program which made available $40 million in the form of interest free commercial loans for qualifying travel agencies to begin their recovery efforts.

Our Pay it Forward program launched in February 2021.

In addition, we continue to operate our Consumer Outreach department, which provides consumers 24-hour access to our vacation planners and customer service agents in our call centers.

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We enable our guests to communicate and book with us through various channels such as phone, web, chat, text message, and/or email.

We also have a robust Onboard Cruise Sales department to help guests to book their next cruise vacations while onboard our ships.

We also have an Onboard Cruise Sales department to help guests to book their next cruise vacations while onboard our ships.

Guest Services

We offer to handle virtually all travel aspects related to guest reservations and transportation, including arranging guest pre- and post-hotel stay arrangements and air transportation.

We offer to handle virtually all travel aspects related to guest reservations and transportation, including arranging

guest pre- and post-hotel stay arrangements and air transportation.

Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises offer recognition and status upgrades to their guests through their loyalty programs, Crown & Anchor Society, Captain’s Club, Le Club Voyage and Venetian Society, respectively, to encourage repeat business.

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We regularly work to enhance each of our loyalty programs by adding new features and amenities in order to reward our repeat guests.

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Cruise Ships and Itineraries

As of December 31, 2020, our Global Brands and Partner Brands collectively operated 61 ships with a selection of worldwide itineraries that call on more than 1,000 destinations.

The following table presents summary information concerning the ships we expect to operate in 2020 under our Global Brands and Partner Brands and their geographic areas of operation based on current 2020 itineraries (subject to change).

The following table presents summary information concerning ships that we expect will be in our fleet in 2021 under our Global Brands and Partner Brands.

The Azamara Pursuit, Azamara Quest and Azamara Journey are not listed due to the definitive agreement to sell the Azamara brand, announced on January 19, 2021 and expected to close in the first quarter of 2021.

Ship Year Ship

Built Year Ship

Entered/Will Enter Service (1)

Berths Primary Areas of Operation

In Service or Delivered, if after 2020 (1)

Royal Caribbean International

Odyssey of the Seas 2020 2020 4,200 Eastern/Western Caribbean

Spectrum of the Seas 2019 2019 4,250 Eastern Asia

Symphony of the Seas 2018 2018 5,500 Eastern/Western Caribbean

Harmony of the Seas 2016 2016 5,450 Eastern/Western Caribbean

Ovation of the Seas 2016 2016 4,100 Australia, Alaska

Anthem of the Seas 2015 2015 4,100 Southern Caribbean, Bahamas, Europe

Quantum of the Seas 2014 2014 4,150 Eastern Asia

Allure of the Seas 2010 2010 5,450 Eastern/Western Caribbean, Europe

Oasis of the Seas 2009 2009 5,650 Eastern/Western Caribbean, Bahamas

Independence of the Seas 2008 2008 3,850 Western Caribbean, Bahamas

Liberty of the Seas 2007 2007 3,750 Western Caribbean

Freedom of the Seas 2006 2006 3,750 Southern Caribbean

Jewel of the Seas 2004 2004 2,150 Western Caribbean, Europe, Middle East

Mariner of the Seas 2003 2003 3,300 Bahamas

Serenade of the Seas 2003 2003 2,100 Southern Caribbean, Alaska, Australia

Navigator of the Seas 2002 2002 3,350 Bahamas

Brilliance of the Seas 2002 2002 2,100 Western Caribbean, Europe, Canada

Adventure of the Seas 2001 2001 3,300 Eastern/Western Caribbean, Bermuda, Canada

Radiance of the Seas 2001 2001 2,100 Australia, Alaska

Explorer of the Seas 2000 2000 3,250 Europe, Western/Southern Caribbean

Voyager of the Seas 1999 1999 3,400 Eastern Asia, Australia

Vision of the Seas 1998 1998 2,000 Southern Caribbean, Europe, Canada

Enchantment of the Seas 1997 1997 2,250 Southern/Western Caribbean, Bahamas

Rhapsody of the Seas 1997 1997 2,000 Western Caribbean, Europe

Odyssey of the Seas 2021 2021 4,200

Spectrum of the Seas 2019 2019 4,150

Symphony of the Seas 2018 2018 5,500

Harmony of the Seas 2016 2016 5,500

Ovation of the Seas 2016 2016 4,150

Anthem of the Seas 2015 2015 4,150

Quantum of the Seas 2014 2014 4,150

Allure of the Seas 2010 2010 5,500

Oasis of the Seas 2009 2009 5,600

Independence of the Seas 2008 2008 3,850

Liberty of the Seas 2007 2007 3,800

Freedom of the Seas 2006 2006 3,950

Jewel of the Seas 2004 2004 2,200

Mariner of the Seas 2003 2003 3,350

Serenade of the Seas 2003 2003 2,150

Navigator of the Seas 2002 2002 3,400

Brilliance of the Seas 2002 2002 2,150

Adventure of the Seas 2001 2001 3,350

Radiance of the Seas 2001 2001 2,150

Explorer of the Seas 2000 2000 3,300

Voyager of the Seas 1999 1999 3,450

Vision of the Seas 1998 1998 2,050

Enchantment of the Seas 1997 1997 2,300

Rhapsody of the Seas 1997 1997 2,050

Grandeur of the Seas 1996 1996 2,000

1996 1996 1,950 Bahamas, Southern Caribbean, Bermuda, Canada

Majesty of the Seas 1992 1992 2,350 Western Caribbean, Bahamas

Empress of the Seas 1990 2016 1,550 Eastern/Western Caribbean, Canada, Bermuda

Celebrity Cruises

Celebrity Apex 2020 2020 2,900 Europe, Eastern/Western Caribbean

Celebrity Flora 2019 2019 100 Galapagos Islands

Celebrity Edge 2018 2018 2,900 Eastern/Western Caribbean, Europe

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Celebrity Apex 2020 2020 2,900

Celebrity Flora 2019 2019 100

Celebrity Edge 2018 2018 2,900

Celebrity Reflection 2012 2012 3,050

Celebrity Silhouette 2011 2011 2,900

Ship Year Ship

Built Year Ship

Entered/Will Enter Service (1)

Berths Primary Areas of Operation

Celebrity Reflection 2012 2012 3,000 Southern Caribbean, Europe

Celebrity Silhouette 2011 2011 2,850 Southern Caribbean, Europe

Celebrity Eclipse 2010 2010 2,850 South America, Alaska

Celebrity Equinox 2009 2009 2,850 Eastern/Western Caribbean

Celebrity Solstice 2008 2008 2,850 Australia, Alaska

Celebrity Xploration 2007 2016 20 Galapagos Islands

Celebrity Constellation 2002 2002 2,150 Middle East, India, Europe, Caribbean

Celebrity Summit 2001 2001 2,200 Southern Caribbean, Bermuda, Canada

Celebrity Infinity 2001 2001 2,150 Western Caribbean, Bahamas, Europe

Celebrity Xpedition 2001 2004 50 Galapagos Islands

Celebrity Millennium 2000 2000 2,200 Eastern Asia, Alaska

Celebrity Xperience 1982 2016 50 Galapagos Islands

Azamara Pursuit 2001 2018 700 South America, Europe

Azamara Quest 2000 2007 700 Australia, Asia, Alaska

Azamara Journey 2000 2007 700 Europe

In Service or Delivered, if after 2020 (1)

Celebrity Eclipse 2010 2010 2,850

Celebrity Equinox 2009 2009 2,850

Celebrity Solstice 2008 2008 2,850

Celebrity Xploration 2007 2016 20

Celebrity Constellation 2002 2002 2,200

Celebrity Summit 2001 2001 2,200

Celebrity Infinity 2001 2001 2,150

Celebrity Xpedition 2001 2004 50

Celebrity Millennium 2000 2000 2,200

Silversea Cruises

Silver Origin 2020 2020 100 Galapagos Islands

Silver Moon 2020 2020 550 Europe, Caribbean

Silver Muse 2017 2017 550 Australia, Asia, Alaska

Silver Spirit 2009 2009 500 Southern Caribbean, Europe, Asia

Silver Whisper 2001 2001 350 Southern Caribbean, Europe

Silver Shadow 2000 2000 350 Asia, Europe, Southern Caribbean

Silver Wind 1995 1995 250 Southern Caribbean, Europe, Canada

Silver Cloud 1994 1994 250 South America, Europe

Silver Galapagos 1990 2013 100 Galapagos Islands

Silver Explorer 1989 2008 100 South America, Europe

Pullmantur (4)

Monarch 1991 2013 2,350 Southern Caribbean

Horizon 1990 2010 1,400 Middle East, Europe

Sovereign 1988 2008 2,300 South America, Europe

Silver Dawn 2021 2021 550

Silver Origin 2020 2020 100

Silver Moon 2020 2020 600

Silver Muse 2017 2017 600

Silver Spirit 2009 2009 600

Silver Whisper 2001 2001 400

Silver Shadow 2000 2000 400

Silver Wind 1995 1995 250

Silver Cloud 1994 1994 250

Silver Explorer 1989 2008 150

Mein Schiff 2 (2)

2019 2019 2,900 Europe, Southern Caribbean

Mein Schiff 1 2018 2018 2,850 Europe, Canada, Western Caribbean

Mein Schiff 6 2017 2017 2,500 Western Caribbean, Europe, Asia

Mein Schiff 5 2016 2016 2,500 Southern Caribbean, Europe, Middle East

Mein Schiff 4 2015 2015 2,500 Middle East, Europe

Mein Schiff 3 2014 2014 2,500 Asia, Europe

Mein Schiff Herz 1997 2011 1,850 Europe

2019 2019 2,900

Mein Schiff 1 2018 2018 2,900

Mein Schiff 6 2017 2017 2,500

Mein Schiff 5 2016 2016 2,500

Mein Schiff 4 2015 2015 2,500

Mein Schiff 3 2014 2014 2,500

Mein Schiff Herz 1997 2011 1,900

Hanseatic Spirit 2021 2021 230

Hanseatic Inspiration 2019 2019 230

Hanseatic Nature 2018 2018 230

Europa 2 2013 2013 500

Europa 1999 1999 400

Total 140,810

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(1) The year a ship entered service refers to the year in which the ship commenced or is expected to commence cruise revenue operations for the brand.

(2) Commencing in the second quarter of 2021, Grandeur of the Seas is planned to no longer operate under the Royal Caribbean International brand and we expect to lease the ship to Pullmantur.

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(3) During 2019, the lease for Discover was terminated.

(4) In January 2020, we sold Zenith to a third party.

(1) The year a ship entered service refers to the year in which the ship commenced cruise revenue operations for the brand.

If after 2020, the date reflects the year of expected delivery into the brand.

(2) TUI Cruises' newbuild entered service as Mein Schiff 2 in February 2019 and the existing Mein Schiff 2 was renamed Mein Schiff Herz .

As of December 31, 2020, our Global Brands and our Partner Brands have 15 ships on order.

Three ships on order are being built in Germany by Meyer Werft GmbH, four are being built in Finland by Meyer Turku shipyard, five are being built in France by Chantiers de l’Atlantique (formerly known as STX France), four are being built in Italy by Fincantieri and one is being built in the Netherlands by De Hoop Lobith.

As of December 31, 2019, the expected dates that the ships on order will enter service, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship Shipyard Expected to Enter

Three ships on order are being built in Germany by Meyer Werft GmbH, four are being built in Finland by Meyer Turku shipyard, four are being built in France by Chantiers de l’Atlantique, three are being built in Italy by Fincantieri and one is being built in Norway by Vard Fincateieri.

COVID-19 has impacted shipyard operations which have and will continue to result in delays of our

previously contracted ship deliveries.

As of December 31, 2020, the dates that the ships on order are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship Shipyard Expected Delivery Approximate

Royal Caribbean International —

Wonder of the Seas Chantiers de l’Atlantique 2nd Quarter 2021 5,700

Unnamed Chantiers de l’Atlantique 4th Quarter 2023 5,700

Wonder of the Seas Chantiers de l’Atlantique 1st Quarter 2022 5,700

Unnamed Chantiers de l’Atlantique 2nd Quarter 2024 5,700

Quantum-class:

Odyssey of the Seas Meyer Werft 4th Quarter 2020 4,200

Unnamed Meyer Turku Oy 2nd Quarter 2022 5,600

Odyssey of the Seas Meyer Werft 1st Quarter 2021 4,200

Unnamed Meyer Turku Oy 3rd Quarter 2023 5,600

Unnamed Meyer Turku Oy 2nd Quarter 2025 5,600

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Celebrity Cruises —

Celebrity Apex Chantiers de l’Atlantique 2nd Quarter 2020 2,900

Celebrity Beyond Chantiers de l’Atlantique 4th Quarter 2021 3,250

Celebrity Beyond Chantiers de l’Atlantique 2nd Quarter 2022 3,250

Unnamed Chantiers de l’Atlantique 4th Quarter 2023 3,250

Silversea Cruises (1) —

Silver Origin De Hoop 3rd Quarter 2020 100

Silver Moon Fincantieri 3rd Quarter 2020 550

Silver Dawn Fincantieri 3rd Quarter 2021 550

Silver Dawn Fincantieri 4th Quarter 2021 550

Evolution-class:

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Unnamed Fincantieri 1st Quarter 2026 4,100

Hapag-Lloyd Cruises (50% joint venture) —

Hanseatic Spirit Vard Fincantieri

2nd Quarter 2021 230

Total Berths 51,980

__________________________________________________________________

(1) The revenue impact from Silversea Cruises' new ships will be recognized on a three month reporting lag from the "Expected to Enter Service" dates above.

(1) The revenue impact from Silversea Cruises' new ships will be recognized on a three month reporting lag from when the ships enter service.

Refer to Note 1 .

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Financial Statements and Supplementary Data for further information.

In addition, as of December 31, 2019, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in the 4th quarter of 2024, which is contingent upon completion of conditions precedent and financing.

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Our revenues are seasonal based on the demand for cruises.

Demand is strongest for cruises during the Northern Hemisphere’s summer months and holidays.

In addition, as of December 31, 2020, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

Our revenues have historically been seasonal based on the demand for cruises.

Demand is typically strongest for cruises during the Northern Hemisphere’s summer months and holidays.

In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have focused on deployment in the Caribbean, Asia and Australia during that period.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations , for definitions).

Passengers Carried, Passenger Cruise Days, Available Passenger Cruise Days and Occupancy reflect the impact of our 2020 suspension of operations due to the COVID-19

Year Ended December 31,

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___________________________________________________________________

(1) As a result of the three-month reporting lag, we included Silversea Cruises' results of operations from October 1, 2018 through September 30, 2019 for the twelve months ended December 31, 2019.

(1) As a result of the three-month reporting lag, we included Silversea Cruises' results of operations from October 1, 2019 through September 30, 2020 for the twelve months ended December 31, 2020, and from October 1, 2018 through September 30, 2019 for the twelve months ended December 31, 2019, respectively.

Refer to Note 1 .

General and Note 11 .

B usiness Combination to our consolidated financial statements under Item 8.

Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for more information on the three-month reporting lag and the Silversea Cruises acquisition.

(2) We acquired Silversea Cruises on July 31, 2018 and report their results on a three-month reporting lag.

(2) We acquired a controlling interest in Silversea Cruises on July 31, 2018 and report their results on a three-month reporting lag.

As a result, these amounts include only August and September 2018 amounts for Silversea Cruises.

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General and Note 11 .

Business Combination to our consolidated financial statements under Item 8.

Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for more information on the three-month reporting lag and the Silversea Cruises acquisition.

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Prices vary depending on many factors including the destination, cruise length, stateroom category selected and the time of year the cruise takes place.

Soon after our initial suspension of operations due to the occurrence of COVID-19, we established flexible cruise pricing programs (i.e.

Cruise with Confidence, Best Price Guarantee and all-inclusive pricing) that present our guests with options and value as we anticipate our return to service.

Although we grant credit terms in select markets mainly outside of the United States, our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the sailing.

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During the selling period of a cruise, we continually monitor and adjust our cruise ticket prices for available guest staterooms based on demand, with the objective of maximizing net yields.

As we grow our business globally, our sale arrangements with travel agents may vary.

For instance, although our direct business is growing at a rapid pace, sale arrangements through travel agent charter and group sales are proportionately higher in the China market than in our other markets which are primarily through retail agency and direct sales.

As our business has grown globally, our sale arrangements with travel agents may vary.

For instance, although our direct business has historically grown at a rapid pace, sale arrangements through travel agent charter and group sales are proportionately higher in the China market than in our other markets which are primarily through retail agency and direct sales.

We have developed and implemented enhancements to our reservations system that provide us and our travel partners with additional capabilities, making it easier to do business with us.

For example, we offer air transportation to our guests through our air transportation program available in major cities around the world.

Passenger ticket revenues accounted for approximately 72% of total revenues in 2019, 2018 and 2017.

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Passenger ticket revenues accounted for approximately 68% of total revenues in 2020, and 72% of total revenues in 2019 and 2018.

Onboard Activities and Other Revenues

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Many of these services are available for pre-booking prior to embarkation.

These activities are provided either directly by us or by independent concessionaires from which we receive a percentage of their revenues.

These activities are offered either directly by us or by independent concessionaires from which we receive a percentage of their revenues.

The all-inclusive pricing programs that we offer currently, add some of these onboard activity and other services to the base price of the cruise.

In conjunction with our cruise vacations, we offer pre- and post-cruise hotel packages to our Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises guests.

We also offer cruise vacation protection coverage to guests in a number of markets, which provides guests with coverage for trip cancellation, medical protection and baggage protection.

Onboard and other revenues accounted for approximately 28% of total revenues in 2019, 2018 and 2017.

Onboard and other revenues accounted for approximately 32% of total revenues in 2020, and 28% of total revenues in 2019 and 2018.

Segment Reporting

We control and operate four cruise brands, Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises.

In addition, we have a 50% investment in a joint venture with TUI AG which operates the German brand TUI Cruises and a 49% interest in the Spanish brand Pullmantur.

In addition, we have a 50% joint venture interest in TUIC, our 50%-owned joint venture that operates the German brands TUI Cruises and Hapag-Lloyd Cruises.

We believe our brands possess the versatility to enter multiple cruise market segments within the cruise vacation industry.

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Financial Statements and Supplementary Data .)

As of December 31, 2019, our Global Brands employed approximately 85,400 employees, including 77,000 shipboard employees as well as 8,200 full-time and 100 part-time employees in our shoreside operations.

As of December 31, 2019, approximately 89% of our shipboard employees were covered by collective bargaining agreements.

Human Capital

Our human capital strategies are continually evolving to provide a rewarding and fulfilling employee experience.

Some key elements of these strategies include:

a diverse and inclusive workforce;

opportunities for employee growth and development;

support for health and well-being;

and an active listening strategy to make sure voices are heard in order to facilitate continuous improvement.

As of December 31, 2020, our four global cruise brands, Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises, employed approximately 85,000 employees.

Our shoreside workforce, including employees who work at our private destinations, consisted of approximately 6,900 full time and 100 part-time employees.

Our shipboard workforce consisted of 78,000 employees, and as of December 31, 2020, approximately 89% of our shipboard employees were covered by collective bargaining agreements.

Due to the pause in our cruise operations in 2020, we repatriated the majority of our shipboard employees to their home countries, and as a result, we ended the year with approximately 87% less employees onboard our ships compared with 2019.

The following table details the distribution of our workforce by employee type and region as of December 31, 2020:

Employee Type (1)

Based Employees International Employees

Shoreside Operations 4,000 2,000

Shipboard Employees 78,000

Private Destinations (2)

(1) Includes full time and part time employees.

(2) Private Destinations includes Coco Cay, Labadee and Galapagos based employees.

As a global operation, we take great pride in the broad diversity of our workforce and the value that it brings to our company.

Our shoreside workforce is gender diverse with 53% female representation.

Our shipboard workforce is comprised of employees from 120 plus countries.

The majority of our shipboard workforce comes from the Philippines (29%), Indonesia (16%) and India (14%).

Our shoreside workforce is primarily based out of the U.S.

(69%), Philippines (10%), U.K.

(5%) and China (4%).

The following table details the gender distribution of our workforce by employee location as of December 31, 2020:

Employee Location Male Female Unidentified

Shoreside - U.S.

Shoreside - International 47% 52% 1%

Shipboard 79% 21%

shoreside workforce is ethnically diverse with 54% of our employees comprised of non-White ethnic groups.

Shoreside Representation by Ethnicity % of Total U.S.

Shoreside Population

African American 11%

(1) American Indians and Pacific Islanders make up approximately 1% of our U.S.

shoreside population.

In addition, we offer a variety of learning and development programs to our workforce which includes a combination of instructor led (classroom and virtual) and web based (self-learning) courses.

In 2020, our workforce spent approximately 1 million hours in training across a variety of areas ranging from Ethics, Compliance, Data Analysis, Business Software and Tools, Finance/Accounting, Professional Development, Project Management Skills, Leadership and Safety/Security.

In total, our workforce completed over 560,000 courses within our learning management systems.

The Company has created a 24/7 care platform provided at no-cost that allows for employees and their families to get confidential assistance with stress management, relationships, financial concerns or legal concerns.

Through this assistance program, we offer:

• Short-term Professional Counseling - providing support for personal and emotional issues through telephone, video or in-person sessions.

• Family Support Services - connecting our employees with advisors that can provide them resources to assist with family planning, parenting, childcare, eldercare, home care support and more.

• Legal Support Services - providing general guidance and referrals to professionals to answer legal questions surrounding divorce, custody, adoption, real estate, debt, bankruptcy, landlord/tenant issues, and more.

• Financial Support Services - providing general guidance and referrals to professionals to answer financial questions about budgeting, debt management, tax issues, and more.

• LifeWorks Digital Wellbeing Website - granting access to an online platform containing hundreds of articles, resources, webinars and tools to help employees better manage overall well-being.

Further, our Disaster Relief program provides emergency funding to employees who have been directly impacted by natural disasters.

All shipboard and shoreside employees are eligible for assistance from this fund.

Finally, COVID-19 has had and continues to have a tremendous impact on our business.

During 2020, our offices closed and our crew were repatriated off our ships to their home countries.

In response, we ramped up our listening strategy through frequent pulse surveys to understand our employees' needs and concerns and help them navigate the crisis.

We continue to run our pulse surveys every quarter to understand and positively impact our employees’ experience.

In 2020, our shoreside employee engagement scores remained high and were higher than the prior 3-year average.

We maintain insurance on the hull and machinery of our ships, with insured values generally equal to the net book value of each ship.

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We are also subject to additional premium calls based on investment and underwriting shortfalls experienced by our own individual insurers.

We maintain war risk insurance for legal liability to crew, guests and other third parties as well as for loss or damage to our vessels arising from acts of war, including invasion, insurrection, terrorism, rebellion, piracy and

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Our primary war risk coverage is provided by a Norwegian war risk insurance association and our excess war risk insurance is provided by our four P&I clubs.

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From time to time, various regulatory and legislative changes may be proposed that could impact our operations and subject us to increasing compliance costs in the future.

CDC Framework for Conditional Sailing Order

On and effective as of October 30, 2020, the CDC issued a Framework for Conditional Sailing Order (the “Conditional Order”) that will conditionally permit cruise ship passenger operations in U.S.

waters under certain conditions and using a phased approach.

All phases listed below are outlined in the Conditional Order;

however, only the first phase listed is detailed in the Conditional Order.

The remaining phases are currently pending approval by the CDC for distribution to all cruise lines prior to being detailed in the CDC's Phase 2 Technical Instructions.

• Establishment of laboratory testing of crew and guests onboard cruise ships in U.S.

waters and upon embarkation and disembarkation;

• Simulated voyages designed to test a cruise ship operators’ ability to mitigate COVID-19 on cruise ships;

• Meeting and maintaining requirements for a Conditional Sailing Certificate, which include, among other things, implementing the required testing protocols, a prohibition on offering itineraries longer than seven days, and the demonstration at each port where a ship intends to dock of approval with U.S.

port and local health authorities, which requires medical care agreements addressing evacuation to onshore hospitals, housing agreements with onshore facilities for isolation and quarantine of COVID-19 cases, and port agreements to limit the number of cruise ships at any single port;

• A return to passenger voyages in a manner that mitigates the risk of COVID-19 introduction, transmission, or spread among passengers and crew onboard ships and ashore to communities.

We are working with both the CDC and the HSP, to implement the requirements of the Conditional Order and establish a comprehensive set of health and safety measures at every step of the guest journey with rigorous protocols.

We are also designing itineraries where we will be able to control the vacation experience in compliance with the health and safety protocols contained in the Conditional Order.

Further, the Conditional Order contemplates that the CDC may issue additional requirements through technical instructions or orders as needed and that the phases described above will be further determined based on public health considerations, including the trajectory of the pandemic and the ability of cruise ships operators to successfully employ measures that mitigate the risk of COVID-19.

Our resumption of operations will include a staggered return of the fleet to service which will include:

• Bringing the fleet from layup status to fully operational;

• Bringing crew back to an appropriate staffing level and expected reduced load factors for a period of time;

• Implementation of the health and safety protocols on ships as they resume operations.

We are also reviewing and assessing the uncertainties relating to the Conditional Order’s requirements.

Based on our assessment of these conditions or for other reasons, we may determine it necessary to further extend our voluntary suspension of our Global Brands’ cruise sailings.

Safety and Security Regulations

Our ships are required to comply with international safety standards defined in the International Convention for Safety of Life at Sea (“SOLAS”), which, among other things, establishes requirements for ship design, structural features, materials, construction, lifesaving equipment and safe management and operation of ships to ensure guest and crew safety.

The SOLAS standards are revised from time to time and changes are incorporated into the

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operation of our ships.

The SOLAS standards are revised from time to time and incorporated in our ship design and operation, as applicable.

The latest enhancements include the addition of the Polar Code which sets goal-based standards for ships operating in the polar region as well as damage stability requirements for new designs and operational measures for existing vessels.

Compliance with these modified standards have not historically had a material effect on our operating costs.

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As our new ships are delivered and additional existing ships are retrofitted with AEP systems, they will provide us with additional operational and deployment flexibility.

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Additionally, all new ships operating within the North American and U.S.

Caribbean Sea ECA that began construction after January 1, 2016 are required to meet more stringent nitrogen oxide emission limits.

Caribbean Sea ECA that began construction on or after January 1, 2016, and North and Baltic Sea ships constructed on or after January 1, 2021 are required to meet more stringent nitrogen oxide emission limits.

We comply with these rules for those relevant ships in service.

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The rules have not had and are not expected to have a significant impact to our operations or costs.

Recently IMO approved draft amendments to the MARPOL convention that will require ships to combine a technical and an operational approach (Energy Efficiency Existing Ship Index and Carbon Intensity Indicator) to reduce their carbon intensity in line with the ambition of the Initial IMO GHG Strategy, which aims to reduce carbon intensity of international shipping by 40% by 2030, compared to 2008.

While there is still a considerable amount of work ahead before these amendments can be implemented, we believe the amendments could have a material impact depending on the technical and operational approaches used (such as speed optimization, engine power reduction, etc.).

Effective July 1, 2015, the European Commission adopted legislation that requires cruise ship operators with ships visiting ports in the European Union to monitor and report on the ship’s annual carbon dioxide emissions starting in 2018.

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The Norwegian Travel Guarantee Fund requires us to maintain performance bonds in varying amounts during the course of the year to cover our financial responsibility in Norway, Finland and the Baltics.

These amounts ranged from NOK 32 million to NOK 57 million during 2019.

Certain other jurisdictions also require that we establish financial responsibility to our guests resulting from the non-performance of our obligations;

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All of the foregoing is subject to change, and any such change could affect the accuracy of this discussion.

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Application of Section 883 of the Internal Revenue Code

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(1) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States;

and (2) the stock of the corporation (or the direct or indirect corporate parent thereof) is “primarily and regularly traded on an established securities market” in the United States.

and (2) the stock of the corporation (or the direct or indirect corporate parent thereof) is “primarily and regularly traded on an

established securities market” in the United States.

In the opinion of our U.S.

tax counsel, Drinker Biddle & Reath LLP, based on the representations and assumptions set forth in that opinion, we, Celebrity Cruises Inc., Silversea Cruises Ltd.

tax counsel, Faegre Drinker Biddle & Reath LLP, based on the representations and assumptions set forth in that opinion, we, Celebrity Cruises Inc., Silversea Cruises Ltd.

and relevant ship-owning subsidiaries with U.S.

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source gross transportation income, if any, each year because it does not have a fixed place of business in the United States and its income is derived from the leasing of a ship.

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Other United States Taxation

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This did not have a material impact to our results of operations for all years presented.

2017 Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law.

Among other things, the new legislation reduced the federal corporate income tax rate to 21% from 35%, resulting in an immaterial benefit in 2017 related to the reduction of our U.S.

deferred tax liability.

Although there are a number of provisions which apply to us, there was no material impact to our overall tax expense as a result of the legislation.

Maltese and Spanish Income Taxation

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We and certain of our subsidiaries are subject to value-added and other indirect taxes most of which are reclaimable, zero-rated or exempt.

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Website Access to Reports

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Lisa Lutoff-Perlo 63 President and Chief Executive Officer, Celebrity Cruises

Lawrence Pimentel 68 President and Chief Executive Officer, Azamara

Roberto Martinoli 68 President and Chief Executive Officer, Silversea Cruises

Kulovaara 68 Executive Vice President, Maritime

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Pujol 53 Senior Vice President, Chief Accounting Officer

Naftali Holtz 43 Senior Vice President, Finance

Fain has served as a director since 1981 and as our Chairman and Chief Executive Officer since 1988.

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Since February 2017, Mr.

Liberty has overseen the Company’s Treasury, Accounting, Corporate, Strategic and Revenue Planning, Corporate Development, Deployment, Internal Audit and Investor Relations functions.

Liberty has overseen the Company’s Treasury, Accounting, Corporate, Strategic and Revenue Planning, Corporate Development, Deployment, Internal Audit and Investor Relations

Since May 2018, in addition to the above functions, he has also overseen the Company’s Information Technology, Supply Chain, Risk Management, Legal and Port Operations functions.

Liberty has overseen our Silversea Cruises investment since 2019.

Prior to his role as Chief Financial Officer, Mr.

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Senior Vice President, Hotel Operations of Celebrity Cruises from 2007 to 2012;

and Vice President, Onboard

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Revenue of Celebrity Cruises from 2005 to 2007.

and Vice President, Onboard Revenue of Celebrity Cruises from 2005 to 2007.

Lutoff-Perlo held various senior positions in sales and marketing with Royal Caribbean International from 1985 to 2005.

Lutoff-Perlo also serves on the Board of Directors of AutoNation.

Lawrence Pimentel has served as President and Chief Executive Officer of Azamara since July 2009.

From 2001 until January 2009, Mr.

Pimentel was President, Chief Executive Officer, Director and co-owner of SeaDream Yacht Club, a privately held luxury cruise line located in Miami, Florida with two yacht-style ships that sailed primarily in the Caribbean and Mediterranean.

From April 1991 to February 2001, Mr.

Pimentel was President and Chief Executive Officer of Carnival Corp.’s Seabourn Cruise Line and from May 1998 to February 2001, he was President and Chief Executive Officer of Carnival Corp.’s Cunard Line.

Lutoff-Perlo currently serves on the Board of Directors of AutoNation and is Vice Chair for United Way of Broward County.

Roberto Martinoli has served as President and Chief Executive Officer of Silversea Cruises since 2016.

Before joining Silversea, Mr.

Martinoli was the Chairman and Chief Executive Officer of Grandi Navi Veloci from 2010 to 2016, President and Chief Operating Officer of Norwegian Cruise Line from 2007 to 2010, Executive Vice President of Operations at Carnival Cruise Lines from 2000 to 2007 and Senior Vice President at Costa Crociere from 1997 to 2000.

Kulovaara has served as Executive Vice President, Maritime since January 2005.

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Pujol was a Senior Manager at the international public accounting firm of KPMG LLP.

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Naftali Holtz has served as Senior Vice President, Finance of the Royal Caribbean since 2019.

Before joining Royal Caribbean, Mr.

Holtz worked in investment banking at Goldman Sachs and was most recently Managing Director, Head of Lodging and Leisure Investment Banking.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business