Royal Caribbean Pays $3 Billion for Half of Sandals, Stepping Off the Ship and Onto the Beach
The cruise operator is buying 50% of Sandals and Beaches at about 10x forward EBITDA, valuing the all-inclusive chain at $6 billion, and its own shares fell sharply on the news.
What Happened
Royal Caribbean Group has agreed to acquire a 50% equity interest in Sandals and Beaches Resorts for approximately $3 billion, implying a forward EBITDA multiple of around 10 times and a $6 billion valuation for the whole business. Family members of Sandals founder Gordon Stewart retain the other half.
The transaction creates a joint venture combining Sandals’ Caribbean all-inclusive portfolio with Royal Caribbean’s cruise, private-destination and vacation operations. It will be governed by a board under the shared leadership of Royal Caribbean chairman and chief executive Jason Liberty and Sandals executive chairman Adam Stewart, who keeps his executive role. Royal Caribbean has secured committed debt financing from Morgan Stanley and expects the deal to close in early 2027, subject to customary approvals, and to be accretive to earnings next year. Royal Caribbean shares fell roughly 12% following the announcement.
Why It Matters
Royal Caribbean is buying the part of the holiday it does not own. The company has spent heavily on private destinations to capture more of a traveller’s spending, but guests still book land-based stays elsewhere. Owning half of the best-known all-inclusive brand in the Caribbean lets it sell combined cruise-and-resort packages and keep revenue inside the group that currently leaks to hotel operators.
A 12% share drop is a clear verdict on capital allocation. Management promised earnings accretion next year, yet the market still marked the stock down hard. The concern is straightforward: a cruise operator taking on committed debt to buy a minority-controlled stake in a different, capital-intensive industry, at a point when investors would rather see deleveraging and buybacks than diversification.
Fifty-fifty ownership is a genuine structural question. Royal Caribbean gets no outright control, and the Stewart family keeps both half the equity and the executive chairmanship. Joint ventures between a listed operator and a founding family can work well when interests align. But they offer limited recourse when they do not, and consolidating neither full profits nor full control complicates the equity story.
- Shared control: A 50% stake without outright control limits Royal Caribbean's ability to force strategic or operational change.
- Debt-funded diversification: Committed financing adds leverage for an asset class the company has not operated before.
- Caribbean concentration: The portfolio is geographically concentrated and exposed to hurricane seasons, regional demand shocks and airlift capacity.
- Reasonable entry multiple: About 10x forward EBITDA is undemanding for a premium leisure brand with pricing power.
- Cross-selling potential: Royal Caribbean's booking engine and loyalty base give Sandals a distribution channel it cannot buy elsewhere.
- Aligned founders: The Stewart family retaining half the equity and day-to-day leadership keeps the operating expertise firmly invested in the outcome.
Source: Bloomberg