管理層發言
Good morning. My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Viking's Second Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the program to your host for today's conference, Vice President of Investor Relations, Carola Mengolini.
Good morning, everyone, and welcome to Viking's Second Quarter 2026 Earnings Conference Call. I am joined by Leah Talactac, President and Chief Executive Officer; and Linh Banh, Chief Financial Officer. Also available during the Q&A session is Torstein Hagen, Executive Chairman. Before we get started, please note our cautionary statement regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release as well as in our filings with the SEC. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-IFRS financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at ir.viking.com.
Leah and Linh will provide a strategic overview of the company, a recap of our second quarter results and an update of the current booking environment. We will then open the call for your questions. To supplement today's call, we have prepared an earnings presentation that is available on our Investor Relations website. With that, I'm pleased to turn the call over to Leah.
Thank you, Carola. Good morning, everyone, and thank you for joining us. We are very pleased to have delivered another quarter of strong year-over-year performance. As we reported this morning, during the second quarter, revenue increased 16.5%, driving an 18.2% growth in adjusted EBITDA. These results reflect the continued strong demand for our destination-focused travel experiences and the great execution of our teams across the organization. On Slide 3, you can see that demand for Viking is strong. From an advanced booking perspective, our 2026 season is effectively sold out with 96% of the capacity for our core products already booked. Looking further ahead, our focus is on continuing to build our book position for 2027. As of August 9, 53% of the capacity for our core products for 2027 was booked, and this includes a 15% year-over-year increase in capacity. Overall, we are very encouraged by the early booking trends for 2027.
As you can tell from these trends, the visibility provided by our advanced bookings gives us confidence in the demand for our product, allows us to manage pricing dynamically and supports our thoughtful approach to capacity growth. As you can see on Slide 4 and since our last earnings call, we have continued to expand our fleet, adding 4 new river vessels and 1 ocean ship, consistent with our long-term growth strategy. During 2026, we expect to take delivery of 12 ships in total, 10 for River and 2 for Ocean. As we grow the Viking fleet, we remain committed to the characteristics that make our ships unique and support the distinctive earnings profile of our business. First, we operate one of the youngest fleets in the industry, which contributes to lower maintenance costs, greater operational reliability and long earnings power. Second, our ships have been thoughtfully designed to maximize operational efficiency while providing the consistent and great experience that our guests expect.
And third, within each of our product categories, our ships are designed to be almost identical and indistinguishable to our guests. Guests choose Viking because of the destinations and itineraries we offer, not because of a particular ship. As a result, when ships are deployed on similar itineraries, they are generally able to achieve comparable yields regardless of when they entered service. We believe this is a significant competitive advantage and an important driver of the long-term returns generated by our fleet. Moreover, our almost identical ships also create significant operational advantages. Because our ships are built to common specifications, we benefit from efficiencies across sales and marketing, operations, deployment, purchasing and shipbuilding. This approach simplifies everything from crew training and maintenance to inventory management and fleet deployment. Taken together, we believe that these advantages reinforce the strength of our business model and the distinctive earnings power of the Viking fleet.
Now while a thoughtful fleet expansion remains the engine of our growth, we are also focused on further enhancing the experiences we offer our guests. Moving to Slide 5. You can see that we continue to increase our offering of land extensions and optional shore excursions, providing guests with more opportunities to explore the destinations they visit before, during and after their voyage. One example is our new St. Moritz, Lombardy & Alpine Train extension, which takes guests through the Swiss Alps aboard the Bernina Express. This 4-night fully guided trip can be added before or after the cruise. And we have also expanded our shore excursion portfolio with experiences such as a Zeppelin flight over Cologne, which offers breathtaking aerial views of the city's most iconic landmarks. Additions such as these reinforce our commitment to providing meaningful and memorable ways for our guests to explore the world.
We believe that they are an important differentiator for Viking. As our fleet continues to grow, so does the range of experiences available to our guests. Now before turning the call over to Linh to discuss our financials, I would like to address the low water levels currently affecting some rivers in Europe. As we have discussed in the past, river cruising is inherently dependent on natural conditions, and no two seasons are alike. This year, portions of several European rivers, particularly the Danube and the Rhine, have experienced historically low water levels, creating operational challenges across the industry. Generally, Viking's purpose-built river fleet, deployment flexibility and well-established ship swap capabilities are significant competitive advantages that enable us to minimize disruptions as much as possible. That said, the historically low water levels this year, combined with conditions that have deteriorated week by week, have impacted guests on some of our itineraries this season.
Delivering a great guest experience is one of our highest priorities, and our teams are working tirelessly to ensure that any necessary adjustments are handled as smoothly as possible. With our guests at the center of every decision we make, we are also enhancing our communication protocols to ensure they understand what to expect on disrupted itineraries. We are doing this through more proactive outreach and more frequent operational updates. We are also issuing future cruise vouchers to certain affected guests. While we believe this is the right approach from both a guest satisfaction and loyalty perspective, these vouchers will have a financial impact extending beyond 2026 and into 2027 and 2028 as they are redeemed. We believe this investment reinforces the trust that our guests place in Viking and supports the long-term loyalty that has been fundamental to Viking's success. Our focus remains on taking care of our guests, operating our European River fleet through these challenges and continuing to deliver the exceptional experiences for which Viking is known. With that, I'll turn it over to Linh to discuss our financials.
Thank you, Leah, and good morning, everyone. I will start by reviewing our very strong second quarter results. On a consolidated basis, total revenue for the quarter increased 16.5% year-over-year to $2.2 billion. The year-over-year increase was mainly driven by increased capacity and higher revenue per PCD. During the second quarter of 2026, capacity PCDs increased 10.9% compared to the same period in 2025. This year-over-year growth was mainly driven by the expansion of our fleet, which included the addition of 7 River vessels and 2 Ocean ships. The growth also reflects additional capacity of the Viking Yi Dun, an Ocean ship dedicated to our guests from Asia. It is now sailing in Europe, and we are pleased to be expanding our European itinerary offerings to this important and growing customer base. Adjusted gross margin increased 16.3% year-over-year to $1.4 billion, resulting in a net yield of $645, 6.2% higher than the second quarter of 2025.
Vessel expenses, excluding fuel per capacity PCD, increased 2.7% this quarter compared to the same period last year. Regarding SG&A, expenses were slightly lower as a percentage of adjusted gross margin when compared to the same time last year. As we have mentioned in the past, our priority is to invest in our teams as well as in sales and marketing to support future growth and drive demand generation. Adjusted EBITDA for the second quarter was $748 million, 18.2% higher than the same period last year. This significant year-over-year increase was mainly driven by higher capacity and higher net yields in both the Ocean and River segments. As we have shared before, capacity growth, coupled with net yield growth, translates into strong EBITDA improvement and margin expansion. Net income was $588 million, an improvement of $148 million when compared to the same period in 2025. Adjusted net income attributable to Viking Holdings Limited was $587 million, 33.8% higher than the same period in 2025.
Adjusted EPS was $1.31 for the second quarter, 33% higher than the same period in 2025. Before moving to our reportable segments, which are on Slide 8, I would like to highlight that for the first half of the year, our consolidated adjusted gross margin increased 16.5% year-over-year to over $2.1 billion, and our adjusted EBITDA was $853 million, 20.9% higher than in the same period last year. It is important to note that the prolonged low water conditions we are experiencing across some of our European rivers are not yet reflected in our financial results. As conditions evolve, we will see some impact in the periods ahead, although it is too early to determine the extent. Now I will briefly discuss our two reportable segments, River and Ocean. Unless noted, I will be referring to the year-to-date metrics for six months ended June 30, 2026. For the River segment, capacity PCDs increased 3.2% year-over-year, and occupancy for the period was 94.8%.
Adjusted gross margin grew 11.3% year-over-year, and net yield was $660, up 8.8% year-over-year, driven by strong demand across all regions and favorable itinerary mix. For Ocean, capacity PCDs increased 11.4% year-over-year, mainly due to the addition of the Viking Vesta in July of 2025. Occupancy for the period was 95.4%. Adjusted gross margin increased 20.3% year-over-year to $1.1 billion, while net yield increased 7.7% to $593. Similar to River, the year-over-year increase was driven by strong demand and favorable itinerary mix. Now moving to the balance sheet. On Slide 9, you can see that as of June 30, 2026, we had total cash and cash equivalents of $4 billion, and we also have an undrawn revolver facility of $1 billion. Our net debt was $2.4 billion, and our net leverage was 1.2x. As of June 30, 2026, deferred revenue was $5 billion. Also on Slide 9, we show our bond maturity outlook.
As you can see, maturities are in 2028 and beyond. With this, I'd like to confirm our debt amortization for 2026 and 2027. As of June 30, 2026, the scheduled principal payments for the remainder of 2026 were $117 million and $234 million for the full year 2027. From a committed capital expenditure perspective and for the full year 2026, the total committed ship CapEx is about $1.9 billion, or $650 million net of financing. And for the full year 2027, the total expected committed ship CapEx is about $1.0 billion, or $260 million net of financing. We will now dive into the booking curves, which are all as of August 9, 2026. On Slide 11, we show our consolidated metrics for our core products. As you can see, we are in very good shape for both the 2026 and the 2027 seasons. The 2026 season already has 96% of the capacity PCDs booked. Advanced bookings equal $6.4 billion, which is 13% higher than the 2025 season at the same point in time, while capacity is increasing by 7%.
And for 2027, we are already 53% booked with capacity increasing by 15% year-over-year. We have $4.7 billion of advanced bookings, which are 21% higher than the 2026 season at the same point in time in 2025. I will now talk about the advanced bookings curves for the segments. On the next slide, you will see our curves for Ocean cruises. This is Slide 12. I will start with the yellow line, which shows the bookings for 2026. Overall, we have sold 96% of our capacity PCDs for the year and have $2.9 billion of advanced bookings, which is 17% higher than last year at this point in time. Capacity is increasing by 9%, and rates have remained strong as we finish selling the year. If you look at the gray line, you will see the booking trend for the 2027 season, which is in very good shape, too. As of August 9, we had sold about 62% of the 2027 capacity for Ocean, which is quite notable since the capacity is increasing by 18% year-over-year.
Advanced bookings are 29% higher than last year, with rates equal to $877 compared to $781 for the 2026 season at the same point in time. Now we move to Slide 13, you will see the curves for the River segment. I will start with the advanced bookings for 2026, which is the yellow line. As you can see, we are having a very good year with 96% of the 2026 capacity already sold. We have over $3 billion in advanced bookings, which is 11% higher than last year at this point in time. Similarly to Ocean, we have continued to book our remaining inventory at very attractive rates. Capacity for the River segment is growing approximately 6% during 2026. Now looking at the gray line, these are the advanced bookings for the 2027 season. As you can see, we have sold about $1.8 billion in advanced bookings, which is 11% higher than the 2026 season at the same point in time. Our operating capacity for River is up 13% year-over-year, and we are already 42% booked.
These are good trends for 2027 with relatively high rates equal to $1,029 compared to $942 in 2026. Keep in mind that the River operation is seasonal as our core European product starts in March. Given this, the booking curve builds through the year. So recapping, demand for our product is strong, and we are very pleased with how the booking curves are developing. Now Leah will add some color to our order book and capacity.
Thank you, Linh. As we reported this morning and since our last earnings call, we took delivery of 4 River vessels and 1 Ocean ship and exercised our options for 2 additional Ocean ships scheduled for delivery in 2032. We are very pleased with our performance year-to-date, and our ongoing fleet expansion underscores confidence in the business, the resilience of demand and the long-term growth opportunity before us. We look forward to updating you on our progress in the quarters to come. With that, operator, we are ready to open the line for questions.
分析師問答
Your first question is coming from Steve Wieczynski from Stifel. At our last earnings call, we took delivery of four River vessels and one Ocean ship and exercised our options for two additional Ocean ships scheduled for delivery in 2032. We are very pleased with our performance year-to-date, and our ongoing fleet expansion underscores our confidence in the business, the resilience of demand and the long-term growth opportunity before us. We look forward to updating you on our progress in the quarters to come. With that, operator, we are ready to open the line for questions.
Technical difficulty.
Steve, your line is not coming through clearly. Are you able to repeat your question? And once again, Steve, your line is not coming through very clearly. Are you able to repeat your question, please? Your next question is coming from Xian Siew from BNP Paribas.
Maybe on the low water levels, are you seeing any near-term indicators that suggest consumers might be avoiding river cruising at all? Just given the low water levels, are you seeing any near-term impact on demand? And then maybe longer term, how do you think about how low water levels might impact guest experience and brand loyalty? I know in the past instances of, I think it was in 2022, low water levels in the Rhine, guest ratings were similar for itineraries with ship swaps and to those without, and maybe it's a little bit more difficult this year, but anything you could share in terms of brand loyalty over time and guest satisfaction?
Thanks for the question. So for nearly 30 years, Viking has successfully operated on Europe's rivers through a wide range of water conditions. River levels naturally fluctuate from year to year. Some seasons we experience high water. Other seasons we experience low water. That's really the reason why our river fleet was designed with these realities in mind. And we have, over the course of 30 years, worked on our operational expertise that allows us to minimize disruptions through proven solutions, including ship swaps when necessary, so that our guests can continue to enjoy the itineraries that we offer. This year was exceptionally low water. We understand that it was not ideal conditions. But nevertheless, we continue to operate without any cancellations. I think our booking curves for the River segment speak for themselves. We have not seen any particular impact in terms of booking cadence, but I'll let Linh expand on that.
Thanks, Leah. I concur with what Leah said. If you look at our '27 curves as of August 9, we are already over 40% booked for Rivers, and that is a great position to be in. So based on that, we don't believe low water is impacting our bookings, and we're pleased with how the curve is tracking.
Maybe could I add a point? It's Tor here. I'm in Europe. I'm in Oslo as a matter of fact. And my daughter, Karine, was on board the Mira here in Oslo, and guests there have been — 100 guests there have been on river cruises — on the combined river cruise down the Rhine and then on to the Mira. And of course, we all are a little bit concerned about our guests' reactions. As you know, we try to go a bit overboard to treat our guests well. She said that the people she spoke to said that they were very pleased with the way Viking handled the whole situation. And of course, we have the benefit that we can do the ship swaps and all that. So of course, it's not ideal, but I think we've been able to handle it very well. We were a little bit slow initially, but I think we have handled it very well.
Your next question is coming from Matthew Boss from JPMorgan.
Congrats on another nice quarter. So Leah, with your 2027 advanced bookings per PCD up 10%, more or less unchanged relative to a quarter ago, can you touch on recent pricing trends across River relative to Ocean? Or just any constraints to delivering at least the mid-single-digit historical yields in 2027 despite the impact that you cited from vouchers? And Linh, on expenses, any transitory impact to expect in costs, excluding fuel for this year? Or just any constraints to your ability to manage costs below yields for this year and next year as we think about the impact from the water levels?
Matt, our booking curves show that our rates are actually pretty good. And also the pacing is strong, with 40% of the River capacity and more than 60% of Ocean capacity for 2027 already being booked as of this point in time. We don't see an impact on demand in the bookings that are coming in. Based on recent events, we've seen our guests prove to be resilient and are continuing to book 2027 and future seasons. Linh, do you want to add additional color?
Sure. Thanks, Leah. So for 2027, as Leah noted, our net yields are quite strong, about 10% higher compared to the same point in time prior season. This reflects favorable product mix and pricing-to-demand. Our goal remains mid-single-digit yield growth for 2027. As it relates to expenses, as you know, we don't provide formal guidance by quarter, but the first half has shown where expenses have been. Cadence of expenses may differ from one period to the next. It's not always like-for-like. So we wouldn't suggest extrapolating too literally, but our goal is always to be prudent and diligent with cost management. We noted earlier that there may be some impact from low water. We may see that in the third quarter and then also from the voucher issuances. As vouchers are issued and utilized for future periods, those future periods will reflect the voucher value.
Your next question is coming from Robin Farley from UBS.
If you could help us quantify a little bit the vouchers issued. It's interesting that you're saying you've done that even though you haven't had any cancellations. Just thinking about, assuming if all those vouchers were to be used in 2027, what the total impact would be? I would assume it's relatively small across the base of your fleet, but if you could help us quantify the value that you've issued. And then also on that 10% increase in 2027 booked revenue per day, you mentioned the favorable product mix in there. Is it fair to assume there's also some benefit that that's a gross revenue number, that airfares are maybe higher in 2027 versus 2026? And any color you could give us on how the cruise ticket price itself is trending if you didn't have that higher airfare in there, just even in whatever way you can help us quantify that?
Robin, this is Leah. So yes, we did proactively issue future cruise vouchers. As Tor mentioned earlier during the call, we want to make sure that the guests feel that we understand that nobody wants a disrupted cruise. We understand that this was not what they had hoped for when they first initially booked. So that future cruise voucher generates goodwill and, in the hopes, encourages guests to return for future seasons so that they can experience what Viking is known for. Based on conditions, they continue to evolve week to week. So at this stage, our focus is on the direct impact to our third quarter. So as of mid-August, more than 50% of the River capacity cruise days were affected with about 10% to 12% ultimately canceling. So we have proactively started to issue vouchers for these guests to acknowledge that we understand what's going on. We understand that this is not what they had purchased. And hopefully, as Linh noted, these vouchers would encourage them to come back to Viking and experience what we are known for. With that, I'll turn it over to Linh for the questions you had about airfare.
Thanks, Leah. So as it relates to 2027 and net yields, our curves show advanced bookings per PCD, which is revenue that we generate from our guests that have booked thus far. So it is favorable product mix. We price to demand, keeping in mind that we want to ensure our pricing encourages guests to return. Net yields reflect costs, including airfare when applicable. Airfare is an area where many companies are seeing pressure. That being said, our goal remains mid-single-digit yield growth year-over-year. That remains the same for 2026 and for 2027.
Your next question is coming from Trey Bowers from Wells Fargo.
I just want to confirm, when we look at the booking curves, is there any impact of that from the issued vouchers? Or is that a totally clean number? And then I guess, as well, kind of unrelated, the sales and marketing spend was really solid this quarter. It was down year-over-year. If you guys could just talk about any efficiencies you're seeing in kind of your marketing spend and where you see that heading over time?
Sure. The second quarter results do not include any impact from the low water. The low water really started in mid-July. The future cruise voucher is a credit that can be applied toward new future bookings, and they're used towards the cruise fare. So they're effectively providing a discount on the price of the future cruise. These can be applied for cruises later in 2026 and into 2027 and 2028 and future years.
Your next question is coming from James Hardiman from Citi.
I wanted to circle back to the discussion about mix and how that seems to benefit your advanced bookings per PCD number. We spent a lot of time on the last call talking about that outsized 11% number and how it wasn't likely to stay where it is. Maybe speak to how much of that mix being sold is responsible for going from the 11% to the 10%. And how much, as we think about what's left to be booked, should impact that number or how much that 10% is likely to stay closer to where it is? And maybe as part of that, we did see River, in particular, decelerate a couple of points versus the last advanced booking per PCD number. I think it went from about 12% to closer to 9%, whereas Ocean was pretty consistent. What's the narrative there? Is that really just about mix? Or did River, in fact, slow more so than Ocean? Just help us understand those pieces.
Sure. We did speak about this in the last quarter call, which is that we do have a product mix benefit for the year-to-date curves for 2027. So as we sell more, for example, Egypt and Vietnam, that does heavily weight the average price so that year-over-year, it looks stronger. As we continue to sell our bread-and-butter product, which is Europe, the average price will start to normalize. Our goal remains mid-single-digit yields for both River and Ocean. As it relates to Ocean, the price year-over-year for 2027 did stay around that 12% range. While there may be upside, we need to let the booking season develop before extrapolating trends. We still have a good chunk of inventory left to sell. Overall, the current strength is driven by higher pricing and itinerary mix, but our goal remains mid-single-digit yield growth.
Your next question is coming from Lizzie Dove from Goldman Sachs.
You talked a bit more about the offering of more land extensions, shore extensions and things like that. Could you share how you're thinking about that longer term and whether from an acquisition perspective, that's something that might fit into the overall portfolio? And especially within the context of, I think you still have about $4 billion of cash, how do you think about the relative priorities of capital returns or capital allocation over time?
Lizzie, we have been clear from the start that our focus is really about the destination and the experiences. When we think about our future itinerary planning and the offerings we have available for either optional shore excursions or pre- and post-cruise extensions, our teams keep destination and guest experience top of mind. These additions are intended to enhance our core products and provide guests more opportunities to explore. Tor, do you want to give a little color on the Zeppelin and how extensions and other experiences enhance our core products?
Your next question is coming from Conor Cunningham from Melius Research.
I didn't know if Tor wanted to respond there or not.
Yes. Tor, I think you might be on mute. Do you want to respond on the experiences? Anyway, I'll look for Tor to unmute. Well, hang on one second. Let me just finish the second portion. On the capital allocation question, we do have a healthy cash balance of $4 billion. Our priority, as you can see from our order book, is to reinvest in the business to generate strong returns. We have a framework for evaluating acquisitions. First, an opportunity must be scalable—able to move and generate comparable or better returns than our ships. It must be margin accretive and complementary to the brand and fit within the brand ethos. Conor, go ahead with your question.
Okay. Sorry. So maybe just a point of clarification and then piggybacking on the excursion stuff. Can you clarify: occupancy in the second quarter for River decelerated year-over-year, and you're saying there was no impact. Could you just talk about that? I think it may be in the context of supply growth. And then on the excursion and shore product, can you talk about what's actually resonating and where attach rates are today and where you see the opportunity for attach rates five years from now?
Your next question is coming from David Katz from Jefferies.
Apologies for the brief disconnect. For the second quarter of 2026, we performed well in River, and occupancy was slightly lower than Q2 2025. There was some impact related to our Egypt cruises, but that itinerary generally sells very well and remains well priced. As it relates to excursions, we've mentioned this in the past: slightly less than 40% of our guests opt to take a pre- or post-land extension. That helps from a margin perspective. In addition, guests who take extensions or optional shore excursions tend to rate their experience better, which is what we want. By adding optional experiences, we increase guest satisfaction. Please go ahead with your question.
No, we're going to—Leah, we're going to take the cadence back right now, okay? What I wanted to ask is context on the portion of bookings that are repeat customers. The degree to which these customers have been on multiple Viking cruises and are having a challenged experience now may make it easier for them to accept disruptions. Any qualitative sense around the portion of the current book that are repeat customers would be helpful.
Sure. As of 2025, approximately 52% of guests who traveled with us were repeat guests. That mix is important as we grow the fleet: a healthy balance of repeat customers and new-to-brand guests as we expand our addressable market. When we think about encouraging repeat travel, we focus on new itineraries, itinerary mixes and new destinations such as India and Egypt, which have proven popular. Optional excursions can also give repeat guests something new to experience even on familiar itineraries. Our portfolio breadth—over 520 destinations, 21 major rivers, operations on seven continents and in all oceans—allows guests to travel with Viking wherever they want to go. That breadth helps drive repeat travel.
Your next question is coming from Andrew Didora from Bank of America.
When you look back historically at times like this, maybe 2022 or before that, what kind of impact did you see in future bookings? Just trying to frame your commentary about seeing an impact in 2027 and 2028. Also, when you said more than 50% of cruises are impacted, is that for third quarter cruises? And how does this compare to other low water events— is this the worst you've seen?
Andrew, as of mid-August, more than 50% of our River capacity PCDs during the third quarter—this really began in July and continued into mid-August—were impacted. For those impacted cruises, we observed disruptions to the guest experience and have issued vouchers for affected guests. Those vouchers will impact future bookings when redeemed, typically later in 2026 but mainly in 2027 and 2028. Compared to prior seasons, this low-water event is more severe than we've seen in many prior years. We are being proactive to protect guest satisfaction and loyalty, and we will likely see some impact to the third quarter of 2026 and into future years. That said, our booking curves and pricing to date remain healthy, and we continue to pursue our mid-single-digit yield growth target.
Your next question is coming from Richard Clarke from Bernstein.
On the booking curve, you cut it at August 9. Would you expect it to look meaningfully different if you cut it today? And operationally, are you happy to treat 2026 as a one-off year, or will you change deployment, shift capacity away from the Danube and Rhine, or add more land-based excursions to mitigate if these conditions repeat more often?
I'll address the operational aspect. River levels naturally fluctuate from year to year—some seasons high, some seasons low. For 30 years we've operated through these variations and designed our fleet accordingly. Having nearly identical ships makes it easier to execute ship swaps and maintain guest experience, since ships can be substituted with comparable product. This year is particularly low, but we have operated through similar events such as in 2018 and 2022 without canceling cruises. Our approach relies on operational flexibility, contingency planning, and itinerary adjustments to minimize disruption for guests.
If I can add: we've seen this before. If we inform our guests about expectations, that addresses much of the concern. Our identical-ship strategy helps minimize swaps to a single ship swap where possible. I see no reason to lower ambitions for River volume. In fact, a contrarian approach could present opportunities—given our strong financial position and ability to act, we might find ways to take advantage of the environment.
Your next question is coming from Stephen Grambling from Morgan Stanley.
Two follow-ups. First, that comment on the cancellations in 3Q—when you say 10% to 12% cancellations, was that of the 50% impacted or of total River capacity? Second, on excursions and extensions, any sense for the economics and operations as we think about incremental margins? Strategically, how do you balance expanding excursions with staying true to your all-inclusive brand?
To clarify, the 10% to 12% cancellation estimate refers to the portion of the affected 50% of River capacity PCDs. Regarding all-inclusive: our core product remains all-inclusive with included amenities, excursions, beer and wine with meals, and more. Optional excursions and pre/post extensions are up to the guest; they choose to opt in for additional experiences. We believe offering choice enhances guest satisfaction while maintaining the all-inclusive baseline that defines the brand.
As mentioned earlier, roughly 40% of guests opt for a pre- or post-extension, and a substantial portion add optional shore excursions. Those revenues are already reflected in our net yields. Over time, optional excursions and extensions can contribute incrementally to revenue and margins, and we will continue to expand offerings where it makes sense operationally and from a guest-experience perspective.
Your next question is coming from Meredith Jensen from HSBC.
Could you speak more about the 'Other' portion of revenues, which is performing very well? Specifically, how are the U.S. products like the Mississippi and Ohio rivers performing given current global conditions?
Meredith, the 'Other' segment is a mix of Mississippi river operations, our Expedition product, and our China outbound efforts. Growth in the second quarter reflects activity in those areas, including the Viking Yi Dun, which we positioned to serve Chinese-speaking guests and took to Europe this summer. We currently operate four long ships in Europe for our Chinese-speaking guests plus the Yi Dun on Ocean itineraries. We're excited about the China opportunity and about the performance of other portfolio elements such as the Mississippi and Expedition itineraries.
I've spent a fair amount of time on our China outbound business, which we operate differently than many others. We market directly to the Chinese consumer and operate ships in Europe with Chinese-speaking staff and cuisine, so guests feel at home. The reactions have been very positive, and deploying the Viking Yi Dun in Europe for Chinese guests has been well received. I think this can be a real opportunity for us in the medium term.
Your next question is coming from Alex Brignall from Rothschild & Company.
On China, is there progress on domestic China business? And on India itineraries, how have they started—what is demand like and how are booking curves looking? Also, on Q3 modeling, with cancellations and vouchers, are there other incremental costs we should consider beyond lower passenger counts?
On China: we did operate in Chinese waters in the past, but that market is fiercely price competitive. Our strategy is different: by marketing directly to the Chinese consumer and deploying ships in Europe with Chinese staff, we can set our own pricing and not be subject to wholesale pricing pressures. It takes longer to scale, but the medium-term profitability should be superior when we succeed.
On India: we announced India in 2025 to start sailing in 2027, and we are pleased to report that 2027 and 2028 India itineraries are completely sold out. 2029 is also selling well. Regarding Q3 costs: the low-water situation is ongoing, having started in mid-July and into mid-August. It is premature to provide precise figures. We will likely see some incremental expenses from transportation that will affect adjusted gross margin and some operational expenses impacting vessel expenses. We will provide an update in Q3.
If you look at our presentation and the order book, this is a phenomenal asset. While water-level issues are challenging operationally, our order book, our marketing, and strong contract pricing with the yards make the fleet one of Viking's main assets. With prudent spending on marketing and good guest treatment, the order book will remain a key value driver for the company.
Yes. Thank you, Tor. That sums up our position. These are historically low water levels, but this is something we are experts at dealing with. It's something we handle from time to time, whether low or high water, and our operations team is excellent at managing it. Having said that, thank you, everyone, for joining us today. We apologize for the various hiccups we've had throughout this call. We appreciate you bearing with us. Thank you, and we will speak to you next quarter. Thanks, and have a great day.
Thank you.