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In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

OVERALL:  

  • BETTER:  Quarter was in-line with our estimate but Q4 guidance was better.  2014 outlook for Europe and Alaska was surprisingly strong.  Guidance for the Caribbean market was less positive and management concedes visibility remains low.  We prefer CCL given its outsized exposure to a European recovery.

RCL 3Q REPORT CARD - rcl  revised

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EUROPE

  • BETTER:  Europe is trending well and will see yield improvement in 2014.  Mgmt sees a comeback in Southern Europe (Germany), particularly from the affluent cruisers.
    • PREVIOUSLY:  "Europe is developing about as we anticipated and we are expecting net yield increases in the mid-single digits for the year."

CARIBBEAN

  • WORSE:  2014 net yields are forecasted to be flat to slightly down.  The positive commentary heard in Q2 has shifted to a more cautious tone. 
  • PREVIOUSLY:  "The Caribbean, which represents about a quarter of our deployment in Q3 and almost half in Q4, is holding up pretty well. We are aware there has been a lot of focus in the investment community on the overall health of the Caribbean in light of some of the competitive pressures. And we would be naive to say that this has not affected us to some degree. But at a macro level, consumers seem to be recognizing the value of our brands and our pricing in the region continues to show improvement for the year."

ASIA

  • BETTER:  The continued territorial dispute between China and Japan has prevented RCL from making calls to Japan.  However, Asian bookings are up considerably in 2014.
  • PREVIOUSLY:   
    • "Asia is the only product in our portfolio that we are forecasting to have lower yields for the year."
    • "The territorial island dispute between China and Japan has forced us to drop Japanese ports-of-call from our itineraries, and in total we have had to modify 30 sailings. These modifications have resulted in some churn in our book-of-business as well as some volatility in the booking behaviors in the region."

PULLMANTUR

  • WORSE:  The tone was somber and the outlook dark.  Tough road ahead.
  • PREVIOUSLY:  "Our Pullmantur brand is one exception here (positive growth) and as Richard noticed, the brand will be putting much more emphasis on developing its business in Latin America."

COMPETITIVE PRICING/PROMOTIONAL ACTIVITY

  • SAME:  It seems that the heighted promotional activity is centered mostly around short excursions in the Caribbean.  Pricing in the Caribbean remains very competitive. 
  • PREVIOUSLY:  
    • "In recent weeks competitive pricing has gotten more intense.
    • "Throughout recent months, there has been a lot of promotional activity. We've discussed in the past that you can basically expect to see promotional activity throughout the revenue cycle."

2013/2014 BOOKINGS

  • SAME:  RCL's booked load factors are currently ahead of the same time last year in all four quarters of 2014.  Booked prices for the first quarter are in-line, while up in 2Q, 3Q and 4Q.
  • PREVIOUSLY:  "Bookings for both 2013 and 2014 are ahead of where we were at the same time last year, both in terms of load factor and pricing."

2014 NCC EX FUEL

  • BETTER:  Although mgmt acknowledges it will be an aggressive target, they believe 2014 NCC ex fuel will be better than flat.
  • PREVIOUSLY:  "Our objective for next year is to at least achieve flat net cruise costs excluding fuel. And while we don't forecast what the price of oil will do, we do work aggressively to reduce our energy consumption."

ONBOARD YIELD

  • BETTER:  3Q onboard yields were up 7% YoY.  Strength was seen among US customers in beverages, gaming, retail, shore excursions, specialty dining sectors.  For 2014, mgmt sees package shore excursions as having the most upside opportunity.
  • PREVIOUSLY:  "Onboard spending was much stronger. Onboard revenues increased 8.2% for APCD in the quarter and generated about $0.04 per share of favorability to our April's expectations.  Overall, we are generally seeing better spending behaviors out of the North American guests, but we are also enjoying very favorable results from our revitalization project. Gaming, beverage, specialty restaurants and shore excursions all out-performed."

ALASKA

  • BETTER:  mgmt is seeing modest yield growth in this region
  • PREVIOUSLY:  "I think we anticipated that Alaska had a terrific beginning of the year and it was unlikely to continue at that trajectory."