A mixed picture for RCL as suggested by our cruise survey: stronger Europe, weaker Caribbean.  We see CCL as the better bet as pricing particularly in the Caribbean looks more robust than RCL in early Wave 2014.




  • Impact of the 2013 challenges is holding back the kind of yield increases they would otherwise be enjoying for 2014
  • The Caribbean weaker due to two factors: firstly, it's the areas hardest hit by the media storm of 2013; and secondly, large capacity increase here for both the company and the industry of 13%. 
  • RC brand:  greatest investments and greatest opportunity for improvements
  • Celebrity:  expect improvement in ROI in 2014
  • Azamara:  looks to achieve some of the highest yield improvements in a year
  • Pullmantur:  expect the greatest relative benefit
    • Spanish market remains key to Pullmantur's long-term success, but the immediate growth in Latin America should be significant. 
    • Expect this transformation to take some time and for 2014, the year will be a transitional year.
    • Expect the biggest benefits of Pullmantur's changes to occur in 2015 and beyond
  • Seeing improvement coming in the results of underperforming assets e.g. Pullmantur
  • 4Q 2013
    • Europe/Asia drove the 3.8% yield increase, offset by slight decline in Caribbean
  • 2013 
    • Flat yields in Caribbean
    • +8% yields in Europe
  • Compared to same time last year, 2014 has 5% more revenues on the books
  • The first week of WAVE was somewhat softer than last year, as much of North America was weathering the polar vortex.  While cold winter typically means increased demand for Caribbean sailing, the severity of the weather kept people indoors and clearly resulted in lower bookings for several days.  Demand was softest out of the Northeast and Midwest but stronger in the warmer market.  Excluding the first week, demand has been more typical at WAVE level. 
  • Caribbean: 46% capacity in 2014
    • Currently, booked load factors and rates for the Caribbean are lower than the same time last year
    • Longer-dated itinerary pricing doing better than shorter-dated ones
  • Europe:  22% capacity in 2014
    • Booked load factors and APDs are significantly higher than the same time last year and are expecting another year of significant yield improvement in Europe and expect yields to surpass pre-recessionary levels.
  • Asia-Pacific:  12% capacity in 2014
    • Those of booked load factors and APDs remain ahead of the same time last year, in spite of a 12% increase in capacity.
    • Expect nicely higher yields
  • Other:  20% capacity in 2014
    •  An aggregate of these itineraries are booked ahead same time last year on both grade and volume 
  • 2014 guidance
    • APDs up in all 4 quarters
    • Load factors flat in 1Q but up in 2Q, 3Q, and 4Q
    • Capacity growth:  1.7%
    • Inflationary pressures
    • Hedges, swaps are $57MM lower YoY
  • Quantum delivery: Oct 2014


Q & A

  • Last year's WAVE bookings were up 20% in January.  WAVE Jan 2014 not as strong as Jan WAVE 2013.  Comparisons get easier particularly in 2Q.
  • Continue to root for cold weather; adversely affected 1st wk of WAVE since it was so cold
  • Cost savings not in early innings but as a journey process
  • Target leverage ratio:  3.75x  and investment grade target
  • Share repurchase? Board has had discussions
  • European strength:  strong demand from NA market (stability with air costs, allows customers to purchase air package at an earlier date); strength from all source markets; capacity is lower
  • 10K - will outline each 2013 Q excluding Pullmantur non-core assets
  • Asia/Australia:  pleased with outlook; Mariner of Seas in China doing well; robust market in Australia; Japan/China dispute still a wild card 
  • Strong late bookings in European/Asian products in 4Q 2013
  • 2014 Onboard yields: similar to 2013 growth (+2%-3%)
  • Cost efficiencies:  global restructuring, back office integration
  • Promotional environment:  discounting is a part of the WAVE equation right now (very competitive)
  • Alaska: 'mini-Europe in terms of importance'; feel pretty good about bookings (capacity unch YoY); fairly confident with how Alaska is shaping up
  • Onboard:  strength across every revenue stream and market 
  • 2015 EICA impact:  pretty modest (will be quantified in 10K)
  • Lower interest expense for 2014:  $2 billion of refi; weighted cost of debt dropped by 55bps; $500MM lower YoY in debt
  • Historically, newer ships premiums have been 25%
  • Europe:  Strong NA sourced demand for European market; for European-sourced European markets, they're generally meeting expectations
  • Caribbean environment:  promotions continuing into 2Q and 3Q but expectations are baked in their guidance
  • Explorer of the Seas norovirus outbreak:  initial spike in illness on Jan 23; now far less guests becoming ill; compensation given out; don't expect a significant impact to financials

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