RCL Q1 2014 CONFERENCE CALL NOTES

04/24/14 11:11AM EDT

RCL is fortunate to have more cost cuts in the bag and a stronger Europe/Asia business.  But there is no question that the Caribbean has gotten weaker. 

CONF CALL

  • TUI JV:  Mein Sciff 3 will take delivery one month from today
    • Will have scrubbers
  • Installing new O3B internet systems to increase internet bandwidth for Oasis of the Seas.  Could roll out to more ships as well.
  • 1Q:  oil spill in Gulf, damaged propeller in Tokyo affected 2 sailings  
  • 1Q 2013:  record yields
  • 1Q Caribbean:  2/3 of capacity
  • Settled maturity of 1BN euro bond in 1Q
  • 2014:  will recognize $23MM in restructuring expenses and $11MM loss associated with Pullmantur tour business.  $19.6MM was included in 1Q and rest will be recognized later this year.
  • Bookings volume:  have been accelerating, bookings up 20% YoY, driven partly by Caribbean discounting.  APDs are high.
  • More bullish on Europe and China and incorporated more conservative outlook in Caribbean.
  • Pricing pressure on Caribbean (3-7 night itineraries)
  • Caribbean capacity is higher in Q2 than in all other quarters; expect largest yield decline there.
  • European sailngs are at higher prices and volume.  US source market particularly strong.  Finally seeing pricing recovery in Southern Europe
  • Asia:  continue to exceed pricing and volume expectations.
  • Costs:  Inflation pressures, rising insurance premiums, and nominal capacity growth
  • Caribbean:  
    • Continuing to experience significant promotional activity
    • Yields to be down slightly 
    • Guidance assumes continued promotional activity for rest of year
    • Oasis continue to command highest premiums 
  • Bookings in March/April up double digits
  • Quantum of the Seas:  Dynamic Dining exceptionally well-received
  • Marnier and Voyager of the Seas doing well in Asia
  • Strong onboard revenue in Asia will improve further
    • Expect double digit yield improvement in 2014
  • Europe:  capacity-adjusted bookings up 25% YoY; load factors highest since 2007
    • Demand from NA particularly strong
    • 80% NA bookings on the books for 2014, considerably higher than that of last year
    • Northern Europe/Med: doing well
    • 2014:  Yields up double digits
  • Alaska:  solid performer; anticipate highest yielding product in 2Q/3Q
    • Low-mid single yield growth for 2014
  • Expect more marketing for Asia later this year

Q & A

  • 1Q incidents:  all were small e.g. Explorer norovirus
  • Caribbean:  booking trends lower but normal since it's post-Wave but more volume than normally in March/April.  
  • Surprised post-Wave volumes were stronger than historically been
  • Caribbean:  weaker yields today than in January;  have been weaker than what mgmt expected
  • Caribbean capacity in 2015:  very slightly up
  • Quantum pricing in China vs Caribbean:  very confident the ship will do well in Caribbean and Asia (ticket/onboard)
  • China is more expensive to operate in
  • 1Q Caribbean capacity deployment was higher before Quantum move.  After move, it is basically flat
  • China is in a profitable position today
  • Still sees opportunity in Latin America and South America e.g. Pullmantur
  • High costs in Brazil
  • Canyon Ranch:  finished transition to Celebrity in less than 4 wks; not much disruption
  • 1Q Onboard strength:  gaming and beverage
  • Strength in Spain, UK, and Ireland markets
  • Med: less capacity YoY, more strength from Southern Europe, better distribution channels
  • Pullmantur tour business:  +/- zero for a couple of years; sold in late January
    • Not included in previous and current guidance 
  • Revitalizations have helped onboard revenue
  • 3 Asian source market developments:  Quantum in Shanghai; Tianjin/Bejing region; Pearl River Delta/Hong Kong region
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