RCL Q2 2014 CONFERENCE CALL

As we expected, Europe lead the Q2 beat despite lower onboard spend than we thought. 3Q net yield guidance was within expectations.  Quantum will be the next catalyst in November.

RCL Q2 2014 CONFERENCE CALL  - gg

CONF CALL NOTES

  • Double Double program (3-yr goal):  
    • Optimizing revenue
      • Structurally, had seen general pressure on pricing and compression on pricing
        • 4 areas of revenue expansion:
          • Strengthening brand
            • Azamara achieving double digit yield improvements
          • Enhancing global footprint
            • Bringing US guests on European itineraries
          • Asia
            • Quantum deployment to China is very exciting
          • Pullmantur
            • Cusp of turning an important corner.  Increased focus on Latin America.
    • Controlling costs
    • Moderate growth
      • 3-5% average compound growth is appropriate
  • Quantum of the Seas
  • 2Q
    • Better close-in pricing for Europe and Asia
    • Caribbean- highly promotional; ticket revenue yields down YoY
    • Onboard revenue yield:  +3% (10th consecutive quarter of onboard growth) - beverages packages and internet service drove the gains
    • NCC - better than expected, mostly timing related; balance of costs will be spent in rest of year
  • Booking environment:  significantly higher YoY.  Booking window continue to expand.  load and APD are up for rest of 2014.
  • Early 2015:  load and APD higher YoY
  • Caribbean:  very price sensitive.  Have implemented various promotions.  Expect Caribbean yield declines but see some improvement on Oasis ships.
  • Europe:   
    • Guests paying 20% more (in-line with our pricing survey)
    • Less supply to sell
    • Black Sea sailings pressured by conflicts in region
    • Med sailings doing well
  • Q3 guidance
    • Positive trends in Europe, China, and Alaska

Q & A 

  • Caribbean:  closer to inflection point; more pressure on 7 night and shorter itineraries.
  • Caribbean got quite a bit worse from 1Q to 2Q but has stabilized since.
  • Caribbean:  1Q 2015 comps will be harder than rest of quarters
  • Either higher dividends or stock repurchases in future
  • China:  proven to be a successful market but it is fairly young; but  investments have been costly, as with all new markets.  Still in the 1st inning.
  • 2015 NCC:  general commitment to cost cutting but there will be inflation pressures
  • Net Yield outlook:  +4% on average is a little on the high side
  • Q4 yield growth:  relatively consistent on bookings environment.
  • New onboard planning tool:  too soon to see how CruisePlanner will perform but doing well on Quantum
  • FY yield target unchanged due to rounding 
  • China vs Caribbean:  economically, Quantum should perform as well in China as in Caribbean (more costs but also more onboard revenues)
  • Demand will drive the profitability change.  Capacity has been set for the next 3 yrs.
  • Onboard revenue:  all categories up.  Doubled efforts on shore excursions.