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.
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.
