NCLH 2Q 2014 CONFERENCE CALL

Management's conference call tone was positive, despite lower Q3 guidance. However, we remain cautious on Q4 guidance as pricing may not match the bullish volume commentary.

 

 

CONF CALL

  • Caribbean environment:  highly promotional
  • Core fleet has done well 
  • Getaway:  leads in guest satisfaction
  • Expanded casino partnerships
  • Tougher comps will ease in 4Q
  • Anticipate the promotional market to continue for the year and into early 2015
  • Europe:  Med continues to do well
  • 3Q:  tougher comps YoY (strategically held pricing in 3Q 2013 (ticket yields was up 5%);
  • Going forward, Breakaway yields expected to perform in-line with rest of fleet;  
  • Higher Caribbean capacity in Q3 (23%) is reason why yield guidance is lower in Q3  this holds no water since you have to Bermuda in the mix.  Q3 Caribbean+Bermuda capacity is 40% of total itineraries vs 32% year ago.
  • Overall, 2014 load is ahead of 2013
  • Q3 deployment:  23% in Caribbean, 32% in Europe, 17% in Bermuda, 18% in Alaska
  • 3Q:  doubling of Caribbean capacity YoY in Miami due to Getaway.  Absent its introduction, yields would be 200bps higher
  • Getaway 5-yr payback
  • 4Q:  easier Caribbean comps
  • Higher costs on new ship orders (2018-2019):  higher euros, new enhancements on ship; will take a little more than 5 yrs to pay back

 

Q & A

  • Started to see some booking traction (last 12 wks):  substantial growth (+20%) in booking activity
  • Q3/Q4:  solidly loaded over prior yr; can protect pricing
  • Cautiously optimistic 
  • Feel better about pricing
  • Cost volatility from Q3 to Q4:  food offerings, guest interaction investments from the NEXT program
  • 2015:  better loaded across the board than in 2014 and 2013; pricing looks good; beginning of a fundamental shift (most of pressure in Q1 (Super Bowl lap))
  • 2015 pricing should be solid
  • Feeling better about Caribbean in 2015 (excluding Q1)
  • Lower cost of sales
    • In Q2, have lowered port agreement costs
    • Have expanded casino players, with no incremental costs
    • Had done less air packages and aggressively negotiated with credit card companies
  • Hearing from Genting that they will not sell at current levels
  • Frustrated with stock price
  • Recently mandated a 3% price increase across fleet.... still seeing good volume
  • Alaska:  overall pleased.  Sun booked significantly better than 2013.
  • Europe:  Q2 pricing above 10% (because of easy comps in 2013)
  • Two ships year-around in Europe which benefits Q4, with signficantly higher pricing and load
  • Premiums on new ships:  across 12 months,  still double digit premiums but onboard could be impacted by a mix issue (larger families spend less onboard)
  • Don't have any 'old' ships; not looking to sell any ships

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