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