Takeaway: Lots of positive buzz on elements on Quantum, particularly the WiFi. But the 'Quantumizing' of the existing fleet will be costly.

Management commentary on board Quantum



Chairman Fain, CEO

  • Fuel:  20% better on ships pre-2006 vs post 2006 on $ per APCD
  • 85% guests using smart online registration process; boarding process on ship was less than 10 minutes.
  • O3B technology:  
    • Connectivity is 450x faster (fastest in the industry)
    • 8 orbiting satellites beaming on Quantum
    • Will be on Allure shortly and will be implemented across the fleet, particularly Caribbean-focused ships
      • Will be a very expensive investment 
      • Currently charging less on new WiFi product than older version of internet on other ships
    • RCL has exclusive contract with O3B in the cruise industry for a long period of time
  • Energy usage:  10-12% more efficient than their competition
    • Additional ~2.5% energy improvement expected in 2014
  • Advanced Emission Purification (AEP):  takes out sulfur; Mein Schiff III is the 1st cruise ship built with an AEP system already installed
  • Oasis 3 :  20% more efficient than Oasis 
  • Newer ships:  25% higher revenue, 20% lower costs, 3.5x higher EBITDA
  • ROI opportunities:  Best thing to add are staterooms; staterooms cost less to build on newer ships. 
  • Customers who book onboard activities in advance spend more onboard $ on the ship.  The pre-cruise planner has worked well.
  • Revenue breakdown:  Have gone from 20% non-US to 50% non-US


Jason Liberty, CFO

  • Solid liquidity
  • Net debt/EBITDA improved by ~50% over last 5 yrs
  • ROIC up 110 bps YoY
  • Moderate capacity growth:  
    • 2 Quantum Class
    • 2 Oasis Class
    • No order for 2017
    • Sold 5 ships in past 6 years
  • Continued double yield growth for Europe and China for end of 2014
  • Quantum demand exceeding expectation
  • 2015 
    • Yield growth: higher than 2014 yield growth
    • Fuel consumption down 2.5% for 2015


Q & A

  • Dollar strength vs lower fuel prices have neutralizing effects.  Will look into revising fuel hedging program but will also keep an eye on how much stronger the dollar gets.
  • Share buyback vs buying back debt:  
    • Being investment-grade credit is very important to RCL
    • Weighted cost of debt:  3.5%
    • Not much tax shield
  • Travel agents vs direct bookings:
    • Quantum has gotten better publicity than any other ship
    • Travel agents critical to attracting 1st time cruisers
    • More and more cruisers are buying directly thanks to internet resources
    • RCL direct bookings cost:  less than the 12-15% of revenues
  • Quantum to China
    • More significant costs
        • Marketing expenditures on grand welcome for Quantum
        • Chic will be transformed into traditional Chinese restaurant
        • Rice will be cooked in large woks -- more expensive products
        • Expanding casino
          • More table games; few slots
          • 2 private gaming rooms
        • Johnny Rockets will be converted to Kung Fu Panda noodle shop
        • Why Quantum didn't consider Southwest China on their itineraries and not just Korea/Japan?
          • For tax reasons and also less port charges.  
          • The trips are short (4-5 days), so not enough time to visit other places
        • Commissions paid to Chinese agents:  similar to US
    • Ships are almost exclusively Mainland Chinese guests  
    • A little more family/multi-generational 
    • 1/3 crew will be Chinese
    • Booking online in China is very low
  • Supply in Caribbean:  have seen stress in Q1 2015
  • Supply stress also in Australia/New Zealand
  • Not focused on macroeconomic trends in Europe
  • Ships that burn MGO fuel have lower ROIC e.g. Millennium, Meridian  
  • Double-Double targets have incorporated much of the additional capex needed to upgrade existing fleet.

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