The chart below describes one reason why there was mismodeling for fuel and how the Street missed FX impact.
For your reference, we have reattached our past pricing survey. http://docs.hedgeye.com/HE_Cruise_Pricing_JAN2015_Wave.pdf
CONF CALL
- On track for Double-Double Program
- Pleased with Quantum and Anthem - experienced healthy bookings and are large drivers of 2015 results
- Oasis-class RC vessels and Solstice-class continue to improve on performance
- That's not new. What about the pre-2006 ships?
- Guest satisfaction at record levels in 2014
- SkySea JV will happen in mid-2015
- All unit cost increases in 2015 is attributable to ramping in China
- Celebrity: EDGE ships in 2018/2020
- Will divest older tonnage as opportunities arise
- Ended 2014 with best forward booking status in company history
- Maybe because of an earlier Wave this year
- Close-in bookings in F4Q were more sluggish than expected. Caribbean is the culprit.
- 2015 Wave: still early but overall encouraged
- Once lap 1Q 2015, yield on all products are expected to be up mid-single digits.
- Capital allocation tools: stock buyback and increasing dividend
- RCL: 'at the pump' prices have lagged brent prices but have now finally caught up. Also uses inventory on FIFO basis.
- Typically 4-6wk lag for at the pump prices for RCL
- 4Q: 2.7% net yields (slower Caribbean, non-holiday price reductions)
- Onboard rev: +4.9% (strong sailings on New Year sailings and strong beverage packages)
- NCC: better back office costs and crew movement costs
- Would have come in better than guidance if not for currency, net of fuel
- 1Q 2015
- Caribbean capacity: up 8% YoY (70% of capacity); promotions stimulating close-in demands. Quantum performing well but short and 7 night Caribbean itineraries have been challenging.
- 2Q 2015
- RCL Caribbean capacity: -2%; industry capacity: -4% YoY
- 2Q-4Q
- APDs up YoY due to Australia and Asia
- 2015
- Caribbean capacity: up slightly (44% of capacity)
- Bookings doing very well
- Caribbean yields: down mid-single digits in Q1, up low single digits in Q2
- 2015 Europe
- Capacity: +5% YoY; bookings over last few months are doing well; recent demand have been strong in US and UK bookings; expect mid-single digit yields (but this is influenced by Allure being in Europe this summer season)
- But what about pricing?
- 2015 Asia: 15% of total capacity
- Expect yields up low-mid single
- 2015 NCC ex fuel: +1% or better
- Change in presentation: Pullmantur financials historically been reported on a 2-month lag. Could change to real-time in 2H 2015 but the effect is immaterial.
- 1Q 2015: Higher marketing spending during Wave
Q & A
- What happens to Double Double if FX continues to pressure earnings?
- Not a new factor.
- Everything positive in the last couple of months.
- Tone is positive. Wave is strong and typical.
- Oil Forward curve in contango
- 2015 onboard forecast: driven by Quantum/Anthem. O3b technology has helped customer spending on internet packaging.
- Expect Alaska pricing is doing well and bookings too
- Australia: a lot of capacity going there so there is some stress on yields
- Value-added vs discounts: more bundled packages like Celebrity 1-2-3 Go
- Proving very popular with consumers and travel agents since it increases their commissions
- Could have a little reduction on onboard revenue
- Last few weeks in January: pleased with Wave. Seeing good volume. Saw some declines after France attacks but only for a few days.
- Europe: much more balanced view; if they had not seen 2014, they would be euphoric.
- Right, so really hard comps - Mgmt tone shaky here.
- European itineraries: 2/3 of European guest come from local economics
- Shift more sourcing to North America passengers
- Incremental demand from European customers: a little bit of dip from Paris tragedy but demand is in-line.
- CCL/RCL in China - need to educate Chinese consumer. Overall industry is growing
- Q4 2014: more promotional than expected
- How much did holiday shift added to Q4 yields? Immaterial (bp point or two)
- 4Q Other income line: excluding the $33.5m in tax reform benefits, the rest is TUI's results