NCLH
#First half, because the second half is still so lightly booked that it's not material to commentary.
Look, our brands are strong, our marketing platforms are resonating in the marketplace.
As we have repeatedly said other than European itineraries, this is strong as ever.
Caribbean is very, very strong, Hawaii, Bermuda.
Q1 of 2017 has been very little Europe.
As you know is primarily a Caribbean-centric quarter.
And as we again distance ourselves from the event of Europe, by Q2 of 2017, things begin to improve.
And remember the Norwegian Joy, the new China vessel doesn't come on until Q3.
So the fact that we are so well-booked at such high pricing without the benefits of the China vessel, which we all know is higher yielding than the rest of the fleet, is very encouraging for us.
Well, look there's a couple of things.
One is yes, those events are not hitting our customers in the face every day in the news cycle.
It's a bit of history.
Nothing new has happened, and let's ---+ hopefully, we keep it that way.
But another factor is because the overall travel through Europe is down, the airlines have also had to drop prices.
And so our customers are gaining the advantage of that lower price.
So it's more economical for them to travel to Europe.
So that's having an impact as well.
The strong dollar helps as well.
So we're hopeful again, that the worst is behind us, and we've got some greenshoots that indicate the worst is behind us.
Yes, I'll take your question about the [Med], Eastern Med and so forth.
Our Q2 capacity in the overall Med is 21%, and the growth of 26% in Q3.
So it's more, but not so materially more.
But we are well booked in Q3.
And again our guidance for the full year, takes into consideration what has happened in Europe in Q2, what impact it has had in our Q3 Europe business.
And in spite of that weakness, we reaffirm our full year guidance.
We suggest that if Europe hadn't had the difficulties that its having, our results would have been even stronger.
But we do feel confident, that in spite of what's happening in Europe, and without the need for Europe to have a major rebound as I noted earlier, we are confident of our current guidance.
Well, the difference between Q2, Q3 when you talk about Europe in general, is that the Baltic which is a very high-yielding itinerary, and has been less impacted than the Mediterranean has, really comes into focus much more in Q3 than in Q2.
And in our case, the Baltic represents almost a three-fold increase in capacity over Q2 in the Baltic.
Yes.
So I think what's really important to keep in mind here is that, as we have rolled out our bundled packages, which actually started in Q1 of 2015, the accounting rules stipulate that the revenues allocated between the ticket and the onboard revenue based on retail value.
Sao as a result the individual components are not representative of the selling price in the market.
So what I would focus everybody to concentrate on, and I've been saying this quarter after quarter, is look at total net yield, or total net revenue.
And so if you look at that, if you just take it on a component basis, and try and divide it out by capacity days, it looks skewed when you look at ---+ when you pull apart ticket and onboard.
But it's totally as a result of these bundled packages.
And then, once we get into Q2, we'll be rolling over like-for-like when you look at Q2 of the prior year, before rolling out the bundled packages.
First half, yes.
It's comparable to the prior year.
And as you know we've started the year in a great book position.
So I'm very happy of where we are for 2017.
To be more booked quite frankly, would probably be leaving money in the table, in terms of yield.
And I much more preferred at this stage to be up double-digit in pricing, than have another point or two in capacity.
Yes, hi, <UNK>.
So the per diems are up in the mid to high single-digits, with occupancy slightly down, and slightly down is primarily in Q3, because of the Europe situation we've been discussing.
So I'd rather be slightly ahead, but not anything significant that we can't overcome.
I'd rather much have the up in price, because it is so difficult <UNK> to claw back pricing, than it is to claw back occupancy.
Occupancy is foregone after that ship sales and comes back again, but that pricing tenure that you have in the marketplace lingers.
And so we're very, very pleased and proud of what we've been able to achieve on the pricing side.
All our three brands are recognizing the industry, as having the highest yield in their perspective categories.
And I want to protect that at all costs so to speak.
And the good news for us is that the tempo of bookings is strong.
It is strong, very strong in the fourth quarter.
It is very strong in 2017.
We know about the slight weakness in the third quarter, but it's being offset again by Explorer being so well booked ---+ just about sold out, if not sold out in an entire second half.
Sirena at a very high-yielding ship, is also very well-booked.
And then there is 40 day charter, that it is at a premium pricing.
So as we mentioned in the call, approximately half of our second half yield growth is locked in.
I am still confident that a Norwegian Cruise Line holding vessel will cruise to Cuba before year-end.
We continue to make progress.
I'm both happy of where we are, and disappointed that I missed your April deadline, but I'm getting closer.
And again feel very strong that we will have all this wrapped up soon, and that one of our vessels will cruise into Cuba first of the year.
Look, I still believe that Cuba will garner a yield premium to anything else in the Caribbean.
The question is going to be what percentage of any brands or any companies overall capacity will be dedicated to Cuba, and how many sailings will that ship operate in Cuba.
Obviously, for a Company like us, that we're smaller than our two other competitors in this space, Cuba or a ship like China that could represent a much bigger impact than it does for others.
As you know Norwegian Joy, one vessel in China represents 8% of our capacity.
And so I don't want to say I disagree with whoever made that statement, but on a relative term, I think Cuba will likely be more significant for us than it may be for the other two, because of pure size.
Thank you, <UNK>.
I don't have that number off the top of my head to give you, but I'll tell you that that business is baked in.
The charter is a contract, baked in.
Sirena and Explorer, both very high-yielding vessels are much more sold that rest of the fleet, and that's what gives us the confidence that we are going to be able to achieve our yields in the second half of the year.
Like I said earlier, it's roughly half of our projected yield growth, in the second half of the year are baked in because of our already strong book position.
Remember, I said that our currently booked position is up mid to high single-digits in the second half of the year, along with those three items.
So I would just add <UNK> that our implied yields are very strong for the back half of the year, approximately 4.5%.
But we've also given the cadence that Q3 will be stronger.
We don't actually break it out by the brands, but significant strength is coming from those three items we've cited.
We typically don't break out occupancies like that, specifically.
I will tell you that the back half of the year, the second half of the year pricing is up mid to high single-digits, with overall occupancy compared to this time last year slightly down, whereas slightly down is all in Q3, because Q4 is slightly up.
No, by contract we can't talk about that charter.
It is at a premium to what you ordinary would generate, had she operated our normal itinerary.
But getting back to your first question about cancellations post Brussels, typically when these kind of events happened, cancellations is not what causes the weakness.
If you're booked, you tend to stay.
What typically happens is new bookings are harder to come by.
And that's what happened after Paris.
It's what happened after the Istanbul situation in early January, and it's what happened after Brussels.
And so it takes a little bit of time for the new cycle ---+ and Brussels as you'll recall, was a heavy news cycle, that lingered on for awhile.
So it's now behind us, and bookings are beginning to come back.
It's also prime time Europe is, this is when people start going to Europe.
And so it is possible, although we aren't counting on it from the point of view of our guidance, that there will be a late Europe booking season, later than normal to bridge the gap from where we are today, versus where we normally are.
So in terms of your question on China, yes, it will be roughly 4% for 2017, because the ship comes mid year.
And on a run rate basis, based on current capacity it is 8%.
And <UNK>, on a ---+ from a mix standpoint nothing has changed.
So we're roughly 70% HFO, 30% MGO, but we're using Brent as a proxy for hedging for MGO.
Thank you, <UNK>.
Sure.
So hi, <UNK>.
So full year is down about $13 million.
And at the time that we gave our original guidance our hedge position was roughly 75%, meaning 25% of consumption was subject to volatility.
So we since, pretty much locked that in being 92% hedged.
I'm sorry, and what was ---+ did I answer that, or do you have another question.
Sorry about that.
We don't know what happened.
Is everybody back on.
<UNK>, can you repeat your question, or did you have a new one.
<UNK>.
Okay, because we couldn't hear you.
Can you repeat that.
We're having a little technical difficulty here.
Yes.
So the updated guidance, <UNK>, is actually a tail wind for us.
So we've locked it in.
It's $13 million to $14 million on a full year basis that we'll benefit from.
No, you have that correct.
So it's $15 million in 2016.
I would straight-line that throughout 2016.
And then 2017 first half, there's an additional $[15] million of cost, and although that would be a run rate of $30 million for the year.
We really just call attention to the fact that the ship isn't there in the first half, and it is there in the second half.
But even with those costs in 2017, it's still a run rate is profitable in 2017.
And that is accretive to our $5 EPS target.
Yes, in terms of the Q1 occupancy, it was a strong quarter.
We had Escape for the first time, we didn't have Escape Q1 of 2015.
She's very popular.
It's the peak winter Caribbean season.
The marketing has resonated very well, and we rolled out the Feel it, Free at Sea promotions.
And the vast majority of the inventory was out of Europe, and already booked at the turn of the year.
Remember.
, we had a very strong book position at the end of the year, which benefited Q1 more than any other quarter but just because of its proximity.
So then, just rolling down through Q1, yields as we called attention to, we have seen great ---+ much greater strength in the Caribbean.
We also saw increased onboard revenue.
So you get the right passengers on there, they tend to spend more as we've called attention to.
So we definitely got a boost to our yield.
Net cruise cost, some of that is timing, primarily on marketing.
Let's see, on the other income, you can't really model that.
So this is the first time that we've called attention to this mark-to-market on our ATS, or advanced ticket sales.
The advanced ticket sales is a liability, for the fact that these are future sailings, and due to the weakening of the dollar at quarter end, we recorded this.
But if rates hold at these levels, it would provide a similar tail wind to future quarters.
So you book that revenue then, as the ship sales if you will.
And again, we've never really called this out in the past, because it was immaterial.
So I don't think from that standpoint, you can really model it, but we will call attention to it in future quarters.
If currencies don't change, what was a head wind in Q1, will turn into a tail wind in future quarters, for the reasons that <UNK> just said.
I think that's why it's important, I called attention to it, was the fact that it's $0.02 added on to $0.38.
If it wasn't for this mark-to-market, we delivered $0.40 EPS.
That's correct.
As long as the ship hasn't sailed.
Mark-to-market, whatever is in your liability in ATS, but then once it sails, it's actually in yield.
Well primarily we source 85% of our business from North America, and therefore 85%, 86% of our business comes in US dollars.
So it's not material, and number one and number two, the currency hasn't changed that much.
Right.
We're rolling over similar levels from the prior year.
Latoya, I think we have time for one more question.
Well we are working to diversify our sourcing, so that we are not so dependent upon the North American market.
It's one of the pillars of the FDR deal that we rolled out last year.
So since last year, we opened sales offices in Sidney, Australia, we've opened up three offices in China, we opened an office in Brazil, and we've added resources to both our German offices to take care of Continental Europe and UK office in South Hampton, as the UK is our single largest non-north American market.
So that takes time, but we are already seeing a increase in business from these non-north American markets.
It's one of the reasons why we feel pretty good about Q3.
We'll be able to source more business out of Europe primarily for the Europe itinerary, although we have to recognize that those likely will come in at a lower price point, because that's just how the European business is.
But we do have, we are booked so well at such high prices for Q3, that we can absorb that.
And we don't ---+I'll take the first part of your question is, we won't break out the capacity by brand.
But overall, our Mediterranean capacity, I think I mentioned it earlier in the call is 26% in Q3, versus 21% in Q2, and only 15% in Q4.
Fir the full year is 17%.
Okay.
So when you're saying Latitudes put on ---+ first off, the advanced ticket sales is whether you're a Latitude member or not.
It's all revenue that is deferred, that's on the books.
But are you referring to the Cruise Next program, where you're actually booking your cruise in advance.
Yes, so that's just when they're redeemed.
It's like 12 months, and it expires.
Thank you.
Well thanks, everyone for your time and support this morning.
And as always, we are all available to answer your questions throughout the day.
Have a great day.
Thanks, everyone.
Bye-bye.
