CCL
#Overall, continental Europe is probably more challenging.
When you think about all of the economic difficulties and the geopolitical issues and the growing refugee concerns, that's the area that has had the most challenges in terms of pricing for 2016.
But we've had these challenges all year in 2015 to some extent, and we are forecasting that we're going to get yield improvement for our EAA brands for 2015.
Hopefully despite all these challenges, we'll be able to do that in 2016 as well.
One of the things to keep in mind, as well, is we are also seeing a transfer ---+ we've announced the Costa Fortuna will be going to Asia in 2016.
Costa will have reduced capacity, which also helps play in less supply in this type of environment, which should help yields for 2016.
The other comment, too ---+ keep in mind, and I know why you guys focus on yield, and we do too.
But there's another aspect of this.
We can be return-accretive and drive return on invested capital in certain markets across certain brands, even with some challenge in yield.
That results from just capacity additions and overall improvement in total mix, and on-board revenues, et cetera.
While yield is definitely a key metric, and we totally focus on it as well, slower than you might expect yield growth does not necessarily equal slower than you might expect return accretion.
Just real quickly before <UNK> comments.
We'll give you guys full guidance in December.
We're about to go into our planning meetings, as <UNK> mentioned.
We're evaluating all the reviews from the brands in terms of investment spending they may want to make in digital media, broadcast media, events, and PR, promotions, other things to drive demand.
We'll take a hard look at all that.
Our plan is to deliver the double-digit return on invested capital.
We're not going to save our way there, but we also have a focus on cost containment.
We, as I've mentioned to you in previous calls, we are focused on cost containment for two reasons.
One is the drag on earnings, but the other is it creates the dollars to invest to drive revenue.
We are achieving the cost savings that we set out to do.
Then the question is whether we let them fall to the bottom line, or we invest them to drive.
The investments we've made to date appear to have paid off because of the significant improvement in the business, and we'll be taking a hard look at that going forward.
Yes, and I went through some of the areas.
<UNK> just talked about the investments that we could potentially make and we'll evaluate; but the other thing that I had mentioned in my notes are the fact that while headline inflation is zero, there is because of commodity prices, there is inflation in certain areas of our business.
We built that into our 2016 numbers, as well.
But offsetting all of that, we are looking at leveraging our scale.
We had talked about the fact we saved $70 million to $80 million in 2015.
We're working hard to do something similar for 2016.
We also have some benefit from the reduced dry dock days, as well.
It's a combination of all those things, which led me to give you guidance that costs could be up slightly next year.
It's too early to ---+ but it's plausible and it's possible.
It's too early to conclude that at this point in time.
But what would not be too early to conclude is that if the yields come down, it will still be return accretive.
<UNK>, I'm surprised you're this deep into the call before a heard a question from you, so normally (laughter)
No, that was a for example.
It was a for example.
Okay, it's really an apples and oranges comparison, because in June, the comments that we were making related to the back half of 2015, the last two quarters and the first quarter of 2016; whereas the comments I made here related to the first half of 2016.
Because the prior-year comparisons are different, you're really ---+ it's hard to read in.
These are apples and oranges comparison, because they're different time periods.
Well we had ---+ we've seen, as we had indicated in the third quarter, we had seen a 20% increase in volume.
We were very pleased with the volume, but we did say it was at lower prices.
We are driving the booking curve ahead, and overall, we believe we'll get yield improvement for 2016.
Yes, I would just add to <UNK>'s comment that, as <UNK> said, it's too early to give yield guidance for full 2016.
But if you're saying what's the feeling compared to June, I would just say that we remain very confident in our ability to drive directionally towards the double-digit return on invested capital in the next three to four years.
To do that, we have to have solid yield improvement.
We feel very confident, probably even more confident than we did in June, that we can deliver on solid yield improvement next year.
That's despite some of the head winds that today exist in Europe.
By the time we get to December, maybe those things won't be the same.
But today, with some of the head winds in Europe ---+ geopolitical, macroeconomic malaise, the intense tension over there around the refugee situation that has affected all travel ---+ not just cruise, but all travel.
Those things may still be present, or they may wane between now and when we get to December, but we'll give you full guidance then.
I think I'll just start with a general comment.
From a deployment standpoint, I think that's a fair statement, and <UNK> will certainly comment on those numbers.
But I think that the comment we were making was from a source market perspective.
We are still sourcing a substantial amount of consumers in the third and fourth quarter, and that doesn't change from quarter to quarter.
On the deployment, in terms of where the ships are sailing, <UNK>.
In the third quarter, it's about 25% of our capacity is in the Caribbean and 45% in Europe.
That goes up to 30% in the Caribbean in the fourth quarter, and Europe goes down to 30%.
You're right, there are more ships in the Caribbean and less in Europe in total in the fourth quarter than the third.
You have to remember that on a year-over-year basis, it was a similar trend in 2014.
When you're comparing year over year, you're comparing then apples and apples.
As <UNK> indicated, we saw some pretty good yield improvement in the fourth quarter of 2014.
As a result of that yield improvement, we are guiding to 3% constant currency yield increase in the fourth quarter which may be down slightly from the third, but remember, the fourth quarter last year was higher than the third quarter last year in improvement.
It is a more difficult comparison.
We did not see any fall off in demand related to stock market or general economic fluctuations, none whatsoever.
Well, by moving the booking ---+ driving the booking curve further out, we're actually hoping to have a lot less to sell closer in overall.
We're looking at it as a situation where as we've said before, what we want to do is have people book early.
It is the best time to book because the pricing will only go up, and there won't be last-minute deep discounting to fill those cabins.
That's a strategy we've been talking about for about two years now.
As a result of that, I think we're on the right path towards good yield improvement for 2016.
There are other factors in a transactional currency and stuff that influenced the appearance of early pricing and yields.
We have targeted affinity groups that some of the brands target.
They book earlier.
That can make the yield look lower, but in fact it's coming sooner rather than spread over time for those affinity groups.
Those affinity groups have big on-board spend patterns, and overall we yield in total very nicely on those.
Of course, we don't have the on-board revenue yield factored into this at this point in time.
There are a lot of dynamics that can influence what it looks like early.
Some of it is just a pricing philosophy of a brand, and some is just booking patterns and charters, and all that can come into play, as well as affinity groups to fill our cabins and drive on-board revenue.
Thanks.
Yes, our policy has been to use the cash-less collars.
We have already, I believe, 48% of 2016 already collared.
The future pricing, which is what you have to establish the collars on, is not the same of course as the spot pricing.
At this point in time, we've seen no advantage to unwinding those collars, or anything to that effect.
When we looked at it once earlier this year, we examined if we had done it we would lost on both ends ---+ unwinding and setting then setting the new collars in.
At this point we don't have any particular plans to change, but we review it constantly.
We also, as you can see in our filings, we've got the cash-less collars for 2017 and 2018, as well.
We are well positioned and well hedged at this point in time.
But we continually re-evaluate it, as <UNK> indicated.
<UNK> and Mickey and I and Josh Weinstein, our Treasurer, frequently get together and talk about it and take a look at it, and review input from other sources, as well.
The first comment I'd like to make is that our European brands have performed well, so I don't want to leave an impression like they're stumbling and bumbling or anything.
They've performed well.
As <UNK> mentioned, EAA overall for us, despite all the stuff we've been talking about and that has occurred this year, has seen yield improvement and has seen return improvement.
That's the first comment.
The second comment is that continental Europe has been hit hardest.
We've seen ---+ we had the 175th anniversary year for Cunard.
That was a very successful year for the Cunard brand.
We had the spectacular launch of the Britannia, which helped elevate the entire P&O brand.
The UK did well, very well this year.
Again, AIDA continues to perform in Germany despite capacity introduction from competitors, as well as just also the impact of sailings related to geopolitical tensions and so on and so forth.
But the brands continue to do well, and are doing better collectively than they have in the past.
We expect that to continue into next year, despite the challenges.
Well, there the sweet spot will vary over time, as you would expect, s people change, environments change, and all types of things.
I don't think there is a Nirvana.
That's something that we continue to look at over time and will evaluate that.
But where we stand today, as I talked about in my notes, the North American brands were well ahead.
The North American brands are at the higher end of the historical booking curves, whereas the EAA brands, which I said were in line with the prior year, while they're still within the historical booking curves, they are at the lower half of the historical booking curves.
It's a mix of two worlds.
As we talked before, the strength of the economy in North America clearly has helped shape the booking curves in the two segments of our business.
Yes, we've given you the ranges before.
As I said, North America is in the higher half and EAA is in the lower half.
For competitive reasons, that's all the detail I want to share.
It's very early to tell.
It's very hard.
We have not gone through.
We have a difficult time enough time analyzing it quarter by quarter within 2015, as you saw the timing of expenses between the third and fourth quarters that I referred to.
It's very difficult to tell this early in the year where we are.
The one thing that I did mention relating to the first quarter or the first half is that there is a significant transactional currency impact, particularly in the first quarter.
As you think about next year, keep that in mind.
I would say again we're not going to give any more guidance for 2016.
It's still early for us.
But the reality is that Carnival out-performed late last year, as well.
They continue to out-perform throughout this year, the Carnival brand, which is primarily in the Caribbean.
They've had an outstanding year with strong demand and strong yields, reflected in everything we said to this point, and reflected in the fact we've raised guidance for the full year.
We have a lot of momentum there.
We feel very good about it.
But at this point, it's too early to give firm yield guidance or anything for 2016.
Absolutely, yes.
Other brands, as well.
We had growth in both sides of the Atlantic, as <UNK> pointed out.
But the Carnival brand definitely out-performed again, yes.
Thank you.
We'll take one more call, operator.
Yes, it did change a little bit.
For the year, our capacity growth came down to 1.7%, and for the fourth quarter is 2.3%.
Fundamentally for the Carnival brand, to get everyone up to speed, we basically allowed people to achieve a certain payout at a lower tier level in the commission structure.
That was a combination of one acknowledgment to travel professional partners for the great work and contributions they've made to our success this year, and also just a recognition for the brand in their Carnival conversations discussing with travel professionals, changes that the travel professionals thought would really make a difference, and would balance things from their perspective.
It's in response to input from the travel professional partners, and an acknowledgment of their contributions, and what we thought it would take to help them help us sustain the momentum.
Each brand does their own evaluation.
The brands have some overlap in travel professional partners.
There's also distinctions, differentiations because the guests are different.
Each brand makes its own evaluation.
Carnival brand was starting from a different point than some of the other brands were, so all the brands will make independently their decision.
Thank you.
Everyone, thank you very much again.
We appreciate your interest.
We feel great about the quarter.
We've increased guidance for the year.
We feel strongly looking ahead that we are on a good path to deliver the double-digit return on invested capital in the next three to four years.
We see solid yield improvement for next year.
We'll give you actual yield guidance and stuff in December, as well as tighter cost guidance for the future.
We feel very good about the business and the momentum, and we thank you for your interest.
