CCL
#You can ask a follow-up, go ahead.
I would say, overall, first-time cruisers are up dramatically.
Now, there's a number of things that contribute to that.
Beyond this year, I guess last year, we were at 3.4 million first-time cruisers, whereas the year prior, we were at like something like 2.7 million or 2.8 million, or something.
But there are a number of things that drive that.
Number one, we've got a lot of first-time cruisers because we're in China, okay, so that's part of it.
Another part of it is in the Caribbean.
There was so much capacity last year in the Caribbean.
The only way to fill those ships was to get lots of new first-time cruisers.
And so that drove first-time cruising, not at yields that we were happy with, but it drove an additional base load of first-time cruisers.
And then of course, all of the initiatives we had to create demand, and others in the industry have.
We think all of that collectively contributes to what you saw, in terms of the increase in first-time cruisers last year versus previous years.
First of all, the current space per guest, in terms of space per guest, is similar to the ships we have on order now, for those new ships.
So it really was innovative design.
And Micky Arison, and then Michael Thamm, who runs our Costa group, were very ingenious in the original conceptualization for these ships.
And then the new build teams in house, and at the yards, were able to follow through on the execution of that.
So we actually have an incredible guest experience, great cabins ---+ absolutely great cabins ---+ and really phenomenal public space.
And are able, on that platform, to have, as I mentioned, space per guest comparable to the ships we currently have on order.
So it really is efficient interior design, and very creative design.
Just to be clear, the 6,600 is total passenger capacity.
Based on two passengers per cabin, it's just North of 5,000 per ship ---+ passengers per ship.
And some of those exceptions, as the ships are being finished.
But in some of the conceptualizations, there are some single-cabin concepts.
Yes.
So first of all, the reason behind Fathom.
Fathom, the purpose is to do good.
The unique aspect of it is a holistic, market-driven approach to doing good, so it has to be a win-win-win.
So we have to do financially well with it, and that gives us the freedom to do it, and makes it sustainable, so the shareholders win.
It has to resonate with the guests, and people want to travel on it.
And if they don't, they won't.
So when ---+ it makes it a win for them.
And then obviously, the ultimate reason, the starting point, is to do good.
And so we have to have real, genuine impact with it, otherwise what's the point.
So the concept of the win-win-win, while it does resonate and over-index with what we loosely call Millennials, it appeals to a broad spectrum of people, who basically want to grow themselves.
So it not just a matter of going someplace to do some good or help out; it's an enrichment and emergent experience for the traveller themselves.
And a very unique and different approach, and one that brings scale that previously just doesn't exist ---+ hasn't existed.
So it is new.
We picked the particular area in Puerto Plata, in the Dominican Republic.
We checked out a number of different countries to start.
And we landed there, primarily, because there are entities on the ground there that have a demonstrated long-term history of genuine impact, in the areas of economic impact, as well as environmental and educational impact.
So there are Dominican organizations on the ground that are currently delivering impact.
So the guests get to work alongside those proven Dominican impact providers, and scale up the impact they can have.
So we'll end up with thousands of volunteer days a week, spread across a region in a holistic fashion.
Not doing any one thing, but doing a combination of things that collectively can transform a community over time.
And the ideal goal would be, we would be there a few years, and no longer be needed, and move on to somewhere else.
How big it is, ultimately, what the appetite is, we've done a lot of research.
We paired our little [skunk works] team with the McKenzie Group, and did a ton of analysis over the last couple of years, leading us to where we are.
But obviously, it all has to be proven out.
We have every confidence we'll be successful with the initial foray.
And then if it is successful, it is scalable and replicable, and as long as there are on the ground entities that are already delivering real impact, that we can help scale up what they're doing, and accelerate the impact they're having.
So that's the concept.
We see a big appetite for it.
We ---+ it is a financial model for us, and it has to financially perform.
That gives us freedom to continue with it.
And we're very optimistic, but it has to be proved out.
Yes, <UNK>, yes, we did assume 2% in the back half of this year.
Keep in mind, though, as you begin to analyze that, that the back half of last year, on onboard and other, was up mid single digits, and it was significantly better than the first half of 2014.
So we do have more challenging comps in the back half, so take that into account, as you analyze the numbers.
There are still a number of things that we're rolling out.
So we expect to continue to see benefits in the future from some of the initiatives, in communications, casino and beverage.
A great example, there was a press release AIDA put out yesterday, on their internet service, and how they had it on a couple of ships, and they were expanding it to the rest of their fleet.
So we do expect to see additional onboard revenue from those initiatives.
I guess I'll just start with, on a constant dollar basis, the guidance for the third quarter is the same as the guidance we gave for the second quarter.
Keep in mind, I had already indicated that we included, in that guidance, was only a 2% increase in onboard and other.
And that is ---+ compares to the 6% in the second quarter.
And as far as the ticket side, as always, we give you our best guess as to what we believe the net ticket yield will be.
And we included that in the guidance, as well.
So overall, we've got some pretty good increases in the third quarter, on a constant currency basis.
We are expecting it to be like 3% to 4% included in the third quarter.
So we're very pleased with those yields, and hopefully we can do better.
And also, the base comparison for the third quarter is a little bit more challenging than the second.
And on the cost side, I think we had indicated, back in December, there was a big increase in dry dock days this year.
It was driving 2 of the 3 percentage point increase in costs.
We did expect to see dry dock days decline in 2016.
And so about half of that increase would go away.
So that will be a benefit for 2016.
It's a little early to give guidance on costs for 2016 overall.
We are hopeful, as <UNK> indicated, with all of the leveraging our scale, to perhaps be able to offset inflation.
But we still have got to go through the whole planning process, and make some decisions on investments.
And we'll do that over the next couple of months.
The critical thing is to deliver the double-digit return on invested capital in the next three to four years.
And the way we're going to do that, ultimately, is through yield.
And so to the extent we invested to that, we will.
But we don't see that need to invest, or those opportunities to invest, to take us well out of range or anything, on costs, going forward.
Yes, I'll start with a general comment.
The general comment is that, while results are tempered by Europe, for 2015, we are going to see growth and yield in Europe and ---+ both in the brands and in the region.
And also, we continue to see strong booking patterns there, where the booking curve is being pushed farther out.
And that bodes well, because it means you have less inventory to sell.
And then that's also, obviously, good for yield.
So despite a lot of the challenges, and Costa in particular, have been facing challenges since 2008, with macroeconomic malaise and other issue, and just a tough trading environment.
But despite that, not only Costa, but the entire European team, Carnival UK, AIDA as well, and ---+ have been doing a great job in managing the brand over this period.
So I'll let <UNK> comment on some of the specifics.
But overall, things are positive.
Yes, we're very positive on the year.
Some of these numbers, as I had talked, we said we beat the second quarter by $0.06.
So overall, when we put together our guidance for the year, keep in mind that to move our yield guidance takes $0.17.
1 percentage point is $130 million, or $0.17.
So as we look at all these numbers, the $0.06 movement causes a few decimal point movement in the guidance, but it doesn't necessarily change the whole overall range for the year.
So we're trying to just give you ranges and averages, but we are flowing through the benefits, as I had indicated before, of the second quarter.
And it was partially offset by costs, and we still increased the midpoint and the bottom end of the range.
So first of all, I think capacity in Europe is going to be about 6%.
That's nowhere near what the capacity increase was in the Caribbean last year, which was up more than double-digit.
It was a dramatic increase in capacity in the Caribbean last year.
And so that's two very different scenarios.
And when you talk about Europe, you've got the Mediterranean and Northern Europe, whereas in the Caribbean, you've got the Caribbean.
There's Eastern and Western, but it's still just the Caribbean.
So there's two very different situations.
So the issues in Europe, we don't believe are capacity driven.
There are different issues.
The reality is that the macroeconomic situation there, and then the geopolitical issues that have popped up, have certainly tempered the results there.
It's still strong, but it's tempered and ---+ the results.
And coming into next year, while we're going to be down in capacity ourselves in the Caribbean a couple of points, overall, the industry will be up in the Caribbean, actually.
But nowhere near where it was last year, in terms of increase.
And obviously, we have a much stronger base of guests now, to fill those ships, than we did a year ago, when we had that huge capacity influx into the Caribbean.
And we'll see what happens in Europe, but there will probably be a little bit of easing of capacity.
I think the bigger issue there is just letting the time go by, and continuing to create demand in Europe, and manage through some of these geopolitical tensions, and get through them.
There are always going to be issues somewhere in the world.
That's the beauty of our business.
We can move our capacity, and we do have a broad portfolio, especially for us as a Company, to buffer a lot of these things.
But I don't want to understate the performance of Europe, given the dynamics.
But the dynamics are not comparable to what they were in the Caribbean last year.
And if you think about the longer term, I think we talked about this either on last call or December, I can't remember.
Our capacity growth, on a compounded annual basis, from 2014 to 2018, is only 2.9%.
And if you take into account all of the announcements we have made to date ---+ and there will be announcements of ships going to China ---+ the compounded annual growth rate for that four-year period, for North America, would be 1%, in Europe, would be 2%.
And so the growth rates, as I think <UNK> had indicated before, are very measured, particularly in the established markets.
And so China is growing.
And for all of the reasons <UNK> talked about before, we believe it's going to be a fabulous market for us over time, with measured capacity growth in the existing markets.
And that should bode well for (multiple speakers).
I think at this point, Operator, we'll take one more question.
I think first of all, overall, the capacity growth for the industry is in the 4% to 5% range, and our capacity growth, along with vessels that we take out of service, is going to be less than that.
So we are totally focused on measured capacity growth.
And we feel that with China, in particular, but even without China, in the existing markets, that level of growth, as long as we are creating demand.
Because we are still relatively low penetrated, as an industry, as a cruise industry, in the overall vacation market.
That there is ample opportunity to create the relative scarcity, to get yields up over time.
And to have them be up and still be the greatest vacation value there is, while providing the greatest vacation experience there is.
So we are quite confident for ourselves, and for the industry, that we can create the relative scarcity that will bode well for the future.
Overall, I would say yes.
It's being demonstrated today.
As you can see, the results we're achieving, we're up 25%, 2014 over 2013.
Our guidance will be up 25% again this year, and that's not from 25% added capacity, obviously.
And so we're in the process of demonstrating it.
We certainly have plans in place, and are making the investments to continue to do so.
You'd have to talk to the other companies, how they see it.
But our perception, we're one of every two people who cruise in the world.
So we're a relatively reasonable bellwether for the overall industry, and we see it as a strong industry, for years to come.
Thank you very much for your questions, everyone, and for being online.
We had a strong quarter, we are confident in our guidance going forward.
And we look forward to delivering results, and ultimately delivering the double-digit return on invested capital in the next three to four years.
Thank you.
