RCL
#Hi, <UNK>.
No, those goals, which again were stated back in 2014, we don't ---+ as we look forward, don't contemplate share buybacks in those equations.
Hi, <UNK>, it's <UNK>.
You know, I think we've said before, we look at that independently.
If it's the right thing to do, we would consider it.
We did one starting at the end of last year and we're basically finished with that.
So I think we would look at it opportunistically and depending on the cash flows, but we don't project it and we don't publish an expectation on that, partially because that's the sort of thing the Board will look at on a case by case basis.
Yes, sure, no problem.
Recently, <UNK>, the SEC has been ---+ has published Q&As on non-GAAP disclosures, and as we talk about Double-Double pretty frequently, we felt it fell in the definition of a non-GAAP disclosure and to just ensure that we met the spirit of what the SEC's looking for, we decided to add that in as a definition.
I would not read anything more into the fact that we're just improving our disclosure.
<UNK>, two things if I may.
First, I think we should wish <UNK> <UNK> a happy birthday because this is his birthday.
And secondly, on the Double-Double, I think one of the things that maybe we should emphasize is when we established it and we established both a goal for EPS and for ROIC, we felt those were reasonable targets for us to shoot for.
I think as we're getting closer to 2017 and start to get insight into 2017, bookings, et cetera, we continue to feel comfortable with that.
I think what may be a bit of confusion is some people would assume that requires heroic performance in 2017, and I think part of what we tried to convey this morning is, no, heroic performance would result in really outstanding 2017.
But to get to the Double-Double, all we need are moderate capacity growth, which is locked in, nothing's really going to change that now, good cost control, which we think we have in good shape, and really quite modest yield improvement.
And we think that all that is realistic and continues to be and I think I feel ---+ obviously the closer you get to it, the more information you have, the more you eliminate those kinds of variations.
So I think it is important to understand.
To get to that, we'd like to have heroic yield improvements, but we don't need heroic yield improvements.
Sure.
So for this year it's about a point in terms of the yield improvement it gives.
So that's why we raised our guidance from a midpoint of 3.25% to a midpoint of 4.25%.
When you look at the cadence of yields and ---+ so for Q2, for example, it's worth approximately 200 basis points.
In Q3 ---+ sorry, in Q4 it's worth approximately 300 basis points and it's about the same, about 300 basis points per quarter in Q1, and in Q2 of 2017, and it's worth about 1.5 points to the full year in 2017.
To give you some color on the cost side, it's worth about 20 to 25 basis points per quarter over the next 12 months.
Sorry, Q3, it's third quarter, sorry.
Q3 is the 200 basis points, right, approximately.
Right.
So the earnings from Pullmantur you now will take into account ---+ will be recorded below the line.
It will be the same as how TUI Cruises and SkySeas is recorded.
It will be in our other income and expense.
Thank you.
It's of course everything that you mentioned, but I think perhaps maybe more important is the importance of Celebrity of being in this key market year-round.
Celebrity wasn't here in the summertime.
Its customers wanted it.
We have the edge project coming out relatively soon.
And so I would consider this the very normal kind of tweak to our itineraries that we do every year.
Yes, that's right.
On a trend perspective we have seen ---+ we've even said this on the last call that we've seen really strong demand trends from the European consumer for European cruises.
I think it's important to point out that typically the European consumer spends a little bit less than the North American consumer on their holiday or their cruise holiday in Europe.
I think it's interesting.
We are sometimes surprised by these things.
After the Brexit vote, I think we expected, for example, if nothing else the distraction of all the dialogue about it to impact bookings and we saw nothing.
And so a lot of what we're doing isn't so much hypothesizing why things are happening; because we rely so much on forward bookings, we really observe what is happening.
Whether we can explain it or not is another question.
But we tend to focus on what the numbers are and they simply lead us in a certain direction.
I don't know.
I frankly just expected that it was such an interesting thing, it was all on the news that everybody was focused on that, and as I said, we would have expected if only from the distraction to have an impact bookings and we saw literally nothing.
We're not complaining.
Thanks.
<UNK>, let me just ---+ it's <UNK>.
Let me just respond to the question with regards to China yields.
I think the way you described it is spot on.
That's exactly how we do see it, that this is crooned of a digestion challenge and as it relates to capacity and growth of this market, which has been quite extraordinary.
We had planned for yield declines in 2016.
If you may recall, we were expecting to see some decline and that has been the case.
When you look at capacity, certainly in the Shanghai region, when we think of China we think of its as one market.
But of course it's really three distinct markets, the north Shenzehn, the south in Hong Kong and south China, and of course the east which is Shanghai, the main market.
And most of the capacity is in Shanghai.
It's about 65% of the total China business.
This year, Shanghai was up around 100%.
So I think your comments were spot on.
So we did expect to see those yield declines and we are dealing with the distribution opportunity.
I think as we look into 2017 in relation to capacity, the good news that we see at the moment in terms of 2017 and Shanghai is that the growth rates are a lot more moderate and some are in the region of 15% to 20% as opposed to 100% this year.
And I think maybe <UNK> could talk to you a little bit about the other markets.
Thanks, <UNK>.
So just kind of putting into perspective around the major products, we do expect Caribbean yields to be up around 4% next year for the industry.
I'm sorry, capacity, around 4% next year and Europe to be about down 5% for the industry.
And then as <UNK> pointed out, we expect China to be up about 50%, a little bit less than 50% for the entire market going into 2017.
I'm not going to give a range.
We thought that China yields would be down for the year as we talked about for the past several quarters, and I would say we're a little bit worse than that.
Yes, sure, <UNK>.
Yes, so as we ramp up our management services, as well as the leases, those revenues will hit our other on board and other revenue line item.
Keep in mind, we still have the depreciation of the ships, so depreciation really doesn't change.
And then the earnings of Pullmantur, we will get 49% of, and that will take place with our other joint ventures below the line.
They were much lower than the fleet average.
Thanks, <UNK>.
I think as it relates to giving a specific number, it's not something that we're going to give by product.
But I think that as we started off in the beginning of the year, we expected China yields to be down.
We expect them to be down more.
And Europe really Northern Europe and Western Med, that combination is accretive.
It's really challenged yields in the Eastern Mediterranean that is driving that product to be ---+ the overall Europe product to be down for the year.
Hey, <UNK>, it's <UNK>.
One of the things that I think <UNK> had commented on earlier is the journey of this market.
Certainly we're optimistic about the overall future in terms of the market potential.
And we've been very actively engaged in the broadening and the opening of channels in the marketplace.
So I think the comment that I think <UNK> had made earlier with regard to digestion problems, I think we're working quite actively in terms of opening up distribution.
There is no issue with demand.
The demand's there and the market's there.
It's the building of the distribution quickly enough to handle the capacity.
So at the moment we're still working through what we think 2017 would look like and I'm sure we'll be able to talk more about that later on.
Yes, and <UNK>, I'd just like to add.
I think it's hard for me to imagine and industry where you in one year suddenly double capacity and you have ---+ you fill all that new capacity and only have to make a relatively small reduction in your pricing to do it.
Again, I simply look at that and say wow, that shows how strong the situation is.
And I think to extrapolate that and to say well, if you had any weakness in the face of a doubling of capacity, even though the capacity growth is half as much next year and in the future, you'd still expect to see the same result.
I just don't think is a logical inference.
Happens to me all the time, <UNK>.
No way.
Excuse me for interrupting you.
But the itineraries are ---+ first of all if we're looking at 2017, the itineraries are largely fixed.
It's very unlikely you will see substantial change in the capacity in the different regions.
And we are a long-term industry.
This is an industry where our horizon is long-term.
We plan long-term.
We see a very powerful market.
And I don't see any real change in that.
So the idea that because of relatively modest discounting in one year, and in the face of as <UNK> earlier said a more profitable environment, even with that discounting, that we would suddenly change the way we've operated forever in the industry, just doesn't seem to me to, again, be realistic.
So I think what I'm saying, <UNK>, is you're 0 for 3.
Yes, <UNK>, hi, it's <UNK>.
This really is something that we're seeing in Shanghai, as I said earlier.
We think of China really in three different distinct markets and we're seeing it more in Shanghai.
We're seeing it in Shanghai, rather.
And that's we think pretty much related to the significant 100% plus capacity increase that's come into the marketplace.
What we've seen is it's been challenging maintaining the really peak pricing as we're moving through this period and of course we'd expected to see some drop-off in terms of the pricing.
We're obviously working with our partners in terms of developing promotional strategies and what have you to stimulate the demand at the right price.
What we are seeing is that load factor percentages are exceeding our expectations.
<UNK>, it's <UNK> again.
In terms of the North American source market for the European product, we reach a point around June, actually, June into July, where the North America demand starts to naturally drop off for European products.
The latest issues have had not such profound impact on the North Americans.
Because we see the drop-off coming.
It's a decline over time.
With the European market, I think <UNK> had mentioned it or <UNK> had mentioned it earlier, particularly after Brexit, we've seen no drop-off at all in the demand.
Certainly from the European markets, we've been pleased with the demand that we've seen and the European market seems to be particularly resilient.
Normally after we see an incident, an event, a terrorist event, you gets this drop-off of bookings from both European and American markets.
What we're beginning to see is the recovery is a lot more rapid in both markets, certainly in the European market.
You're welcome.
Well, I think first as it relates to the narrowing of the range, as we move towards the back half of the year, we typically narrow the range.
Also, as I commented in my opening remarks, we're over 93% booked for the year, and so we are in a very good book position and especially when you focus on North America, which is very heavy in Q4.
We're in a very strong position.
So I think when you look at Q4 and you say, well, what's going to have yields drive to a high level, the first component you have to consider is about 300 basis points of that is Pullmantur's deconsolidation.
The other thing which I think is important is our commentary about strength in North American products, strengths in a mix of products that is very similar to what we had in Q1, which we saw very strong yield improvement for.
And also I think the comments we've had around Harmony and the attraction to Harmony, as well as a lot of strength for Ovation out of Australia, which is where she'll be in the wintertime.
Those are the ---+ I would say are the underlying currents that support sizable yield growth in the fourth quarter.
<UNK>, it's <UNK>.
I think it's a good question.
Obviously I don't think we mentioned it previously, but with the softness that we've seen, still China continues to generate above average yields and it's accretive to our business.
That's how we view the China market and I think that's what we'll see in 2017.
And just to add in terms of it being accretive to earnings and to returns, first off, it's already high returning market.
Having another half a year of Ovation is a strong tailwind to returns for 2017.
<UNK>, I know this question has come up.
I'll build on it, as well as in the way I responded to <UNK> earlier.
I'm aware that there are some concerns that if China doesn't develop all that capacity will turn left and head towards the Caribbean and saturate the Caribbean.
And it would require an enormous change in the fundamentals of China to even begin to contemplate that.
I will just tell you within our Company, the subject has just literally never arisen in any deployment discussion that I'm aware of.
And we're so far from it that we just think that would require a level of change that none of us think is likely or even remotely likely.
So I understand the sensitivity on this, but we just aren't seeing those kinds of shifts.
And again, I emphasize, we think long term.
And so we're looking at a market that continues to grow and grow nicely.
Thanks, <UNK>.
We have time for one more question.
Sure.
So at this point there's nothing else I think planned as it relates to new additions or deletions from our fleet going into 2017.
Just to clarify, was your question for capacity just for us or were your capacity more for the industry.
Yes, so ---+ but you were asking what's our year-over-year capacity change for Q3 and Q4 this year.
Okay.
So Q3 our capacity change is about 3% and in Q4 it's flat.
You mean in terms of for adjusted earnings.
Those had more to do with our structural changes that we were doing as relates mainly to Pullmantur, so closing down offices for example in Brazil is really what most of those costs relate to.
Thanks.
Okay.
Thank you for your assistance, Nicole, with the call today and we thank you all for your participation and interest in the Company.
Carol will be available for any follow-up questions you might have and I wish you all a great day.
Thank you.
