Q1 2021 Royal Caribbean Cruises Ltd Earnings Call
Good morning, My name is Shelby and I'll be your conference operator today.
At this time I would like to welcome everyone to Royal Caribbean Cruise business update and first quarter 2021 earnings call.
Participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session. Joe asked a question during the session you will need to press star one on your telephone.
I'd now like to introduce <unk>, Chief Financial Officer, Mr. Jason Liberty, Mr. Liberty the floor is yours.
Thank you Shelby.
Good morning, everybody and thank you for joining us today for a business update and first quarter earnings call.
Joining me are Richard Fain, our chairman and Chief Executive Officer, Michael Bayley, President and CEO Royal Caribbean International.
And gorilla Mango, Amy our vice President of Investor Relations.
This is actually crawlers last call al with us that she is retiring and I just want to sincerely. Thank her.
For all of her efforts and we all really wish her the very best.
Lots of lump sum so thank you Oh, thank you Carlo.
During this call we will be referring to a few slides, which have been posted on our investor website, Www Dot RTL investor Dot com.
Before we get started I'd like to refer you to our notice about forward looking statements, which is on our first slide.
During this call we will be making comments that are forward looking these.
These statements do not guarantee future performance and do involve risks and uncertainties.
Examples are described in our SEC filing and other disclosures.
Please note that we do not undertake to update the information in our filings as circumstances change.
Also we will be discussing certain non-GAAP financial measures, which are adjusted as defined and a reconciliation of non-GAAP financial non-GAAP historical items can be found on our website.
Richard will begin the call by providing a strategic overview of the business an update on the latest news from the CDC.
I will follow up with a recap of our first quarter results and then I will then provide an update on our latest liquidity actions and on the current booking environment.
We will then open up the call for your questions Richard.
Okay.
Thank you Jason and thank you all for joining the call and thank you can roll through your help them consistent support over many years with Royal Caribbean.
You all know it's been painful to pass the one year Mark since we suspended ceilings in March of 2020 and to keep saying most of our beautiful ship still sitting at anchor.
However, I'd like to comment on some of the dramatic positive developments that we've just mentioned.
The big change has been a significant improvement in the <unk>.
And the quality of our dialogue with the C D C.
As I have said elsewhere scientific knowledge does not advance will in a vacuum.
More and better exchange of information and more and better understanding of all the perspective.
Always leads to a better and healthier outcomes.
The CDC has recently significantly increased its efforts in this regard and we really appreciate and we'd like to put the poor undertaking this important effort.
Last night the C D C issue.
Multiple very constructive clarifications and amplification of this conditional sale order.
You've addressed many of the items that concerns us in the order in a manner that takes into account the recent advances in vaccines and medical science.
We believe that this communication really helps us to see a clear and achievable pathway forward to a safe and healthy cruising in the near future.
But an important caveat is that this is a very complex area and we only received the leather last night.
Furthermore, there are still a great many details to be provided in the future.
Others that need to be resolved.
We need to be cautious about all of those.
Nevertheless, we know have high hopes that if these details can be resolved quickly it could be possible to restart cruising by mid July.
I would also emphasize that the restart does not mean that we will immediately go into full operation.
While we are hopeful about restarting that restart will be gradual and deliberate.
Furthermore, our business books long in advance so it will take some time for the machinery to get back into full strength full swing.
But the weather is a very constructive part of this process and then indicates both the values good good communications at <unk>.
Indicates the Cdc's desire to see cruising, we opened in a safe and healthy manner.
As I've said before we share a common goal with both of them.
The CDC in the cruise industry are determined to do this right.
One of our strongest discussion points in these meetings with the C. D. C has been the data that we've collected from our cruises in Asia and Europe.
As mentioned earlier, we have successfully carried over 125000 passengers.
The 21, COVID-19 cases 'twenty one.
That's a positivity rate of 0.01%.
And as we emphasize all of this has been experience without having the availability of vaccines.
Our goal throughout this pandemic has been to make a cruise ship, where we can control the environment safely with main street USA.
We've already demonstrated our ability to do that.
And we're now eager to resume life and so many other businesses would do it.
And we are pleased with the C. D C leather really does reflect an.
An intention to treat us similarly to other industries and similar circumstance.
In addition to this particularly positive development in the U S. There are a lot of other activities going on.
Simple last month.
Odyssey of the seas, our newest quantum class ship joined the World Caribbean International Fleet.
Along with celebrity apex, and Silversea Silver Moon, we now have three brand new ships each with the most amazing technology to ensure safety security and of course unbelievable guest experiences.
And theres been such demand for our current sailings for example from Singapore on quantum Aziz. So we've extended our season there now through the end of October.
And of course, we've also taken additional steps to strengthen our financial position, even further and you're going to hear more about that from Jason.
Before I describe all the energy, we see and feel within the group I want to acknowledge once again, the dedication and hard work of our people.
Always been our people who have made us successful and there's been people that have gotten us through these past 13 months of living with COVID-19.
Everyone have suffered during the pandemic, but working for cruise lines has been a real test of the doors and trust and agility.
Over and over our people have passed that test.
I'd like to also thank our investors and our travel partners, who have been our strongest advocates with our guests over these months of uncertainty.
I'm also grateful their commitment to work, we will always grateful for their commitment to work with us.
While a lot of what we're doing right now is directly to a healthy return to service. We're also focusing on how we can strengthen our position in the other areas income.
Moving on ESG, environmental social and governmental responsibility.
Of course, this focus isn't new for us from our partnership with the World Wildlife Fund to support true sustainable destinations to active engagement on diversity and inclusion to aggressive emission reduction.
Commitment to progress on the ESG agenda is long standing.
But we believe strongly that it's not enough to reflect on what we have been doing we need to get ready for what's next and plan for how we will meet the challenges of the future.
You'll hear more about this initiative in future calls, but I wanted to take this opportunity to make you aware of this intensified focus.
Is that true.
The microphone back to Jason Jason.
Thank you Richard.
Before I start like Richard I want to again, thank our teams across the whole enterprise for their dedication and tireless efforts during these unprecedented times.
I will now start to discuss our first quarter performance.
This morning, we reported an adjusted net loss of $1 $1 billion were $4.44 per share for the first quarter 2021.
While reporting these type of results continues can be painful.
We are excited about the fact that little by little a flywheel is starting to spin.
Furthermore, the latest news by the CDC as it relates to a resumption of service in the U S is quite encouraging.
During the first quarter of 2021 we deliver memorable vacation to over 55000 guests through our Royal Caribbean International TUI cruises and hop onboard brands.
Moreover, our teams are diligently working on the health protocols and startup activities needed to begin operations on an additional 11 ships. This summer.
While these activities are extremely encouraging.
Also put some additional pressure on our cash burn in the short term.
Having said this we are also very encouraged by our customer deposit balance which as of today.
Approximately $2 billion compared to the $1 8 billion that was shared this morning related to work at the end of the first quarter.
Moreover, the latest balance reflects the reduction in deposits that related to the Azamara brand, which was sold just a few months ago, demonstrating an even larger improvement versus our December 'twenty.
Our customer deposit balance this improved balance has been disproportionately driven by new bookings versus the issuance of more F. C seats at this point approximately 45% of our customer deposit balances associated with the FCC's versus about 50% at the time of our last call.
Now I will share my remarks around liquidity actions during the quarter.
As you all know we pride ourselves on having industry, leading brands with a world class and highly innovative fleet and a history of strong financial discipline.
These assets and attributes have been instrumental in helping us raise more than $12 $3 billion of new capital since March of last year.
During the first quarter 2021, we continued our efforts to enhance our liquidity position and manage our maturity profile.
At this time, we successfully executed executed two capital raises with cumulative gross proceeds of $3 billion connect.
Connected to this we amended two debt facilities totaling approximately two and a half billion dollars, which were due in 2022 and extended the maturity for consenting lenders by 18 months.
I will highlight that since we are refinancing guaranteed debt with unsecured and guaranteed debt. We are starting our journey back to an unencumbered investment grade balance sheet.
Altogether during this quarter, we paid down approximately $800 million I'm, Joe related to principal on the amended facilities in the UK commercial paper program that was due in March.
Now as it pertains to free cash burn during the quarter. The average monthly monthly cash burn was approximately $300 million, which was slightly higher than previously announced range. This was mainly driven by restart expenses, which.
Right.
Were related to the new health protocols in some crude movements it.
It is important to note that previously announced range did not include any expenses that related to the restarting of operations as it assumed a status a prolonged suspension of operations.
When excluding the return to service expenses, our cash burn was in line with the previously announced range.
Overall, we closed the first quarter with $5 $8 billion in available liquidity.
As I previously mentioned, we are very encourage with the latest news current momentum and the restart of operations around the globe, but the environment remains extremely fluid and for this reason we are not providing the cash burn estimate or the related offsets generated by revenue and new customer deposits that come from returning ships.
I'll highlight that the burn rate for the ships that are kept in lay up is expected to be consistent with our previous expectations on a relative basis.
Now as it pertains to our debt maturities and in addition to the extension of the two 'twenty 'twenty two facility that I. Previously mentioned, we also completed the amendments to our export credit facilities deferring $1.15 billion of principal amortization and waving financial covenants through at least the end of the third quarter of 2022.
After all these negotiations are scheduled debt maturities for the remainder of 'twenty, one and 'twenty 'twenty two.
Our $200 million and $2 2 billion respectively.
I will now update you on our business outlook and I know this is top of mind for many and I'll start by providing an update on our summer capacity.
Over the last two months, we have announced a return to service for nine ships across three or three three global brands and have extended the Singapore, Steve and for quantum of the seas through the fall. These.
These 176 sailings in the Caribbean Europe and Asia.
Now represent 19% of our free capacity for the summer season.
Six of these ships will fail in Europe, offering Greek Isles in UK itineraries to guests from the U S. The U K, Israel and Europe.
These guests will have the opportunity to experience our three newest ships Odyssey of the seas celebrity apex and the silver Moon for the first time ever.
In addition, three ships will cater to the U S market offering Caribbean itineraries departing from Nassau, St Martin and Bermuda.
Many of these feelings will call on our amazing private island perfect day at <unk>.
On top of these kauffman the teams will continue to offer cruises from Singapore.
From Singapore for the local market.
Now regarding TUI cruises are our JV they have announced two additional ships sailing. This summer. In addition to three vessels, but had been operating out of the Canary Islands. Since this past November.
We look forward to announcing the return of additional ship soonest and remain committed to a safe thoughtful and financially sensible resumption of cruising across the entire fleet.
Now I will provide an update on our bookings.
When we opened the first set of sailings for quantum in the season October 2020, we immediately saw the pent up demand for cruising in Singapore.
Because of this we hoped and expected that the same would be true in other markets and these expectations were confirmed when we launched our new deployment.
We have been very pleased with booking levels and pricing for sailings in both Europe, and the Caribbean and as a result, our load factors in revenues or building up nicely.
After less than three weeks of sales for most ships, we already have about 30% of our expected revenue booked for June through September sales.
We expect to start our initial operations with lower load factors and ramp up gradually over time.
On our last earnings call I shared that we received 30% more bookings in January when compare to November and December.
Despite anemic sales and marketing activities demand continued to accelerate and new bookings in March exceeded January and February levels by approximately 80%.
In addition to new bookings guests continue to utilize the FCC's and take advantage of the lift and shift program.
Now overall the booking activity for the second half of 2021 is in line with our anticipated resumption of cruising and pricing on these bookings bookings is higher than 2019, both including and excluding the dilutive impact of future cruise credits.
Regarding 2022 sailings it is still early in.
In the booking window to provide too much detail, but I will share that our book load factors for the first half of 2022 remains potential store ranges and pricing on booked business is up nicely versus 2019, when including the dilution Harry impact I've got to see season as well.
While a portion of this improvement is related to our new ships pricing as I'll also walk for the existing fleet.
I'll close by saying that we are prepared and eager for the flywheel start turning again, we feel very optimistic about our future and are thrilled to see more and more guests around the globe enjoying incredible vacation onboard our ships.
With that I will ask Shelby to open up the call for a question and answer session.
As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Ask that you limit yourself to one question and one follow up.
Pause for just a moment to compile the Q&A roster.
Your first question is from Robin Farley of UBS.
Great. Thank you.
Quick question about the restart obviously, great news I'm just trying to understand.
Okay.
You can go forward.
Chip and then Theres a separate timeline for rich.
We starting with a ship that allows non vaccinated passengers out of the U S. It it it seems that way, but I just wanted to kind of get clarification on that and then just as my follow up would be.
On the return to service expenses versus typical layout.
How much if you if we think about you know.
Her months lay up cost per ship and then what is that with restart costs. You know for maybe that sort of monthly three months say heading into restart what the differences in inland first display up and restart. Thank you.
So robin on the first question, which I'm sure is an amazing question I don't think we we got most of it broke up about about 50% of it and so we actually didn't actually hear what you asked.
I'll just comment real quick as it relates to <unk>.
On the cost side and then he can be asked.
The first part of your question.
Yeah.
We really have tuned in are way up cost and of course, we've kept our ships generally in a warm state.
So, whereas we restarted our ships.
We would be able to do that expeditiously.
And at a reasonable cost.
But as it relates to the return to service as we ramp the ships back up because those costs are still kind of very fluid, which is why we're not guiding on them as we need to take into consideration you know testing and crude movement and vaccination and maybe other things that might be part of that equation.
Might be different itinerary by itinerary, so where we're not yet ready to kind of guide on that what I would tell you is we are being very where we're very focused to make sure that Dan as were spending moving.
We're being very thoughtful about it and of course at the same time Adam.
We're launching these ships were also getting.
The revenues and customer deposits that are associated with that so I'll just pause there and let you as at the first part of your question. So we can hear it and I hope we give you a thoughtful answer.
Great well hopefully you can hear me a little bit better how much on the first question I just wanted to understand you know obviously very good news overnight.
So the timeframe is it that there will be kind of two different.
Restart timeframes that you can today go forward with a fully vaccinated chip out of the U S. But there will be a separate timeframe for ships that have a mix of vaccinated and unvaccinated passengers is that how to interpret the timing.
<unk>.
Hi, Robin it's Michael.
As Richard commented we will.
We received this.
These modifications and commentary late yesterday evening, and we've got we've got some cost with the CDC to clarify some of the comments and what have you but.
Fundamentally yes, you're correct that there will be there'll be really two pathways, one pathway for vaccinated crew and largely vaccinated guests that meet the thresholds that day.
Defined.
That would mean that there wouldn't be a requirement for a simulated voyage et cetera, and they would be different.
The expectation on protocols and planning so it's it's a it's a faster route.
And then for ships that that wouldn't have that wouldn't meet that threshold for whatever reason there would be a different timeline and are under a different set of protocols and requirements.
Fundamentally that there's two pathways.
It's not that simple, but that's the way of simplifying.
Yeah.
I think we need to make clear.
Reemphasize as Michael just did Theres still a lot of uncertainty about this and.
I don't think you should think of these as two completely divergent.
Processes.
Obviously, just as there are in other areas in society.
You treat people who have been factor today is different than.
The situations, where you don't have vaccinations.
But what.
What is nice about this is that there are.
Both are viable pathways under the C D G.
Leather that we got.
And I think again I think just add.
To that I think you know the the acknowledgment that the vaccines are really transformational is as you know very exceedingly helpful. I mean, it's something we all knew was coming but that's very positive.
Yep.
Great. Thank you very much.
Thanks Robyn.
Your next question is from Steve <unk> of Stifel.
Yeah, Hey, guys. Good morning so.
My first question is going to be a bunch of C. D C questions that hopefully.
I don't know if you'd be able to answer your you won't be able to but it is a three part question. So prepare yourself for some some fun here.
When you look at the mandates that have been.
Laid out I mean, calling for 98% of crew and 95% 95% of passengers to be vaccinated.
The first question is do you think getting to those thresholds will be easy to achieve the second part of that is going to be the kid component Howard kids accounted for under those percentages and if I'm reading that right. It seems like getting kids on board might be difficult during the CSO timeframe and then the third part of this is do you think the cdc's cautionary travel.
Outlook for the Bahamas.
You know it could cause some panic with your potential customer base.
Hi, Steve.
So on the 98% 95% mandate.
Our guideline and remember its the guidelines. So there's there's you can meet that threshold and you don't have to meet that threshold and there's different pathway.
We we know from surveys of our customers who've been booking since January.
But 80% of our customers have already told us they read the vaccinated or will be vaccinated when they cruise.
So that's since January so there's an overwhelming.
Certainly for our customer base people are just saying I'm getting vaccinated and as you skew older B.
Percentage increases quite significantly.
Mainly because of close windows applications started it started with the older age group first et cetera et cetera.
So the crew interestingly.
Every year, we offer we don't mandate flu vaccines for our crew members and we've been doing that for many many years and.
The crew typically the vaccination rates of our crew members for flu is around the mid 90%.
They just voluntarily take the vaccine.
Surveyed.
True some months ago, and we stay in touch with the crude through surveys and various forms of communication.
And in the survey that we sent that I'm going to say it was at the end of last year or the beginning of this year.
We asked our crew members and the festival have you been vaccinated, all you're getting vaccinated and will you get vaccinated and we had a we had a over 98% positive response from our cruise, saying, yeah, we're going to get vaccinated. So.
I think you know.
It's just it's I think it's somewhat of a natural event in a true used to getting vaccinated for flu and there's certainly willing to get vaccinated for COVID-19, we do understand for.
Household religious reasons, a belief reasons some people won't want tubing and that's been in place for many years in terms of how do we vaccinate for flu on the kids.
Thank you.
We obviously take a look at our.
Kent could population and what have you.
We think this is the next phase.
And we know that the vaccination now for eligible for children 60 day, we've been told that in the coming weeks and months that that age limit will likely dropped to 12.
And we're encouraged by that and then for kids.
Kids 11, and under obviously, we carry a lot of kids 11 Ananda.
Relatively speaking as a percentage of our total guest counts, but a small number.
So.
We're not overly concerned with that and again as Richard pointed out we received this these MA patients late last night, we really do have to study them and discussed with the C. D C and understand all of these these different nuances but.
We're not discouraged by this in any way.
Okay Gotcha.
And just to just to I think we ought to make it clear.
That.
We've been operating and have announced cruises.
Some of which.
Ah requiring full vaccination.
And some of which do not and so I think we consider it constructive.
The CDC has.
Look at this with a dual pathway approach much as we have taken.
Okay got you thanks for that and then second question Jason.
If the timeline is correct here and you know you can start north American cruising sometime over the next couple of months and from there you continue to bring ships back online over an extended period of time. The question is do you feel like your current liquidity position is adequate at this point, meaning you feel comfortable enough with <unk>.
Where you guys sit today.
I think I think we feel like we are in a very strong liquidity position.
And.
The real focus here is getting the ships back on the water.
And of course as that's occurring at the same time, you know the customer deposits and revenues and so forth start coming in so I think we feel.
Very good and of course, we were also remaining to be opportunistic and looking at ways to improve or our balance sheet and negative carry and so forth. So but overall, Steve I think we fuel mix.
We've taken a very prudent actions to make sure that we're in a position of strength.
Okay, great, Thanks, guys and Carlos Congratulations.
Okay.
Your next question comes from Jamie Katz with Morningstar.
Hi, Good morning, I'm curious if you have any comments on.
Consideration sales anymore.
Or wedding CRB.
Good day.
Okay.
The interest for your scrap across the industry.
Recently.
Comment on the percentage of work force that Youre getting from India.
How that might constrain the ability to.
Certainly going forward.
Overlaying constraint on it that would be really helpful. Thanks.
Yes sure Jay.
I'll tell you I'll take the first one and then I'll.
And then Michael will due to the mix in terms of crew from India.
As it relates to our fleet, even even for some of the shifts that we've sold.
The way that we kind of approach this always.
Just understanding whether a ship.
<unk> is a good fit for the brand we're still a good fit for the brand or if we can invest in that ship to make sure. It's a good fit for the brand in and if not we look and when we're opportunistic about this but I think we've made we've scrapped some ships. We've sold some ships, we typically sell about a ship a year, but overall we feel.
Really good about the fleet and Steve.
Steve.
You've heard us say in the past these.
These ships are are really always cash flow positive.
And so for us to part ways with them, but it has to because it's the right strategic reason for us to do so.
And Jamie on the on the cruise situations, particularly as it relates to India I mean, it's.
It's an unfortunate what's occurring in India and.
For the past week or so there's been multiple travel restrictions placed on on the Indians traveling through to various countries and what have you. So we did temporarily.
Spend a crewing activities from India.
I understand how this will.
This will work out.
The beauty of cost of about Crewing model is that.
Almost from the very beginning we've crude from literally over 100 countries around the world up some countries like India have significant volume with employees, who come from India, but.
We have large populations that come from many other countries around the world. So we will obviously super sympathetic about what's happening in India, because we do have many loyal employees who've been with us for many many years.
So we you know obviously pretty confident this will work out in the coming months and we have the ability to crew and change.
Accruing based upon all of these these circumstances so.
Discouraging what's occurring in India, but our model is very robust. So we're encouraged by the module that we have.
Thank you.
Thank you.
Your next question is from Brent <unk> of J P. Morgan.
Good morning, everyone and thanks for taking my my questions and obviously, yes, all positive news today, Bob on the simple one more on the C. D. C. If I may with the CSO skilling in place outside let's say outside of what we've talked about so far the vaccination specific bogey what was the biggest change.
The biggest changes overnight for you and does this change your best guess for the Ultimate capacity you think youll have sailing at the end of this summer versus say, what you saw 24 hours ago.
Hi, Brian as Richard commented in his opening statement, but what what really.
First of all we've been in very constructive dialogue with the C. D C over the past few weeks.
And beyond the CDC with the Intergovernmental Agency group that was representing many different departments of the government.
And I think that that dialogue allowed the industry to talk realistically about.
Many of the elements of the CSO that which as you know.
Unrealistic or unable to be executed the way, but the crafted.
What we saw last night was.
Very encouraging because it wasn't it wasn't one or two things it was multiple additions and corrections to too many of the elements of the existing CSO that with the really challenging and very very difficult, particularly as it relates to what's occurring with vaccines. So.
<unk>.
I think the mood.
At Royal Caribbean.
Alright, and late into the night and then just just speaking also to some of our industry colleagues.
Simply positive that that all of this dialogue that was constructive had resulted in and clearly being hood.
So I wouldn't say, there's any one thing that's just many many things, but certainly the you know the.
The vaccines.
A major foundational.
Elements of this.
Thank you Brian Okay.
That's helpful. Just a quick follow up on sort of how you're thinking about occupancy and load. Jason you mentioned that that's sort of bookings in.
To date for the summer sailings are around sort of maybe 30% of expected revenue is that that sort of just to clarify that's not of the of.
What your total capacity would be on the selling that's just of what your target load would be and and then and then sort of a second part of that would be sort of what do you think the range of that target is.
For earnings or vaccination sailing so so reconcile that with what youre doing in Singapore on non vaccination sailings and that's it for me.
Yeah.
It is or the statement was really relating to what we expected it to be and of course the.
Most of these sailings.
Go shaded.
We've had conversations in terms of what.
Those load factors would start off being until we've we've been.
Very kind of thoughtful about what our expectations are gonna be weatherbird, turning in the Bahamas, or whether we're turning in Israel and so forth.
So I think obviously, we saw a lot of encouraging news.
<unk> here from the CDC, but the sailings in which we've announced are really pursuing that that takes place outside of U S imports.
But all of that.
As Michael and Richard was talking about this is a evolving story.
And.
As long as you know as long as we can continue to believe that we can operate.
Safe manner, making sure our guests have an incredible experience and we can do that in a in a way that is improving our financial.
Financial position. That's those are the kind of three guiding like that that are that are.
Regarding our day to day decisions.
Excellent thanks, everyone.
Thanks, Ron.
Your next question is from Stephen Grambling of Goldman Sachs.
Yeah.
Yes.
I guess turning to ship growth ship growth and capacity increases what is a reasonable range of net capacity growth as we look over the next couple of years and I.
I guess have any of the dispositions effectively been pull forward of future retirement. So we should expect maybe less going forward.
Well I mean, I think first overall industry wide I think I commented on the last call.
The growth rate, which is probably it was probably around 6% is probably going to be around 4%. So youre going to see less cost growth there I think for us.
Our our planned capacity growth is.
It's kind of laid out as it relates to the ships that are coming online.
Again, I wouldn't focus too much on.
On the retirement story because for US we continue to just be thoughtful and.
Be opportunistic about the opportunity to do two to them to sell ships, if that if that opportunity arises but.
But for the most part I think we feel the fleet.
But we have today and the new ships that are coming online and that cadence is how we would expect our business to grow and there might be some retirements I wouldn't say, that's an accelerated retirement.
Program based off of what we've done I would I would just say we plan to kind of operating our business.
And manage our fleet and invest in our fleet and how we've done it on a.
On a pre COVID-19 basis.
And perhaps a related follow up some of your peers have sighted basically cost improvements and efficiency improvements from the mix of new ships and or changes in the cost structure can you give us any color on how you see the either the mix of new ships impacting net yield and net cruise cost or any big buckets of opportunity for.
For permanent changes in how you operate.
Yeah, well I mean I think.
We've also talked about this and we've talked about quite a bit on the last call as well. So obviously as the new capacity comes on they are more efficient, especially on a fuel standpoint.
And they also generate a much higher yield profile because of the inventory mix and the onboard revenue opportunities.
That come along with our new capacity.
But during this time, we have looked at.
Our cost structure, we have taken action on our cost structure.
Two to ensure that as we come out of this I think I used the term in our and our wedding weight.
And so we've identified and we've implemented and we are implementing.
Several hum.
Well.
Cost actions in order to.
Hum improve our margins.
And then also I would just add at the same time, we want to make sure that the guest experience is protected.
Employee experience is protected and so a lot of this comes through with automation and now it's just coordinating better enterprise wide.
To make a better.
Better margin decisions.
Just one quick follow up on that I guess between the vaccine only type cruises and then.
Those that are more open.
Are you seeing any differences in the cost structure between those two as we think about just kind of a dual approach potentially from the C. D C.
Well.
Hi, Stephen it's Michael.
There is a different cost profile, but again we.
We need a little bit of time to work our way through this but you know there's more there's more protocols with non vaccine then with vaccine and there's more testing requirements and.
And what have you so there is.
There will be slightly more cost, but we really do need to work our way through that and I think you know there's a lot of.
Averaging of scale. So the great news is our teams are not sitting down and we're looking at all of this and trying to understand it and plan. So I think we'll have more clarity in the coming days and weeks.
Great. Thanks, so much.
Thank you.
Your next question is from Paul Golding of Macquarie.
Thanks, so much for the question.
I was wondering.
Solve that for 2021, you cited a 75% new booking rate as opposed to 25% FCC and.
I guess I was wondering if there was something I don't know if you've given at 22 mix number but is there something structural there in the near to medium term around marketing.
In marketing, you're able to maybe take some savings there as demand seems to be strong despite low levels of marketing and then my second question is around Caribbean.
Homeport versus.
U S home for it I was wondering if there was anything structural about.
For whatever reason you decided this season wasn't the one for for a robust U S.
Homeport setup are there.
Savings or are there structural cost.
Net debt outpace what a U S homeport.
Itinerary mix would look like.
Yeah. So.
On the first one as it as.
As it relates to the.
The bookings that are coming in the profile of new bookings versus the application of FCC's.
Is it really kind of a broader commentary around the bookings that we've been taking on through 2022, we see a very similar profile where.
You bet around that percentage is also for on new bookings versus versus the application.
Again, it's really early days I think to try to.
Hum kind of piece that.
Those type of stats will result in some type of sales and marketing savings.
Time will tell.
It's clear to us that there's there's really strong demand.
And really some some activity on the marketing side is able to generate.
Hum you about demand, which is which is I think very encouraging for us overall.
And then I think on the cost side as it relates to.
Turning in different ports around the World you know, there's always different port fees Hum.
You know vaccinations testing and so forth can all kind of play in the mix of it but I think for the most part.
It's not really a cost differential I think.
It's more about our ability to.
Get our passengers to those locations.
<unk> and churn at those locations and then deliver Royal classification experiences.
Great. Thanks, so much.
Hey, Paul just want one wont comment ourselves in marketing.
We.
We've always internally and what was going to happen with wave.
21, you know understanding we wouldn't really obviously you have a wave as we historically used to having a wave.
And you know normally wage starts.
Time into the second week of January and that runs through February, peaking and then dropping off.
And we certainly didn't get away this year, but then but then in March of this year.
We have we had a.
Really strong March and so we looked at.
Looked at the the volume of bookings that came in in March of this year and we compared it with wave in 19, which was you know our last real wait period.
And our bookings and in March of this year.
Equally peak.
Peak wavelength and 19.
So.
That was I mean.
That was quite an amazing number so we kind of we started to see wave coming.
In March instead of January and certainly the volume was impressive but the point of this is that.
Ironically, our marketing and sales investment during that month was with was way way below what we invested in 19.
So I mean, it's an interesting fact that we had so much demand with very little investment, which I think speaks to what were seeing and believe is occurring in the market with pent up demand I mean, we you know we know that.
We've been told that savings rates in the U S with U S consumers increased by two and a half trillion that credit card debt stand by.
100 billion and enough surveys tell us that the consumer is increasingly optimistic about the future that the worst is behind them that they are going to go on a vacation.
So I think you know that one.
Statistic for March.
You know we interpret is incredibly positive and speaks about what we think is going to be quite amazing pent up demand that's going to be you know, it's gonna be unleashed, particularly for 'twenty two.
Thanks for the color there.
My point or my question around that is that it seems like the consumer is seeking out the experience and so I wondered if there was some medium.
Term efficiency, there, but I appreciate the color on the volume on the booking volume. Thanks, so much.
Thank you Paul.
Your next question is from Greg Baddish Caribbean of Wolfe Research.
Hey, guys, it's actually Fred Wightman on for Greg I, just wanted to follow up on Michaels comments, just now on the bookings in March.
Totally get that it's sequentially strong growth in January February in the 2019 commentary was Super helpful have you seen a change in the SKU about where those bookings are taking place as far as 'twenty one versus 'twenty two.
More recently, just given some of the improving dialogues with the CDC and what do you think that means for the prospects of a potential July restart here domestically.
Yeah.
Well over the past few weeks, we've introduced multiple.
Products home floating up outside of the U S and the Caribbean, which we've spoken about.
And that the demand for those products is being is being quite robust I mean, we were quite pleased with the demand that we've seen for those products.
Certainly you know, we see things moving into into 'twenty two.
Which is natural.
We're heading into June and June traditionally is the months, where bookings tend to heavily skewed more towards the next year rather than the current year and then that certainly holding true for from from what we're seeing.
Yeah Yeah.
I think just to just add a couple of comments to it.
Yeah.
As we commented a little bit earlier, obviously, the booking activity is skewing a little bit older.
What you would what you would expect because of the vaccination comments in terms of the percentage of our guests that say they've either had been vaccine or do they plan on getting vaccinated.
2022, especially out of.
The North American markets, the U K markets and so forth book actually pretty similar to what you would see in a typical year, while the 2021 bookings obviously have more recently have gravitated to the sailings that we have.
Announced.
And in the Bahamas in Israel, and so forth. So it's it's I think it's very clear as Michael said people are thinking that the worst is behind that there's a lot of these.
Different.
You statistics as it relates to our credit card debt.
Savings in People's propensity to get back out there.
In vacation and I think 2022, so far looks like it's behaving like we saw pre COVID-19.
That's helpful and the released sort of teases the prospect of a return to Alaska. This year I'm wondering if you could just touch on the mechanics for that how realistic that might be and then what the next steps or clarifications that you might need to here to make that happen what day.
Yeah Yeah.
So that's a slightly complex one.
Specifically with respect to Alaska because of course, Canada has.
With in place.
Stop until the.
Throughout the season.
And so in order to restart the Alaska season, we will need a waiver from the passenger vessel services or.
Canada would have to allow at least technical stops.
We're working on both and others are working on both.
We can't be certain where that will end up.
Well I think.
Given the momentum.
There's a reason for some hope, but I think we're that's a sufficiently.
Really complex and confusing situation.
I don't think we're going to put odds on it one way or the other.
I also think we need to be just a little bit careful when we're talking about reading into these bookings.
There are still a lot of issues have yet to be resolved with respect to the.
The CDC and disorder.
The bookings that have taken place have been in a period of high uncertainty are these cruise is going to be sailing will they go where they want and what will be the political so there's a lot of uncertainty and while we try and read a lot into it.
Moving on I think we're feeling comfortable is that there is a lot of pent up demand.
There.
Too many.
Fluid factors or anything to read too much into some of the specifics of what is this particularly new or particularly 'twenty. Two I think it's all terribly encouraging for 'twenty three.
And it's very encouraging for 'twenty two with the spin.
So.
Each of these is going to be difficult to read into.
Until.
Things have calmed down and there's much more certainty about where it's weighted into it.
But as to Alaska.
<unk>, while we're optimistic and we're working to make that happen. There are these other factors we.
We do think that will be in time for the Alaska season.
And we're obviously hopeful that we'll be able to.
Hum.
Solve the issue with Canada.
And either one of these two ways.
Understood. Thank you.
Thank you.
Your next question is from Patrick Scholes of true Securities.
Great Good morning.
Question Alright.
It appears that the next step that the C. D. C is looking for is to complete our foods to weigh in.
In your opinion, what's a realistic timeline at this moment in which you think you could complete a phase iia.
Hi, Patrick.
I cant give you like a week. So you know how many weeks and days.
I think again.
As we understood and interpret what we received last night.
If if you're if you are planning on a highly vaccinated cruise.
There will be no requirement for a simulated voyage and the previous 30 day.
Notification process for stimulation and then the subsequent 60 day for net.
Notification and the process for your first actual se revenue saving.
As effectively.
Being removed and so highly vaccinated cruise can can literally soon.
As soon as you have your pulp plan ready and everything lined up.
You can submit your request to two two cruise and they will try their best to get you. A response within five days. So you can see that the timeline and the process has improved quite quite significantly.
So I think.
There's the process of Crewing the ship, obviously and then the vaccination process. So.
You know I think the target that's been stated in that we've been working towards as is.
Amidst the mid July.
Think that after what we received last night is looking very realistic.
But again to Richard.
We still got a lot to clarify but.
I think this commitment to mid July is looking very realistic based upon what we saw last night.
Okay very good thank you.
Thank you.
Alright final.
Final question, Yeah, that'd be great.
Your final question is from Vince Stifel of Cleveland Research.
Hi, Thanks for taking my question I'm curious if there are some factors we should keep in mind that wood.
'twenty 'twenty two yield maybe not as comparable to 2019, just in light of pricing being ahead. It sounds good.
Had mentioned that new capacity should maybe be a bit of a tailwind but are there any offsets from a mix perspective or the itineraries that you might be running in 22 versus <unk> 19, or even you know.
Getting back to those peak of 107, 108% occupancy levels that might impact the comparability of the 2022 yields for 2019 yield.
Hey, Vince.
I think it's really too early to kind of timing structurally.
The additional capacity.
Obviously getting rid of some of our older tonnage.
And negative as the sale of Azamara, which is a higher yielding brand versus the average.
But for the most part I think it really kind of depends on.
How the business builds going into next year as Michael said, you know really as we start getting here into the early part of the summer is really when 2022 really begins to.
To build up but theres not necessarily something structurally.
Hum.
As it relates to the fleet or our deployment, that's going to make a a.
Any significant change on 2022.
Got it and as a follow up Richard mentioned, the uncertainty and solidity of the situation and I think when you look at your deposits they've been stable for a number of quarter at $1 8 billion, but still a ways away from that $3. Four they were at one point. So curious what you think it takes for those to rebid.
It seems like that's a key part of helping to delever a bit as well and if there's a path for that kind of in the second half of this year as confidence hopefully returns in the booking curve lengthens a bit.
Yeah.
First time, expanding its been stable now for several quarters, it's now building.
And it's building because we're we're we're able to provide clarity on shifts in deployments that are that are coming back up.
Into service and so I think the consumer is gaining confidence.
But I think they're looking for us for your clarity on exactly which ships are going to be coming up and when so that they can plan and count on their vacation experience.
And I think there's obviously a lot of this is beginning to.
Some of the barriers are beginning to evaporate.
That confidence is building and hopefully soon.
Move back to those.
Those levels on a customer deposit standpoint.
Thanks, Joe Thanks, Vince.
Thank you all for your assistance today Shelby with the call and we thank you all for your participation and interest in the company call. It will be available all day to day for any follow up questions you might have and.
As always we wish everybody a great day and please stay healthy.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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