Q4 2023 Royal Caribbean Group Earnings Call
Jason T. Liberty: In fact, the five highest booking weeks in our company's history all occurred since the last earnings earnings. As a result, while our capacity is up 8.5% year-over-year, we have less inventory available to book in 2024 than we did a year ago for 2023, and half as many staterooms left in Q1. Our commercial apparatus is full speed ahead, and all channels are delivering quality demand above 2023. Our direct-to-consumer channels continue to perform exceptionally well as consumer preferences for digital engagement change, and our ongoing investment in enhanced capabilities is supporting record-breaking book sales. Our travel partners are also delivering meaningfully more bookings than last year and beating our elevated expectations. We continue to see particularly healthy demand from North America, where about 80% of our guests will besourced there. Our brands' global appeal and nimble sourcing model allows us to attract the highest yielding guests by positioning our ships in multiple markets across the globe. Our brands lead in their respective segments and are very successful at capturing quality demand across sectors and sourcing from new consumer bases.
The five highest booking weeks in our company's history all occurred since the last earnings call.
As a result, while our capacity is up eight 5% year over year, we have less inventory available to book in 2024, then we did a year ago for 2023 and half as many state rooms left in Q1.
Our commercial apparatus is full speed ahead, and all channels are delivering quality demand above 2023 levels, our direct to consumer channels continue to perform exceptionally well as consumer preferences for digital engagement and our ongoing investment and enhanced capabilities supporting record breaking bookings are.
Travel partners are also delivering meaningful way more bookings in last year and beating our elevated expectations.
We continue to see particularly healthy demand from North America, we're about 80% of our guests will be sourced this year.
Our brands Global appeal, and nimble sourcing model allows us to attract the highest yielding guests by positioning our ships in multiple markets across the world.
Our brands lead in their respective segments, and our very successful at capturing quality demand across sectors and sourcing from new consumer bases.
Jason T. Liberty: As we think about consumer demand for 2024 and beyond, we look to both macro trends and data points from millions of daily interactions with our customers. We continue to see very positive sentiment from our customers bolstered by strong labor markets, high wages, surplus savings, and Elevated Wealth. Yearly growth and spend on experiences is double that of spend on goods. And cruising remains an exceptional value proposition with lower penetration, higher consumer consideration, and high purchase intent.
Do you think about consumer demand for 2024 and beyond we look to both macro trends and data points for millions of daily interactions with our customers.
We continue to see a very positive sentiment from our customers bolstered by strong labor markets high wages surplus savings and elevated wealth levels.
Year over year growth in spend on experiences is double that of spend on goods and cruising remains an exceptional value proposition with lower penetration higher consumer consideration and high purchase intent.
Jason T. Liberty: We see an exceptionally engaged consumer base across markets, brands, and products. People are looking to book their dream vacation with us and continue to spend at elevated levels. Consumers are increasingly interested in booking their vacations earlier.
We see an exceptionally engaged consumer base across markets brands and products people are looking to book their dream vacation with us and continue to spend at elevated levels consumers.
We are engaging in booking their vacations earlier.
70% book at least one of their onboard activities pre cruise at higher AP DS and onboard spend continues at record levels and at higher rates.
Jason T. Liberty: 70% book at least one of their onboard activities pre-cruise at higher APDs, and onboard spend continues at record levels and at higher rates. This positions us very well to outperform the broader travel industry and narrow the pricing gap to land-based vacations. We continue to attract new customers into our vacation ecosystem and Deliver the Best Vacation Experience so that our guests are highly satisfied and continue to rebook and return to our brands and our products.
This positions us very well to outperform the broader travel industry and know where the pricing gap to land based vacations, we continued to attract new customers into our vacation ecosystem and deliver the best vacation experiences. So that our guests are highly satisfied and continue to rebook and return up.
To our brands and our products.
Jason T. Liberty: 2024 is shaping up to be a record-breaking year with 40% earnings growth as our progress continues on an accelerated path towards achieving our trifecta goal. As you can see in our release today, we expect to achieve several trifecta targets in 2024, a full year earlier than previously anticipated. As I've said in the past, Trifecta creates the pathway back to what we internally describe as basic.
2024 is shaping up to be a record breaking year with 40% earnings growth as our progress continues on an accelerated path towards achieving our trifecta goals.
As you can see in our release today, we expect to achieve several trifecta targets in 2020 for a full year earlier than previously anticipated as.
As I said in the past <unk> to create the pathway back to what we internally describe as base camp.
And while an important milestone it is not our final destination as our ambitions go well beyond it.
Jason T. Liberty: And while an important milestone, it is not our final destination, as our ambitions go well beyond it. As highlighted on slide 6, in 2024, we expect to grow capacity by 8.5% with the introduction of Utopia of the Seas and Silver Ray and the first full year of service of the three incredible ships that joined our fleet in 2023: Icon of the Seas, Celebrity Ascent, and Silver Nose.
As highlighted on slide six in 2024, we expect to grow capacity by eight 5% with the introduction of Utopia, the CS and silver array and the first full year of service of the three incredible ships that joined our fleet.
During 2023 icons of the seas celebrity ascent and silver Nova.
Jason T. Liberty: New ships not only elevate our vacation experiences and draw new customers to our brand, but they also provide yield tailwinds and enhance overall profit. In 2024, we expect yields to grow 5.25% to 7.25%, driven by the performance of our entire fleet, new and existing ships, combined with our leading private destinations and strong commercial apparatus. Load factors and rate growth, together with continued focus on margins and disciplined capital allocation, are expected to drive record earnings that grow 40% year-over-year, getting us very close to our trifecta target. Our proven formula for success remains unchanged.
New ships, not only elevate our vacation experiences and draw new customers to our brands, but they also provide yield tailwind and enhance overall profitability.
In 2024, we expect yields to grow 5.25% to 7.25% driven by the performance of our entire fleet, new and existing ships combined with our leading private destinations and strong commercial apparatus.
Load factors and rate growth together with continued focus on margins and disciplined capital allocation are expected to drive record earnings that grow 40% year over year getting us very close to our trifecta targets.
Our proven formula for success remains unchanged moderate capacity growth moderate yield growth and strong cost controls lead to enhanced margins profitability and superior financial performance.
Jason T. Liberty: Moderate capacity growth, moderate yield growth, and strong cost controls lead to enhanced margins and profitability. Superior Financial. Our operating platform is bigger and stronger than ever. We have the leading brands in their respective segments, the best people, and the best and most innovative fleet and destination. We remain intensely focused on delivering a lifetime of vacations for our guests and long-term value for our show.
Our operating platform is bigger and stronger than ever we have the leading brands in their respective segments. The best people and the best and most innovative fleet and destinations we remain intensely focused on delivering a lifetime of vacations for our guests and a long term value for our shareholders.
We are leading the vacation industry, and creating exciting new products and experiences which in 2024 include game changing ships and the expansion of our highly rated destination perfect day of Coke Okay.
Jason T. Liberty: We are leading the vacation industry and creating exciting new products and experiences, which in 2024 will include game-changing ships and the expansion of our highly rated destination, Perfect Day at Coco Cay. Our new ships are performing exceptionally well, and we always expect to see strong trends when we introduce new ships. Icon of the Seas is definitely living up to her name and has taken things to a whole new level in every way.
Our new ships are performing exceptionally well and while we always expect to see strong trends when we introduce new ships icon indices is definitely living up to her name and is taking things to a whole new level in every way.
Demand and pricing for icon has been incredibly strong.
Jason T. Liberty: Demand and pricing for Icon have been incredibly strong. This year, we are all so thrilled to take delivery of the sixth OASIS class ship, Utopia of the Sea, which will set the stage for the ultimate weekend getaway. Lastly, we will take delivery of Silver Ray, the second ship in the Evolution class, redefining ultra-luxury cruising. Silver Ray will debut in the Mediterranean this summer before transitioning to the winter season in South America.
This year. We are also thrilled to take delivery of the sixth Oasis class ship Utopia of the seas, which will set the stage for the ultimate weekend getaway.
Lastly, we will take delivery of silver Ray the second ship and the evolution class redefining ultra luxury cruising.
Silver Ray will debut in the Mediterranean This summer before transitioning to what's your season in South America.
New ships and their incredible innovative experiences further accelerate our efforts to steal market share from land based vacations.
Jason T. Liberty: New ships and their incredible, innovative experiences further accelerate our efforts to steal market share from land-based vacations. We completed the expansion of Hideaway Beach at Perfect Day at Cook O.K. just in time to welcome Icon of, sizing the benefit of this strategic asset. Hideaway Beach is our newest, adult-only, ultimate beachfront paradise at Perfect Day at Coco Cay, which expands our capacity on the island to over 3 million guests annually.
We completed the expansion of Hideaway Beach at perfect day at Cook, Okay. Just in time to welcome icon of the seas upsizing the benefit of this strategic asset.
<unk> beaches, our newest adult only ultimate beachfront Paradise at perfect day of Coke, Okay, which expands our capacity on the island to over 3 million guests annually.
Jason T. Liberty: About two-thirds of World Caribbean International Caribbean guests will visit Perfect Day at Coco Cay this year, allowing us to deliver high satisfaction scores and higher margins across the globe. Our journey to deepen the relationship with the customer continues this year. We will further enhance our commercial capabilities to optimize our distribution channels, build even more customer loyalty, and lower our acquisition costs. The outsized increase in our on-board revenue over the past couple of years has been fueled by new capabilities introduced to make it easier for guests to pre-book onboard experiences. We will continue to enhance those capabilities in 2020. About a third of on-board purchases are now coming through the mobile app, and we already have about 40% more pre-cruise revenue booked in 2024 as compared to 2023. As a reminder, customers who purchase on-board experiences before their cruise spend about two and a half times more than those who do not buy pre-cruise.
About two thirds of Royal Caribbean International Caribbean guests will visit perfect day of Coke, Okay. This year, allowing us to deliver high satisfaction scores and higher margins across the fleet.
Our journey to deepen our relationship with the customer continues this year, we will further enhance our commercial capabilities to optimize our distribution channels build even more customer loyalty and lower our acquisition costs.
The outsized increase in our onboard revenue over the past couple of years has been fueled by new capabilities introduced to make it easier for guests to pre book onboard experiences we will continue to enhance those capabilities in 2024.
About a third of onboard purchases are now coming through the mobile App and we already have about 40% more pre cruise revenue booked in 2024 as compared to 2023.
As a reminder, customers who purchase onboard experiences before their crews spent about two five times more than those who do not buy pre cruise, we will remove friction by investing in a modern digital travel platform, making it easier than ever for guests to book their dream vacations.
Jason T. Liberty: We will remove friction by investing in a modern digital travel platform, making it easier than ever for guests to book their dream vacations while allowing us to expand wallet share. We will also continue driving business excellence to increase yields and capture efficiencies across our platform. Our teams are committed to controlling costs and enhancing profitability while focusing on delivering the best guest experiences and doing so in a responsible way. Our sustainability ambitions help inform our strategic and financial decisions daily, ensuring that we always act responsibly while achieving our long-term profitability goals.
Allowing us to expand wallet share with.
We'll also continue driving business excellence to increase yields and capture efficiencies across our platform.
Our teams are committed to controlling costs and enhancing profitability, while focusing on delivering the best guest experiences and doing so in a responsible way.
Our sustainability ambitions help inform our strategic and financial decisions daily ensuring that we always act responsibly, while achieving our long term profitability goals, we are making progress on our C. The future commitment to sustain the planet energized communities and accelerate innovation.
Jason T. Liberty: We are making progress on our See the Future commitment to sustain the planet, energize communities, and accelerate innovation. We wrapped up the year on track to achieve our carbon intensity reduction targets, and we are entering 2024 well beyond the halfway mark. To make this possible, we continue to accelerate innovations like the first methanol-capable tri-fuel engine that we expect to debut on Celebrity Excel in 2025. And every new ship represents an advancement in our energy transition effort. The game-changing Icon of the Seas exceeds industry standards for energy efficiency by 24 percent. Icon and the recently launched Silver Nova also allow us to take advantage of new technologies, such as innovative waste-to-energy systems on board by consistently using our latest ships to pilot new technology.
We wrapped the year on track to achieve our carbon intensity reduction targets and we are entering 2024, well beyond the halfway mark.
To make this possible we continue to accelerate innovations like the first methanol capable trifle engine that we expect to debut on the celebrity Excel in 2025.
Every new ship represents an advancement in our energy transition efforts the game changing icons of the CS exceeds industry standards for energy efficiency by 24%.
Icon and the recently launched silver Novo also allow us to take advantage.
Of new technologies, such as innovative waste to energy systems onboard.
By consistently using our latest ships to pilot new technologies, we can validate the decisions we are making now to help position us to achieve our destination net zero targets by 2050.
Jason T. Liberty: We can validate the decisions we are making now to help position us to achieve our destination net zero targets by 2020. To wrap up, the future of the Royal Caribbean Group is exceptionally bright. With our strong operating platform and proven strategies, we are creating a lifetime of vacation experiences for our customers, while also delivering long-term shareholder value that allows us to reach new financial records. We are well positioned for continued growth in 2024 and beyond. And with that, I'll turn it over to Naftali. Thank you, Jason, and good morning, everyone.
To wrap up the future of the Royal Caribbean Group is exceptionally bright with our strong operating platform and proven strategies, we are creating a lifetime of vacation experiences for our customers. While also delivering long term shareholder value and allows us to reach new financial records. We are well positioned for continued growth in 2020.
Four and beyond.
And with that I'll turn it over to Naftali.
Naftali: Thank you, Jason and good morning, everyone. Let me start by reviewing fourth quarter results. Our teams delivered yet another strong performance with adjusted earnings per share of $1 25.
Naftali: Let me start by reviewing fourth-quarter results. Our teams delivered yet another strong performance with adjusted earnings per share of $1.25, about 15% higher than the midpoint of our October guidance. All key products exceeded expectations, delivering double-digit yield growth in the fourth quarter.
Naftali: About 15% higher than the midpoint of our October guidance.
Naftali: Oh key products exceeded expectations, delivering double digit yield growth in the fourth quarter net yields were up almost 18% compared to 2019 and that would have been 20% if not for the 200 basis point drag from eliminating the reporting lag related to silversea.
Naftali: Net yields were up almost 18% compared to 2019, and that would have been 20% if not for the 200 basis point drag from eliminating the reporting lag related to Silver Sea. Load factors were at 105%, and rates were up approximately 19%, with significant growth for both ticket and onboard revenue. Net cruise costs excluding fuel increased 6.7% compared to the fourth quarter of 2019.
Naftali: Load factors were at a 105% and rates were up approximately 19% with significant growth for both ticket and onboard revenue.
Naftali: Net cruise costs, excluding fuel increased six 7% compared to the fourth quarter of 2019.
Naftali: Since our last earnings call the stock price appreciated over 50% and added 250 basis points to stock based compensation expense versus our prior guidance.
Naftali: Since our last earnings call, the stock price appreciated over 50% and added 250 basis points to stock-based compensation expense versus our prior guidance. Excluding the increase in stock-based compensation, our costs came in in line with expectations. Our focus on enhancing profitability allowed us to deliver a 30% adjusted EBITDA margin in the fourth quarter ahead of 19 levels. We also utilized excess cash flow to pay down debt and lower interest expense consistent with our Trifecta goals. 2023 was an exceptional year, as you can see on slide five. We generated almost $14 billion of total revenue, $4.5 billion of adjusted EBITDA, and $4.4 billion of operating cash flow. Net cruise costs, excluding fuel, increased 7.9% compared to 2019.
Naftali: Excluding the increase in stock based compensation our costs came in in line with expectations.
Naftali: Our focus on enhancing profitability allowed us to deliver 30% adjusted EBITDA margin in the fourth quarter, our head of 19 levels.
Naftali: We also utilized excess cash flow to pay down debt and lower interest expense consistent with our trifecta goals.
Naftali: 2023 was an exceptional year as you can see on slide five we generated almost $14 billion of total revenue $4 $5 billion of adjusted EBITDA and $4 4 billion of operating cash flow.
Naftali: Net cruise costs, excluding fuel increased seven 9% compared to 19.
Naftali: <unk> also included approximately 65 basis points higher costs related to increase in stock based compensation versus our prior guidance.
Naftali: NCCX also included approximately 65 basis points higher costs related to increasing stock-based compensation versus our prior guidance. Our cost performance reflects the continued and durable benefit from all the actions we have taken over the last several years to support enhanced margins. Our proven formula for success also drove $6.77 in adjusted earnings per share that were more than twice our initial expectations in January. Now, switching to our 2024 outlook. I will start by taking you through capacity and deployment for the year.
Naftali: Our cost performance reflects the continued and durable benefit from all the actions we have taken over the last several years to support enhanced margins.
Naftali: Our proven formula for success also drove $6 77 in adjusted earnings per share that were more than twice our initial expectations in January.
Naftali: Now switching to our 2020 for outlook.
Speaker Change: I will start by taking you through capacity and deployment for the year.
Speaker Change: For the full year, our capacity is expected to be up eight 5% compared to 2023.
Naftali: For the full year, our capacity is expected to be up 8.5% compared to 2023. This year, we have almost twice as many dry dock days compared to 2023, reducing APCD growth by 1% and resulting in more pronounced capacity growth in the first and third quarters. APCDs are expected to grow around 10% in the first and third quarters, 5% in the second quarter, and 8% in the fourth quarter.
Speaker Change: This year, we have almost twice as many dry dock days compared to 23, reducing a b C D growth by 1% and resulting in a more pronounced capacity growth in the first and third quarter.
Speaker Change: A P C d's are expected to grow around 10% in the first and third quarter, 5% in the second quarter and 8% in the fourth quarter.
Naftali: 2024 has consistently been in a strong booked position, and as Jason mentioned, the year is off to a very strong start with a record wave. As a result, both rates and volume are currently booked significantly ahead of the same time last year. All key products, including the Caribbean, Europe, Alaska, and Australia, are booked nicely ahead of last year. The Caribbean represents just over 55% of our deployment this year, following a 13% increase in capacity year-over-year. The growth is due to the additions of Icon of the Sea and Utopia of the Seas combined with Celebrity's upsized summer program. Supporting this increase in capacity is the addition of Hideaway Beach at Perfect Day at Coco Cay.
Speaker Change: 2024 has consistently been in a strong book position and as Jason mentioned the year is off to a very strong start with a record wave.
Speaker Change: As a result, both rates and volume are currently booked significantly ahead of same time last year.
Speaker Change: All key products, including the Caribbean Europe, Alaska, and Australia are booked nicely ahead of last year.
Speaker Change: The Caribbean represents just over 55% of our deployment this year following a 13% increase in capacity year over year.
Speaker Change: The growth is due to the additions of I kind of see and Utopia of the seas combined with celebrities Upsized Summer program.
Speaker Change: Supporting this increase in capacity is the addition of Hideaway Beach at perfect day at Coke Okay.
Speaker Change: Our Caribbean programs are booked nicely ahead of last year in both rate and volume.
Naftali: Our Caribbean programs are booked nicely ahead of last year in both rate and volume. While bookings and pricing for Icon can only be described as iconic, and Utopia is demanding significant price premiums in the short Caribbean market, we are also very pleased with the trends we are seeing on existing hardware. Europe accounts for around 15% of our capacity following a 7% reduction year over year. At the time of our last earnings call, we were in the process of altering itineraries for European Mediterranean sailings that were previously expected to visit Israel, and we have since redeployed all ships with calls to Israel. Regarding the situation in the Red Sea, the safety of our guests and crew is of top priority, and we are constantly monitoring the situation.
Speaker Change: But bookings and pricing for icon can only be described as iconic and utopia as demanding significant price premiums in the short Caribbean market. We're also very pleased with the trends we are seeing an existing hardware.
Speaker Change: Europe accounts for around 15% of our capacity following a 7% reduction year over year.
Speaker Change: At the time of our last earnings call. We were in the process of altering itineraries for European Mediterranean Sailings that were previously expected to visit Israel and we have since redeployed all ships with Kohl's to Israel.
Speaker Change: Regarding the situation in the Red Sea the safety of our guests and crew is of top priority and we are constantly monitoring the situation.
Speaker Change: We only have a handful of repositioning cruise is scheduled in the region. This year and have already rerouted one of our Silversea chips and have contingency plans for a couple of others in the spring.
Naftali: We only have a handful of repositioning cruises scheduled in the region this year and have already rerouted one of our Silversea ships and have contingency plans for a couple others in the spring. Regarding demand for Europe products, more broadly, bookings were softer for the impacted itineraries for a few weeks last October but rebounded relatively quickly and are now significantly higher than at the same time last year. As a result, our European sailings are booked nicely ahead of last year.
Speaker Change: Regarding demand for your product more broadly bookings were softer for the impacted itineraries for a few weeks last October a rebounded relatively quickly and are now significantly higher than same time last year as a result, our European sailings are booked nicely ahead of last year.
Speaker Change: We are also very pleased with the trends we are seeing on other north American itineraries.
Naftali: We are also very pleased with the trends we are seeing on other North American routes. Alaska has been performing particularly well from both a rate and volume standpoint. Alaska accounts for 6% of full-year capacity and 15% in the all-important summer season. While our capacity for Alaska is only up slightly this year, we have made some exciting changes to our Alaskan deployment. For the first time, Celebrity will offer incredible Alaskan vacations on an Edge-class ship, the Celebrity Edge.
Speaker Change: Alaska has been performing particularly well from both a rate and volume standpoint.
Speaker Change: <unk> accounted for 6% of full year capacity and 15% in the all important summer season, while.
While our capacity for Alaska is only up slightly this year, we have made some exciting changes to our Alaska deployment.
Speaker Change: For the first time celebrity will offer incredible Alaska vacations on an edge class ship celebrity edge and Silversea newest ship silver Nova will also sale in Alaska.
Naftali: And Silversea's newest ship, Silver Nova, will also sail in Alaska. Asia Pacific will account for 10% of our capacity. We are seeing strong pricing and demand trends for both Asia and China as we return to China with the full spectrum of disease in the second quarter. Taking all this into account, if you turn to slide 7, you will see our guidance for 2024. This will be the second full year on our path towards our trifecta goals, and our results remain ahead of track. Net yields are expected to be up 5.25% to 7.25%, and that's following an exceptional 2023 that saw double-digit yield growth that only accelerated as the year progressed.
Speaker Change: Asia Pacific will account for 10% of our capacity we.
Speaker Change: We are seeing strong pricing and demand trends for both Asia and China as we returned to China with spectrum of the seas in the second quarter.
Speaker Change: Taking all this into account if you turn to slide seven you'll see our guidance for 2024.
Speaker Change: This will be the second full year on our path towards our trifecta goals and our results remain ahead of track.
Speaker Change: Net yields are expected to be up five in a quarter to seven a quarter percent and thats. Following an exceptional 2023, they saw double digit yield growth that only accelerated as the year progressed.
Speaker Change: While the 2023 comparable set a high bar full year yield growth is being fueled by our incredible new hardware higher load factors higher pricing do you expect that the expansion of perfect day at Coke, Okay, and further advancements in our commercial capabilities.
Naftali: While the 2023 comparable set a high bar, full-year yield growth is being fueled by our incredible new hardware, higher load factors, higher pricing, the expansion of Perfect Day at Cocoa K, and further advancement in our commercial capability. Now moving to costs. Our focus remains to enhance margins as we continue to grow the business. Full-year net cruise costs, excluding fuel, are expected to be up 3.75% to 4.25%, and that includes approximately 315 basis points of impact from increased dry dock days and the operations of Hideaway Beach. The majority of our dry docks are in late the first quarter and early the second quarter, which will mostly weigh on our first half costs. The remaining dry docks will be in the fourth quarter. We anticipate a fuel expense of $1.16 billion for the year, and we are 61% hedged at below market rates. This year, we'll also see the introduction of the EU Emission Tax Scheme, which will apply to 40% of our European itineraries related emissions.
Speaker Change: Now moving to costs.
Speaker Change: Our focus remains to enhance margins as we continue to grow the business full year net cruise costs, excluding fuel are expected to be up 375% to $4 two 5% and that includes approximately 315 basis points impact from increased dry dock.
Speaker Change: And the operations of Hideaway Beach.
Speaker Change: Majority of our dry docks or in late first quarter and early second quarter, which will mostly way on our first half costs. The remaining drydocks will be in the fourth quarter.
Speaker Change: We anticipate fuel expense of 1.16 billion for the year and we are 61% hedged at below market rates.
Speaker Change: This year, we'll also see the introduction of the EU emission tax scheme, which will apply to 40% of our European itineraries related emissions and we do not expect this to significantly weigh on earnings.
Naftali: And we do not expect this to significantly weigh on earnings. Based on current fuel prices, currency exchange rates, and interest expense, we expect a record adjusted earnings per share between $9.50 and $9.75. Turning to first quarter guidance, summarized on slide 8, in the first quarter, about 73% of our capacity will be in the Caribbean, 18% in Asia-Pacific, and the remaining capacity is spread across a number of other itineraries, including South America and Expedition Korea. Book load factors and rates are at record levels and are both up significantly versus the same time last year.
Speaker Change: Based on current fuel prices currency exchange rates and interest expense, we expect a record adjusted earnings per share between $9 50 and.
Speaker Change: At $9 70.
Speaker Change: Turning to first quarter guidance is summarized on slide eight.
Speaker Change: In the first quarter about 73% of our capacity will be in the Caribbean, 18% in Asia Pacific and the remaining capacity is spread across a number of other itineraries, including South America and expedition cruises.
Speaker Change: Book load factors and rates are at record levels and are both up significantly versus same time last year.
Naftali: As you can see from our guidance, we expect significant yield growth for the first quarter driven by full load factor recovery and the annualization of the strong pricing trends which began at the end of the first quarter of 2023. Net yields are expected to be up approximately 15% for the first quarter, with both Caribbean and Australian itineraries driving the growth in yields. Net cruise costs, excluding fuel, are expected to be up in the range of 7.1 to 7.6 percent and include 380 basis points of impact from increased dry docks and costs related to operating hideaway beach. We also have approximately 200 basis points of cost in the first quarter related to the startup of ICON as well as higher load factors as compared to Q1 2023.
Speaker Change: As you can see from our guidance, we expect significant yield growth for the first quarter driven by full load factor recovery and the annualized nation of the strong pricing trends, which began at the end of the first quarter of 2023.
Speaker Change: Net yields are expected to be up approximately 15% for the first quarter with both the Caribbean and Australia 19 areas driving the growth and yield.
Speaker Change: Net cruise costs, excluding fuel I expect it to be up in the range of seven 1% to seven 6% and include 380 basis points impact from increased dry docks and costs related to operating Hideaway Beach. We also have approximately 200 basis points of cost in the first quarter.
Speaker Change: Related to the startup of icon as well as higher load factors as compared to Q1 2023.
Naftali: Taking all this into account, we expect adjusted earnings per share for the quarter to be $1.10 to $1.20. Now, turning to our balance sheet. We ended the quarter with $3.1 billion in liquidity. During the fourth quarter, we refinanced our revolving credit facilities and term loans and repaid the remaining $500 million of our $11.5 million senior security net. We settled our 2.875% convertible notes in November by utilizing $225 million of cash and issuing just under 147,000 shares.
Speaker Change: Taking all this into account, we expect adjusted earnings per share for the quarter to be $1 10 to $1 20.
Speaker Change: Turning to our balance sheet.
Speaker Change: We ended the quarter with $3 1 billion in liquidity.
Speaker Change: During the fourth quarter, we refinanced our revolving credit facilities and term loan and repaid the remaining $500 million of our 11 five senior secured notes.
Speaker Change: We settled our two 875% convertible notes in November by utilizing $225 million of cash and issuing just under a 147000 shares.
Speaker Change: We made significant progress during 2023 strengthening the balance sheet towards our trifecta goal of investment grade metrics better performance and disciplined capital allocation allowed us to accelerate reduction in leverage to around four times total debt to adjusted EBITDA at year end, when excluding the impact of new <unk>.
Naftali: We made significant progress during 2023, strengthening the balance sheet towards our trifecta goal of investment-grade metrics. Better performance and disciplined capital allocation allowed us to accelerate a reduction in leverage to around four times total debt to adjusted EBITDA at year-end when excluding the impact of new ships that were delivered mid-year. We will continue to proactively pay down debt and pursue opportunistic refinancings and expect to further reduce leverage to close to mid-three times by the end of 2024. Our priorities to address debt remain unchanged: managing debt maturities, reducing interest expense, and removing remaining restriction on capital allocation and towards a fully unsecured balance sheet.
Speaker Change: <unk> that were delivered mid year.
Speaker Change: We will continue to proactively pay down debt and pursue opportunistic refinancings and expect to further reduce leverage to close to mid three times by the end of 2024.
Speaker Change: Our priorities to address debt remained unchanged managing debt maturities, reducing interest expense and removing remaining restrictions on capital allocation and towards a fully unsecured balance sheet.
Speaker Change: In closing, we remain committed and focused on executing our strategy and delivering on our mission, while achieving our trifecta goals trifecta creates the pathway back to base camp and while an important milestone is not our final destination is our ambitions go well beyond it.
Operator: In closing, we remain committed and focused on executing our strategy and delivering on our mission while achieving our TRIFECTA goals. Trifecta creates the pathway back to Basecamp, and while an important milestone, is not our final destination, as our ambitions go well beyond it. The combination of our strong book position and an accelerating demand environment is certainly pointing to another strong year of yield growth and a step change in earnings growth. With that, I will ask our operator to open the call for a question and answer session. At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad.
Speaker Change: The combination of our strong book position and an accelerating demand environment is certainly pointing to another strong year of yield growth and a step change in earnings growth.
Speaker Change: With that I will ask our operator to open the call for a question and answer session.
At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.
Speaker Change: I ask that you limit yourself to one question and one follow up and re enter the queue for any additional questions that you might have.
Steven Wieczynski: We ask that you limit yourself to one question and one follow-up, then re-enter the queue for any additional questions that you might have. Our first question comes from the line of Stephen Wieczynski with Steeple. Please go ahead.
Speaker Change: First question comes from the line of Stephen <unk> with Stifel. Please go ahead.
Stephen: Yes, Hey, guys good morning.
Steven Wieczynski: Yeah, hey, guys, good morning. And congratulations on a strong 2023 in the launch of ICON. You know, so as we think about your guidance for this year, specifically thinking about yields, just, you know, just wondering if you could break down that yield guidance a little bit for us, essentially, just trying to figure out what you guys included in there in terms of, you know, things like core pricing, your occupancy ramp, obviously, you've got new hardware. Coco K. as well.
Stephen: Congratulations on a strong 2023 and the launch of <unk> on the launch of icon.
Stephen: So as we think about your guidance for this year, specifically thinking about yields just just wondering if you could break down that yield guidance a little bit for us essentially just trying to figure out. What you guys are included in there in terms of.
Stephen: Things like core pricing your occupancy ramp obviously, you've got new hardware with coke, Okay, as well and then maybe how youre thinking about.
Jason T. Liberty: And then, you know, maybe how you're thinking about, you know, onboard yield this year. And then, finally, there, you know, maybe help us think about the cadence of yield for this year. You know, as this guide might make some believe, there's a potential for slowing in the back half of the year, but I would assume that's just more lack of visibility, you know, tougher comps with low visibility. Well, thanks, Steve. And good morning, everybody.
Stephen: Onboard yields this year.
And then finally, there maybe help us think about the cadence of yields for this year.
Stephen: Guide might make some believe.
There is a potential for slowing in the back half of the year, but I would assume that's just more lack of visibility.
Stephen: Tougher comps with with load factors.
Stephen: Yes.
Speaker Change: Thanks, Steven and good morning, everybody.
Jason T. Liberty: I think you pointed to a lot of things there. So first, obviously, 2023 was an incredibly strong year on both a ticket and onboard standpoint. Q1, you know, the strong yield is, as Nav commented, driven by having a kind of full period with the pricing that we saw on the ramp up, starting in the middle of the first quarter of last year and then the recovery of the load factor. There is nothing that we see in the booking environment or onboard spend that doesn't point toward acceleration. And so our formula for success, which is moderate yield growth and good cost control, is very much how we see Q2 forward. But when we look at things, whether it's the new hardware, whether it's like for like, whether it's onboard spend, all those things are pointing north on a positive basis in terms of what we're seeing in the booking environment. And I think there shouldn't be any concern at this point in terms of what we see, that there's any slowdown occurring in our business in Q2 forward. Okay, gotcha. Thanks for that!
Speaker Change: I think I think you pointed to a lot of things. There. So first obviously 2023 was an incredibly strong year on both a ticket and onboard standpoint.
Speaker Change: Q1.
Speaker Change: Strong yield is now.
Speaker Change: Commented.
Speaker Change: Driven by <unk>.
Speaker Change: A kind of full period with the pricing that we saw in the ramp up starting in the middle of the first quarter.
Speaker Change: Of last year, and then the recovery of the load factor.
Speaker Change: There is nothing that we see in the booking environment are onboard spend that doesn't point towards acceleration.
Speaker Change: And so our formula for success, which is moderate yield growth and good cost control.
Speaker Change: Is very much how we see.
Speaker Change: Q2 forward.
Speaker Change: And but when we look at things, whether it's the new hardware, whether it's like for like whether it's onboard spend all those things are pointing north on a positive basis in terms of what we're seeing in the booking environment.
Speaker Change: And I think Thats theres, there shouldn't be any concern at this point in terms of what we see.
Speaker Change: That there is any slowdown occurring in our business Q2 forward.
Speaker Change: Yeah.
Speaker Change: Okay got it thanks for that that makes that makes sense and then.
Jason T. Liberty: That makes sense. And then, you know, Jason, as we think about your trifecta goals, you're essentially knocking off two of those goals this year with a strong possibility that your third trifecta goal, of getting north of $10 a share in earnings, is probably a very high probability based on what we're seeing right now, based on what you're seeing right now. You know, Jason, I know you're talking about tri... Basecamp. But I guess the question is really where do you guys go... here? I mean, if trifecta goals are indeed base camp, do you start to think about introducing, you know, at some point, something that moves you well beyond base camp?
Speaker Change: Jason as we think about your trifecta goals.
Jason: You're essentially knocking off two of those goals this year with the <unk>.
Jason: <unk> possibility that your third right that could go up getting north of $10 a share in earnings is probably a very high probability based on what you know.
Jason: We're seeing right now based on what you're seeing right now.
Jason: So Jason I know you talked about trifecta being what you've got base camp, but I guess the question is really where do you guys go from here.
Jason: I think the goals R&D base camp do you start to think about introducing at some point something that moves you well beyond <unk> camp.
Jason: Maybe help us think about the return to investment grade in and how you and your your agency partners are thinking about that timeline as well. Thank you.
Jason T. Liberty: And then maybe, you know, help us think about the return to investment grade and how you and your agency partners are thinking about that timeline as well. Thank you.
Speaker Change: Sure well I'll, let <unk> take the investment grade.
Speaker Change: <unk>.
Speaker Change: We are an organization that I think that does really well with.
Speaker Change: Two to three year targets.
Naftali: Well, I'll let Nav take the investment grade question. We are an organization that does really well with, you know, kind of two to three year targets. And we can see that obviously here, when we consider Trifecta, getting the hearts and minds of our organization, really focusing on, you know, delivering strong returns for our shareholders and also an incredible guest experience while also, you know, lightening our impact on the planet, all these things are so heavily in the consideration of what we do each and every day. As we get closer to achieving Trifecta, we will evaluate what's the next program, financial performance program that we're going to put out there that we think is important, not just to make sure management is focused on what it is we're looking to achieve, but also to make sure everybody understands where we're navigating.
Speaker Change: We can see that obviously here when we consider trifecta getting the hearts and minds of our organization.
Speaker Change: It really focusing on delivering strong returns for our shareholders.
Speaker Change: And also an incredible guest experience while also.
Speaker Change: Widening our impact on the planet all of these things are so heavily in the consideration of what we do each and everyday.
Speaker Change: As we get.
Speaker Change: Closer to achieving trifecta.
Speaker Change: We will evaluate what's the next.
Speaker Change: Hum.
Speaker Change: Program financial performance program that we're going to put out there that we think is important not just to make sure management is focused on what it is we're looking to achieve but also to make sure everybody understands where we're navigating too.
Speaker Change: But if you just run the math on moderate yield growth good cost control, while we moderately grow our business, while continuing to invest in destinations and so forth.
Naftali: But, you know, if you just run the math on moderate yield growth, good cost control, while we moderately grow our business, while continuing to invest in destinations and so forth, you know, that math will tell you that we will be in a very strong financial performance on an earnings basis, ROIC basis, as well as a margin basis. And all those things I think are really important as we consider how disciplined we have been on capital and also we'll be in a consideration set as we think about returning capital to shareholders as we zero in on getting to investment grade metrics. But I'll hold here for now to talk about investment grade. Thanks, Jason. Hey, Steve.
Speaker Change: That all back that math will tell you that we're in a row, we will be in a very strong financial performance on an earnings basis, ROIC basis, as well as a margin basis.
Speaker Change: And all of those things I think are really important as we consider how.
Speaker Change: Discipline, we have been on capital and also will be in the consideration set as we think about returning capital to shareholders as we zero in on getting to investment grade metrics, but I'll hold here for now just talking about investment grade.
Speaker Change: Jason.
Jason: Hey, Steve.
Jason: So.
Jason: On the balance sheet part of Trifecta is getting back to investment grade metrics and we've really focused on that and as you could you could see in our and what we've announced for the results in 2023, we've made significant progress in.
Naftali: So on the balance sheet, part of Trifecta is getting back to investment grade metrics, and we've really focused on that. And as you can see in what we've announced for the results in 2023, we made significant progress in that direction. We lowered our cost of capital. We repaid roughly $4 billion of debt with excess cash flow because, as we saw, the performance accelerates. Our formula of just being disciplined around capital allocation allowed us to pay down debt faster than we thought. I will continue to do that this year, and in my remarks, I said that we would be very close to the leverage levels that we have in the targets. In addition to that, we also want to unsecure the balance sheet, and that will come as some of the notes that we have had to issue, either secured or guaranteed, have the opportunity to refinance those or pay them down.
Jason: In that direction, we lowered our cost of capital we repaid.
Jason: Roughly $4 billion of debt with excess cash flow because as we saw the performance accelerate.
Jason: Our formula of just being disciplined around the capital allocation allowed us to pay down debt faster than we thought.
Jason: And we will continue to do that this year and EMI.
Jason: In my remarks, I said that will be very close to the leverage levels that.
Jason: That we have in the targets.
Jason: In addition to that we also want to unsecured the balance sheet and that will come as some of the notes that we had to issue.
Jason: Either secured or guaranteed have the opportunity to refinance those or pay them down.
Naftali: With regard to the rating agencies, we are in very close contact with the rating agencies. We were very pleased with the credit upgrades, and the rating upgrades that we had last year. We are focused on making sure that we have the balance sheet we are comfortable operating under, and that's really what the goals are. And then we'll continue to be in close contact with agencies as we make progress on that. But we're not necessarily focused on the ratings, really on the metrics there. Your next question comes from the line of Robin Farley with UBS, please go ahead. Great, thanks.
Jason: Do the rating agencies were very close contact with the rating agencies, we were very pleased with the.
Jason: Could it upgrades debt rating upgrades that we had last year.
Jason: We are focused on making sure that we have the balance sheet, we are comfortable operating under and Thats really what the goals are.
Jason: And then we will continue to be in close contact with the agencies as we make progress on that but we're not focused necessarily on the ratings really on the on the metrics there.
Your next question comes from the line of Robin Farley with UBS. Please go ahead.
Robin M. Farley: Great. Thanks, I wanted to ask and you alluded to potential changes with some of the itineraries in the Red Sea is it fair to say that your guidance. Your EPS guidance for 'twenty. Four already includes what you think you may have to do in terms of rerouting.
Robin M. Farley: I wanted to ask you alluded to potential changes with some of the itineraries in the Red Sea. Is it fair to say that your guidance today, your EPS guidance for 24, already includes what you think you may have to do in terms of rerouting, you know, anything that would be transiting there? I don't know if you can help us quantify what, you know, like kind of the, if there's any downside that's already baked into your EPS guidance for that. And then I do have a follow-up question, but I'll start with that one. Thanks.
Robin M. Farley: Any anything that would be transiting there.
Robin Farley: If you can help us quantify what.
Robin Farley: The downside is already baked into your EPS guidance for that and then I do have a follow up that I'll start with that one thanks.
Speaker Change: Well thanks for the question Robyn and I think just as we talk about how we how we guide our guidance does not plan for perfection.
Jason T. Liberty: Yeah, well, thanks for the question, Robin. And I think, you know, just as we talk about how we guide, our guidance does not plan for perfection. And so when we consider things like the Red Sea, and there are things that come up from time to time within the course of the year, you know, we very much take those kinds of things into account. And so I don't think we think the handful of sailings that will sail through, or are expected to sail through, the Suez is something that's going to impact our guidance at this point in time. And I think that's how we just generally set up our guidance to not plan for perfection. Okay, fine.
Speaker Change: And so when we consider things like the Red Sea and there are things that come up from time to time within the course of the year.
Speaker Change: We very much kind of take those kinds of things into account.
Speaker Change: And so on.
Speaker Change: I don't think we think the handful of sailings that will that will sell through.
Speaker Change: Alright, if I could the sale through the Suez is something that's going to impact our guidance at this point in time.
Speaker Change: And I think that's that's how we just generally set up our guidance to not plan for perfection.
Speaker Change: Okay perfect. Thank you and then.
Speaker Change: I don't know if you have any initial thoughts.
Speaker Change: And potential tax changes in the global minimum tax and how that.
Naftali: And then, I don't know if you have any initial thoughts on potential tax changes in the global minimum tax and how that might impact you given your incorporation and your itineraries and, you know, kind of anything that you may be able to do to mitigate that. Thank you. Hey Robin.
Speaker Change: That might impact you given your incorporation in your itineraries in you know kind of how you think.
Speaker Change: You may be able to do to mitigate that thank you.
unknown: Hey, Robyn so yes, the global minimum taxes, obviously out there and it's been.
unknown: There for quite some time.
If we if we so we continue to evaluate it and if we do nothing that doesn't really impact us until 2026. So I think that's important and of course, we we believe that we can do with some mitigation mitigating the majority of that impact.
Naftali: So yes, the global minimum tax is obviously out there, and it's been around for quite some time. You know, if we continue to evaluate it, and you know, if we do nothing, that doesn't really impact us until 2026. So I think that's, that's important. And of course, we, we believe that with some mitigations, we can mitigate the majority of that impact. So, so that's kind of that. Your next question comes from the line of Brandt Montour with Barclays. Please go ahead. Hi, Brandt, please check to see if your line is on mute. Can you hear me?
unknown: So that's kind of on that.
unknown: Your next question comes from the line of Brandon <unk> with Barclays. Please go ahead.
unknown: Yeah.
Hi, Brian. Please proceed your line is on mute.
unknown: Hi.
Brandon: Can you hear me.
Brandon: Yeah, Hey, Brian Okay.
Okay, great sorry about that guys. Congrats on the results. This morning, and thanks for taking my questions. So the first one is.
Brandt Montour: Yep, April. Okay, great. Sorry about that, guys.
Jason T. Liberty: Congratulations on the results this morning and thanks for taking my question. So the first one is, you know, given the European slowdown in bookings that you saw in sort of November, which is great to hear that that came back, but taking into account the seasonality of Europe and thinking about yield for the back half or sort of for the balance of this year that's baked into your full year guide, is it fair to assume that the yield growth cadence for the balance of the year will sort of correlate with the quarters that are strongest Anything else you can help us to think about how that cadence will progress? Well, first, we're very happy that demand for Europe came back, and we saw this acceleration soon after our last call. I really don't think anybody should be reading into any concern around Q2 going forward in terms of any kind of slowdown.
Brandon: Given the European.
Brandon: Slowdown in bookings that you saw in sort of November which is great to hear that that did that came back.
Brandon: But taking into account the seasonality of Europe.
Brandon: And thinking about yields for the back half for sort of for the balance of this year that.
Brandon: That's baked into your full year guide is it fair to assume that.
Brandon: The yield growth cadence for the balance of the year will sort of correlate with the.
Brandon: The quarters that are strongest in the Caribbean given you have high with each and an icon on selling Theyre just moving else you can help us think about how that cadence will progress.
Brandon: Well.
Brandon: We're very happy with.
Brandon: The demand for Europe came back and we saw this acceleration soon after.
Brandon: Our last call.
Brandon: I really don't think anybody should be reading into any concern around Q2 going forward in terms of any kind of slowdown we're seeing an acceleration in pricing and volumes from all of our key markets for all of our key deployments.
Jason T. Liberty: We're seeing acceleration in pricing and volumes from all of our key markets for all of our key deployments. And obviously, the first quarter is higher because of what I talked about with the load factor and the normalization of rates. So, I would just leave it that we expect Q2 forward to continue to be strong and our yields to grow across like-for-like, new hardware, onboard, et cetera. And, of course, we are lapping, as you commented, Brandt, on some very high comps year over year. And I think that's an important line to appreciate. Okay, great, that's helpful.
Brandon: And obviously the first quarter is higher because of what I talked about with load factor and the normalization of rate.
Brandon: I would just leave it that we expect Q2 forward do you continue to be strong and our yields to grow across like for like new hardware onboard et cetera.
Speaker Change: Of course, we are lapping as you commented Brandt on some very high comps year over year and I think that that's.
Speaker Change: It's an important line to appreciate.
Brandt: Okay, Great. That's helpful. And then my second question is on the book position.
Jason T. Liberty: And then my second question is on the book position, the record book, you know, the commentary, obviously upbeat in your release and your prepared remarks. Are you willing to sort of give us a sense for how much of the first half or the full year is booked at this time and how much different that is year over year? And to the extent that you don't wanna answer that, I would also just be curious if you want to refresh your sort of philosophy on the optimal curve, right? And if you're at that point where you wouldn't wanna become any more booked, you know, lest you leave money on the table or how you're thinking about that, that revenue management strategy. Well, I'll start off with the latter. I mean, I think on an optimal curve, you know, the answer is we always get it wrong.
Brandt: Our record book.
Brandt: The commentary.
Brandt: When you release in your prepared remarks.
Brandt: Willing to sort of give us a sense for how much of the first half or the full year is booked at this time and how much different that is.
Brandt: Year over year and to the extent that you don't want to answer that.
Brandt: I would I would also just be curious if you'd want to refresh your sort of philosophy.
Brandt: The optimal curve right and if you are at that point, where you wouldn't want to become any more booked.
Brandt: Unless you leave money on the table or how youre thinking about that that revenue management strategy.
Speaker Change: Well I'll start off with the latter I mean, I think on an optimal curve. The answer is we always get it wrong.
Speaker Change: It's it's.
Speaker Change: There are always estimates.
Jason T. Liberty: There are always estimates. We do not give out the percent booked that we're in. But it is meaningfully higher, obviously, than last year and also versus our highs in 2019. You know, we have installed very sophisticated yield management systems. Those yield management systems have, you know, we've obviously seen them perform exceptionally well in 2023 and what we're now seeing here in 2024 through WAVE. And they continue to allow us to get more and more share of the wallet. And also taking those practices which we also saw this last year and feeding them into our onboard activities, our pre-crew sales activities, is also something, you know, why, you know, I think as we look at the 2023 results and what we're seeing in the 2024 estimates on the top line is what's causing just, I think, continued outperformance. Yeah, just one other comment, not just on the volume but also the pricing.
Speaker Change: We do not give out.
Speaker Change: Percent booked.
Speaker Change: That we're in but it is meaningfully higher.
Speaker Change: Even last year for sure and also versus our highs and in 2019.
We have installed you're very sophisticated.
Speaker Change: Our yield management systems, those yield management systems have obviously, you've seen them perform exceptionally well.
Speaker Change: In 2023, and what we're now seeing here in 2024 through wave.
Speaker Change: And they continue to allow us to.
Speaker Change: To get more and more share of the wallet.
Speaker Change: And also taking those practices in which we also saw this last year.
Speaker Change: And feeding them into our onboard activities, our pre cruise sales activities.
Speaker Change: Also something why.
Speaker Change: As we look at the 2023 results and what we're seeing in the 2024.
Speaker Change: <unk> on the top line is what's causing just I think continued outperformance.
Speaker Change: Yes, just one other comment.
Speaker Change: Not just on the volume, but also the pricing obviously.
Naftali: Obviously, you know, we are on more booked versus last year on volume, but also on a pricing level as well. So we're very encouraged with where we are. Your next question comes from Matthew Boss with JP Morgan. Please go ahead.
Speaker Change: We are on more booked versus last year on a volume, but also on a pricing level as well. So we're very encouraged with where we are.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Matthew Boss with JP Morgan. Please go ahead.
Matthew Robert Boss: Great Thanks, and congrats on another great quarter.
Matthew Robert Boss: So two part question, Jason when you talked about taking things to a whole new level could you size up where you stand today versus the larger total addressable market share opportunity and maybe you see beyond crews and and just the multi generational customer base secret drafting and then for <unk>.
Matthew Robert Boss: Congratulations on another great quarter. Thank you. Thank you. Two-part question, talked about. Thank you for your time. Thank you, beyond. Thank you, and Furnov Toli.
Speaker Change: Maybe just how best to think about the breakdown of the 4% comp guide this year and multiyear what you see is the right run rate for costs going forward.
Jason T. Liberty: All best to think about the... Yeah, well, I'll start off, Matt, by saying I think it's important to understand what our orientation is. Our orientation is experiences. And we keep trying to advance experiences that our customers not only desire, but they're also willing to pay for. And so when you have an experience mind focus, obviously, there are a lot of things that we're adding onto our ships. I think ICON is an incredible example of dreaming and the delivery of endless experiences for multi-generational travel.
Speaker Change: Yes, well I'll start off Matt by I think it's important to understand what our orientation is our orientation is experiences and.
Speaker Change: And we keep trying to advance experiences that our customers are not only do they desire, but they're also willing to pay for and so when you have an experienced mine focus obviously there are a lot of things that we're adding onto our ships.
Speaker Change: Icon is an incredible example of the dreaming and the delivery of endless experiences for multi generational travel, but you'll also see those for example in silver and over and what that does for the ultra luxury space in terms of the dreaming and innovating to deliver those experiences that our guests seek and are willing to pay for it you see that also.
Jason T. Liberty: But you also see that, for example, in Silver Nova and what that does for the ultra-luxury space in terms of dreaming and innovating to deliver those experiences that our guests seek and are willing to pay for. You see that also extend into the destination. And what we're doing in a private island space, whether it's with Hideaway, that we just announced; we had the Royal Beach Club in the Bahamas, and we continue to think about and dream about other opportunities that are there. Our goal is to keep our customers in our ecosystem. And we're building, as I mentioned in my notes, a travel platform on a technological basis that, you know, makes sure that our guests, through loyalty as well as experiences, stay within that ecosystem. That all kind of comes into continuing to grow what we believe are the best brands in each of the segments and investing in those experiences for us to deliver each and every day. Hey Matthew, it's Michael.
Speaker Change: And into the destination.
And what we're doing in our private island space, whether it's with Hideaway that we just announced we had the Royal Beach club.
Speaker Change: To the Bahamas.
Speaker Change: We continue to think about a dream about other opportunities that are there our goal is to keep our customers and our ecosystem and we are building as I mentioned in my notes travel platform.
Speaker Change: On the technology.
Speaker Change: <unk> basis.
Speaker Change: Make sure that our guests through loyalty as well as experiences stay within that ecosystem.
Speaker Change: That all kind of comes into.
Continuing to to grow what we believe are the best brands in each of the segments.
Speaker Change: And invest in those experiences for us to deliver each and every day.
Speaker Change: Hey, Matthew it's Michael just to add some comments to Jason.
Michael W. Bayley: Just to add some comments to Jason. There's quite a big difference, and we've had these conversations before, between the addressable market for traditional cruises and the addressable market for land-based vacations when you consider Orlando, Las Vegas, and all of those different land-based options. We really believe that with ships like Icon and Perfect Day, Hideaway Beach, the coming of Royal Beach Club in 25, Utopia coming straight into the short product market like Perfect Day, we are really kind of transcending and moving, particularly the Royal brand, from that traditional cruise space where the addressable market is big but smaller than the land-based, and we feel that now we're beginning to really attract a lot of demand from those land-based options with better So I think we feel there's a big opportunity in the addressable market, particularly as it relates to what we've done with kind of repositioning the brand and becoming acutely focused on the multi-generational family, and particularly with the kind of new products that we're introducing. And I think Icon really is a great example of that.
Speaker Change: There's quite a big difference and we've had these conversations before between the addressable market for traditional cruise and the addressable market for land based vacations when you consider.
Michael: Atlanta, Las Vegas, and all of those different land based options.
Michael: We really believe that with ships like icon and perfect day Hideaway Beach, the coming of <unk> Beach club and twenty-five Utopia coming straight into the short product market to perfect day.
Michael: We are really kind of transcending and moving particularly the royal brand from that traditional cruise space, where the addressable market is big but smaller than the land based and we feel that now we're beginning to really attract a lot of demand from those land based options with better quality product more exciting product and great price point so.
Michael: I think I think we feel there's a big opportunity with the addressable market, particularly as it relates to what we've done with kind of repositioning the brand and be becoming acutely focused on the multi generational family and particularly with the kind of new products that we're introducing that and I think I'd gone really is.
Michael: Good example of that we've never seen such incredible demand reaction and pricing power that we've seen with a new product that we've introduced is really been phenomenally successful.
Jason T. Liberty: We've never seen such incredible demand reaction and pricing power that we've seen with a new product that we've introduced. It's really been phenomenally successful. Hi Matt.
Michael: Yeah.
Speaker Change: Hi, Matt.
So on your on your on your question on cost.
Naftali: So, on your question about cost... So this year, we gave the guidance of 375 to 4.25% cost growth. And I think it's just important, obviously I mentioned it in my remarks, that there are 300 basis points throughout the year impact from both increased dry dock days and also the operations of Hideaway Beach, which while it is very accretive to margin, just does not have an APCD, so that's the reason. But I think if you put that into context of all the things that we have done over the last couple of years and our really relentless focus For the cadence of the year, we have more costs in the first half of the year because we have most of our dry docks really in the latter part of the first quarter and early in the second quarter, and that will weigh on costs. Also, I mentioned in the first quarter, we have specifically for that quarter more impact from starting ICON as well as just catching up on the load factor, but obviously, it normalizes throughout the year.
Speaker Change: This year, we we gave the guidance of $3, 75% to 404.25%.
Speaker Change: Cost growth.
Speaker Change: I think it's just important obviously I mentioned it in my remarks that there is a 300 basis points throughout the year impact from both increased dry dock days and also the operations of a hideaway Beach.
Speaker Change: While he is very accretive to margin just does not have a b C. D. So so that's the reason, but I think if you put that into context of all the things that we have done over the last couple of years and are really a relentless focus on enhancing margins and controlling cost.
Speaker Change: Is really coming into play as we continue to grow the business.
Speaker Change: For the for the cadence of the year, we have more cost in the first half of the year.
Speaker Change: We have most of our dry docks really in that in the last latter part of the first quarter and early in the second quarter and that will weigh on costs also mentioned in the first quarter, we have specifically for that quarter more impact.
Speaker Change: From starting icon as well is just catching up in the load factor about obviously it normalizes throughout the year and the second half will benefit from those lower dry dock days and also the <unk>.
Naftali: And the second half will benefit from those lower dry dock days and also the addition of Utopia, which will add APCDs to the second half of the year. But all in, we're very pleased with how we've really, in a durable way, enhancing margins that will help us as we continue to grow the business and create operating leverage. For the long term, our formula really remains unchanged.
Speaker Change: The addition of Utopia, which will add <unk> to the half part of the year.
Speaker Change: But all in we're very pleased with it.
Speaker Change: We've really in a durable way enhance enhancing margins that will help us as we continue to grow the business and create operating leverage for the long term our formula really remains unchanged.
Naftali: You know, moderate capacity growth, moderate yield growth, and strong cost control really lead to enhanced financial returns. And the formula is basically we've got to grow yields faster than we grow our costs, and that will enhance margins, more cash flow, and more earnings. Your next question comes from the line of Connor Cunningham with Melius Research. Please go ahead. Hi, everyone.
Speaker Change: Moderate capacity growth moderate yield growth and strong cost control really leads to to finance the enhanced financial returns and the Formula is basically we got to grow yields faster than we grow our cost and Delaware enhanced margins more cash flow.
And more earnings.
Speaker Change: Great color congrats again.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Hi, everyone. Thank you and just keeping with the theme on cruisers land in the context of <unk>.
Connor Cunningham: Just keeping with the theme on cruisers land, you know, in the context of moderate yield growth, there seems to be an argument that you can make that that actually should be a little bit higher on the Discount VersaLand base right now and then how we get back.
Conor Cunningham: Moderate yield growth.
Conor Cunningham: Seems to be an argument that you can make that it actually should be a little bit higher given you're going to close the gap.
Conor Cunningham: Land base can you just level set on where you sit.
Conor Cunningham: On the discount versus land based right now and then how do we get back to kind of pre COVID-19 levels, I think thats been like 15%.
Jason T. Liberty: Yeah, so obviously, last year, we talked around having a 40 to 45% gap to land-based vacation. Our yields in 2023 rose 13.5%. And our APDs were up, I think, 16%.
Barclays: Barclays. So if you could just talk about that that'd be great. Thank you.
Speaker Change: Yes so.
Speaker Change: So obviously last year, we talked around having a 40% to 45% gap to land based vacation.
Our yields in 202023.
Speaker Change: Rose 13, 5%, our Apd's were up I think 16%.
Jason T. Liberty: So we obviously made a dent in that. And this year, we expect, obviously, to make a further dent in that. We are obsessed about really not—it's much less about what's happening in the cruise space. It's more about how do we close that gap?
Speaker Change: So we obviously made a dent into that in this year.
Speaker Change: We expect obviously to make a further dent into that.
Speaker Change: We are obsessed about really not it's much less about what's happening in the cruise space. It's more about how do we close that gap how do we compete.
Jason T. Liberty: How do we compete with land-based vacations? And we can see in the consideration how much the cruise has moved into the average consumer's consideration for travel. So our focus is on that, how do we close that gap, and really how do we make sure, going back to the ecosystem, which I think land-based does very well, that the focus on a vacation of a lifetime evolves into a lifetime of vacations.
Speaker Change: With land based vacation.
Speaker Change: We can see in the consideration how much cruise has moved into the.
Speaker Change: The average consumers consideration for travel and.
Speaker Change: So our focus is on that how do we close that gap and really how do we make sure going back to the ecosystem, which I think land base does very well.
Speaker Change: Do we make it make sure that that focus on a vacation or a lifetime evolves into a lifetime of vacation.
Speaker Change: The commentary about the the return of what we're getting from our customers that that that repeat rate has now doubled.
Jason T. Liberty: And I think the commentary about the return of what we're getting from our customers, that repeat rate has now doubled, shows that what we're doing in delivering the best vacations in the world, what we're doing to incentivize through loyalty, to keep our customers in our ecosystem, and really leveraging our house of brands that are the best in each one of their segments, is really starting to create another wave of demand, and we think land-based We're focused on doing this, obviously, exceptionally well, and when you think about what we're doing on the destination side with Perfect Day as an example, when you look at Icon, you can see how it's an extremely competitive product, we would probably argue even a better product, to what's happening on land, and by us continuing to dream and innovate and deliver on that, that's going to chip away further and further into that value gap to land We are really channel agnostic.
Speaker Change: <unk>, what we're doing and delivering the best vacations in the world what we're doing.
Speaker Change: To incentivize through loyalty to keep our customers and our ecosystem.
Speaker Change: We're really leveraging our house of brands.
Speaker Change: That are better or the best in each one of their segments.
Speaker Change: Really starting to create another wave of demand.
Speaker Change: And we think land based off this really well.
Speaker Change: We're focused on doing this obviously exceptionally well and when you think about what we're doing on the destination side with perfect day as an example, when you look at icon.
Speaker Change: You can see.
Speaker Change: How it's extremely.
Speaker Change: Competitive product, we would probably argue even a better product to what's happening on land and thats by us continuing to dream and innovate and deliver on that.
That's going to chip away further and further into that.
Speaker Change: That value gap to land based vacation.
Speaker Change: Super Helpful. And then you mentioned the digital investments and increased direct bookings can you just talk.
Speaker Change: That's evolved over the past few years and how it continues to kind of.
Speaker Change: The increase in the direct booking channel going forward. Thank you.
Speaker Change: Yes.
Speaker Change: It's less about.
Speaker Change: The shift from.
Speaker Change: From direct or through our travel partners, we are really.
Jason T. Liberty: We want to show up on how our guests want to shop and book a cruise. We want to take as much friction out of that experience as we possibly can. Sometimes that leads them to our digital channels like the web or our app. Sometimes it has them call our call centers. And of course, that very much takes them to our travel partners who do an exceptional job helping guests identify and have the experiences that they want to do. So we're very agnostic about that.
Channel agnostic, but we wanted to do is whether it's we wanted to show up on how our guests want to shop and book a cruise.
Speaker Change: And we wanted to take as much friction out of that experience as we possibly can sometimes that leads them through.
Speaker Change: Through our digital channels like the web or our App, sometimes it has them call our call centers and of course, you know that very.
Speaker Change: Very much.
Speaker Change: Makes them.
Speaker Change: Our travel partners, who do an exceptional job.
Speaker Change: Being helping guests.
Speaker Change: Identify and have the experiences that they wanted to do so we're very agnostic about that but we also recognize that the customer.
Jason T. Liberty: But we also recognize that the customer expects very little friction in their shopping experience. So we spent a lot of time figuring out not only how to be easier to do business with but also how to use technology like AI and so forth to curate and put those experiences in front of the guests and the way in which they want to consume them. I think we're getting better and better at that every day. But it's a journey. When I think we're heading to the fourth or fifth inning, I find out we're back in the first inning.
Speaker Change: <unk> very little friction in their shopping experience. So we've spent a lot of time figuring out not only how to to be easier to do business with but also how to use technology like AI and so forth to cure rate and put those experiences in front of the guests in a way in which they want to consume them.
Speaker Change: We're getting better and better at that every day, but I would.
Speaker Change: It's a journey when I feel we're heading to the fourth or fifth inning I find out where we're back in the first inning.
Naftali: As the consumer continues to evolve, and just the technology that's available to do it so thoughtfully is growing stronger and stronger every day. And just one other thing to add is that it allows us to make sure that the customer gets the vacations they want. So some of the meaningful progress we've seen, and we also noted in the last couple of earnings goals, just the ability to buy and design your vacation ahead of time through pre-cruise. And as Jason mentioned in his remarks, it also leads to great financial success as people are booking their vacations, they get on board, and they spend two and a half times more than those that haven't pre-cruise. Your next question comes from the line of Vince Ciepiel with Cleveland Research.
Speaker Change: As the consumer continues to evolve and and just the technology that's available to do it thoughtfully.
Speaker Change: <unk> is a.
Speaker Change: Is growing stronger and stronger every day.
Speaker Change: And just one other thing to add is.
Speaker Change: Also it allows us to make sure that the customer gets the vacations day, one so some of the meaningful progress we've seen and as we also noted in the last couple earnings calls is just the ability to buy and design. Your vacation ahead of time to a pre cruise.
Speaker Change: As Jason mentioned also in the remarks. It also leads to great financial success as people are booking their vacations, then they get on board and they spend two five times more than.
Speaker Change: Then those to happen pre cruise.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of CBL with Cleveland Research. Please go ahead.
Naftali: Please go ahead. Thanks for taking my question. I wanted to dig a little bit more into the eye, keep talking about how it's taking things to a new level. Curious kind of how it compares to what you saw with a new class, you think about Oasis 15 years ago, Quantum 10 years ago; how does this launch compare in terms of reception by the customer, the travel agent community, the national
CBL: Thanks for taking my question I wanted to dig a little bit more into the icon you keep talking about how it's taking things a new level.
CBL: I'm curious kind of how it compares to what you saw with our new class. When you think about <unk> 15 years ago Quants on 10 years ago.
CBL: How does this launch compare in terms of reception too.
CBL: Customer the travel agent community the national coverage that you've been getting.
CBL: Your approach to marketing.
CBL: And do you think that Thats sustainable as you move into Utopia and star.
CBL: In the next.
CBL: 12 to 18 months.
CBL: Vince Thank you very much for that question.
Speaker Change: I mean waiting for about 20 minutes to talk about icon.
Speaker Change: I mean first of all icon as a product in terms of the design and the focus on multi generational family and the evolution from the.
Speaker Change: The Oasis class I think what we've created.
Speaker Change: <unk> really is a game changing hit I mean, it really is working with our customer demographic.
Speaker Change: It's really working with our target market and I think if you've got an exceptional product that people really are impressed with then you're kind of you're almost there.
Speaker Change: We feel like we've really.
Speaker Change: Cheap that with icon at epic and.
Speaker Change: You combine that with perfect day, and the opening of Highway Beach, we have a product in the vacation experience for a multi generational family that truly is the best in the world.
Speaker Change: We've made that statement, it's the best family vacation in the World.
Speaker Change: So you've got to have that foundation, but I would say that in comparison with previous first in class launches.
Speaker Change: <unk> is not this just out of the park, we've never seen the response that we've seen with icon. It's been genuinely unbelievable from every single metric that you would want to look at.
Speaker Change: The bookings have been phenomenally strong the rate has been unbelievable the appreciation of the product has been high the interest from the trade partners from the consumer from destinations. We've never seen the kind of response that we've seen with icon of the seas. The employee response the crew response when we own.
Speaker Change: Pinned up and we had our first shakedown cruise has been unbelievable, we really feel as if this product is absolutely right on the Mark and the response has been phenomenal.
Speaker Change: When we look at the metrics and we have all of these metrics, where we compare first in class icon has doubled or tripled. The response. So volume was X percent with first in class with Oasis with icon. Its been three times better than Oasis was rates has been really high but when you compare right.
Speaker Change: With icon versus first in class and in a previous launches, it's double or triple its been phenomenal in terms of the overall performance in the same seems to be true with the onboard product itself, we do feel that icon with perfect day stand shoulder to shoulder with Orlando and Las Vega.
Speaker Change: Yes, except that we've got both we've got the gaming and we've got everything that the kids would want to do is have a great vacation. So we feel like we've got it perfectly right and I think when you look at the lineup that we have for Royal particularly with the opening of the Royal Beach Club in Nassau and 25.
Speaker Change: <unk> the introduction of Utopia in the three and four day market out of Port Canaveral to perfect day, we see exactly the same kind of response with Utopia in terms of volume and rate performance versus traditional first in class three and four day products, we feel like we've been going back to my earlier comments.
Speaker Change: We feel like we've started this transition from being a traditional cruise vacation to being a world class multi generational family option that stand shoulder to shoulder with Orlando and Las Vegas, and any land based destination experience that you could mentioned, we feel like we're right there with it.
Speaker Change: <unk> with Utopia with perfect day and of course, it's a journey that we're on in terms of introducing these new exciting products year over year.
Speaker Change: And thank you for asking that question, it's very much appreciate it.
Speaker Change: [laughter].
Speaker Change: Absolutely. So when you layer in this it sounds like new hardware is kind of firing at a cylinder that you haven't seen before you had the discount to land based and then you have kind of a multiyear strategy.
Speaker Change: Muted industry supply is there any reason to think that yield growth couldn't be at more elevated levels on a multiyear stretch than what you've seen historically.
Speaker Change: Well I'm the brand Guy So I've got to tell you yeah, we do.
Speaker Change: We live in a very optimistic world and we are extremely excited with the product and the brand that Royal Caribbean International has now become so yeah, I see plenty of upside.
Speaker Change: NASA, Jason they have a slightly different perspective I can tell you. We're very excited with the lineup that we've got coming in we feel unbelievably proud of the performance of icon today. So yes, I see a lot of upside and I just want I just want I mean, I think we're all extremely optimistic on the very strong quarter.
Speaker Change: <unk> demand.
Speaker Change: We continue to see I wouldn't want to leave the call with anybody thinking that we are not very optimistic about Q2 and beyond I know Q1 is very high in terms of the overall performance.
Speaker Change: But the bookings.
Speaker Change: The level of onboard spend activity is exceptionally strong.
Speaker Change: Strong.
Speaker Change: And I know that there is there is I can just tell by the questions. There were some there was some focus on that but.
Speaker Change: It should only be focused on on the opportunity that's ahead of us.
Speaker Change: Our final question comes from the line of Jamie Rollo with Morgan Stanley. Please go ahead.
Jamie Rollo: Yes, if I can just one sort of follow up really on I call them.
Jamie Rollo: Michael like I guess, just given the figures you gave then how does that change the way you think about ordering new ships.
Jamie Rollo: And also some of the older ships in the fleet I mean is this opportunity to really press your foot down on an accelerate new class ship.
Speaker Change: As our carry on perhaps to see as you would have before thank you.
Speaker Change: Yeah, we see we see the huge opportunity with the direction that we've taken in terms of this combination of phenomenal lambaste curated destination experiences like perfect day, the Royal Beach club in Nassau and icon class. So I think our direction. Our mindset is very much focused on the future and further development of that kind of product.
Speaker Change: Experience that we know absolutely resonates with the customer and.
Speaker Change: And Jamie I think just to add.
Speaker Change: We were very purposeful.
Speaker Change: And our actions were very purposeful in the segments in which we are operating in and we think we operate in the segments, where we're the the level of quality demand significantly outpaces. The current supply, there's obviously constraints inside the yards in terms of the ability to.
Speaker Change: For anyone to grow at a fast pace, but we expect in the future to continue to invest in our business. We expect to continue to invest as Michael said in destinations and also in the growth of our fleet.
Speaker Change: But it's going to stick generally to that formula moderate yield growth good cost control.
Speaker Change: Capacity growth overtime.
Speaker Change: Yeah.
Speaker Change: I'm just surprised.
Speaker Change: Given what <unk> seen which sounds much better than expectations are not changing and the thing even for existing ships.
Speaker Change: You might be doing with some of the divisional radiance class ships.
Speaker Change: Maybe putting some of the successful features of I call them on some of the sort of maybe comfortable Oasis class.
Speaker Change: Yes.
Speaker Change: We're always moderns.
Speaker Change: Modernizing and we have a lower coming up and the actions we took on a way. So some of the learnings on icon is going to be in the modernization of allure of the seas.
Speaker Change: We're always updating our ships to make sure those ships stay relevant.
Speaker Change: It doesn't move like the Capex number potentially or maybe it's not as exciting today as we're talking about icon and hideaway et cetera, but we're always investing in bringing a lot of the learnings broadly not just on an experience standpoint, but also on our sustainability standpoint.
Speaker Change: Our fleet stays relevant in and competitive.
I'll now turn the call back to telehealth CFO for any closing remarks.
Telehealth CFO: Thank you operator, thank you all for your participation and interest in our company Michael will be available for any follow up we wish you all a great day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Our family vacations among.
Speaker Change: Jimmy family vacation on the world's largest.
Speaker Change: All of this.
Speaker Change: It's the first of a whole new class of ships, where you'll have the time of your life multiple times a day, you'll never say you have a feeling of Tien tsin Huang.
Speaker Change: Record breaking slides.
Speaker Change: Or finding the courage to conquer the crowds out.
Speaker Change: <unk> like nothing you've ever dared gambling.
Jamie Katz: Hi, Buffy Ocean.
Speaker Change: I hope Youre down.