The operator welcomes participants to the Royal Caribbean Group's earnings conference call and introduces the speakers. The speakers will be making forward-looking statements and discussing non-GAAP financial measures. The call will begin with a strategic overview and business update from CEO Jason Liberty, followed by a recap of the fourth quarter and full year 2023 from CFO Naftali Holtz. The call will then be opened for questions.

Last week, the Royal Caribbean Group launched their revolutionary new ship, Icon of the Seas, which is expected to deliver the best family vacation experience. The company is also looking forward to making millions of vacation memories through their sports partnerships and exceptional guest engagement. In 2023, the company saw exceptional demand for their brands, with net yields up 13.5% compared to 2019 and record-breaking margins. The company has also focused on reshaping their cost structure to provide operating leverage as they continue to grow their business.

In 2023, our company's focus on innovation has led to high guest satisfaction and record numbers of new and loyal guests. Our financial performance has greatly improved, and we are on track to meet our goals. Bookings for 2024 are at an all-time high, with strong demand across all products and channels. Our investment in digital capabilities has resulted in record-breaking bookings through our direct-to-consumer channels, and our travel partners are also exceeding expectations.

In 2024, the company expects to see strong demand from North America due to their global appeal and efficient sourcing model. They have a positive sentiment from customers and see growth in spending on experiences. The company is well-positioned to outperform the broader travel industry and attract new customers. They anticipate achieving their Trifecta goals a year earlier than expected in 2024.

In 2024, Trifecta will continue to be an important milestone for the company, but their ambitions go beyond it. They plan to grow capacity by 8.5% with the introduction of new ships and expect yields to grow by 5.25% to 7.25%. This, combined with their private destinations and strong commercial apparatus, is expected to drive record earnings and get them close to their Trifecta targets. Their formula for success remains the same, with moderate capacity and yield growth and strong cost controls leading to enhanced margins and profitability. They are focused on delivering a lifetime of vacations for their guests and creating new products and experiences, including game-changing ships and the expansion of their popular destination, Perfect Day at CocoCay.

Royal Caribbean International's new ships, Icon of the Seas and Utopia of the Seas, have been performing exceptionally well with strong demand and pricing. The upcoming launch of Silver Ray, the second ship in the evolution class, will further redefine ultra-luxury cruising. The expansion of Hideaway Beach at Perfect Day at CocoCay has increased the island's capacity to over 3 million guests annually. With about two thirds of Caribbean guests visiting Perfect Day at CocoCay, Royal Caribbean is able to deliver high satisfaction and higher margins. The company will also focus on deepening customer relationships and enhancing commercial capabilities to optimize distribution channels and lower acquisition costs. The introduction of new capabilities has led to a significant increase in onboard revenue, with about a third of purchases now made through the mobile app.

In the fourth quarter, the Royal Caribbean Group had a strong performance, with adjusted earnings per share of $1.25, which was 15% higher than expected. Their teams delivered double digit yield growth in all key products, exceeding expectations. They are committed to controlling costs and enhancing profitability while also focusing on sustainability and customer experiences. The company is well positioned for continued growth in the future.

Net yields were up almost 18% compared to 2019, and would have been 20% if not for the drag from eliminating the reporting lag related to Silver Sea. Load factors and rates were also up, while net cruise costs increased. The stock price appreciation and focus on profitability allowed for a 30% adjusted EBITDA margin in the fourth quarter. Looking ahead to 2024, capacity is expected to be up 8.5% compared to 2023, with a strong booked position and record Wave. Rates and volume are currently booked significantly ahead of last year, with all key products showing growth. The Caribbean represents over 55% of deployment, with increases in capacity due to additions of new ships.

The addition of Hideaway Beach at Perfect Day at CocoCay has increased capacity for Caribbean programs, which are experiencing strong bookings and pricing for Icon and Utopia. Europe accounts for 15% of capacity, with a 7% reduction in itineraries to Israel due to safety concerns. Bookings for impacted itineraries rebounded quickly and are now higher than last year. North American itineraries, particularly Alaska, are performing well in terms of rate and volume. Exciting changes have been made to Alaska deployment, with Celebrity and Silver Sea ships sailing in the region. Asia-Pacific will account for 10% of capacity.

Royal Caribbean is expecting strong pricing and demand in Asia and China as they return with Spectrum of the Seas in the second quarter. Their guidance for 2024 shows an expected net yield growth of 5.25% to 7.25%, driven by new hardware, higher load factors, and the expansion of Perfect Day at CocoCay. The focus remains on enhancing margins and net cruise costs, excluding fuel, are expected to increase by 3.75% to 4.25%. Fuel expenses are anticipated to be $1.16 billion for the year, with 61% hedged at below market rates. The introduction of the EU emission tax scheme is not expected to significantly impact earnings. First quarter guidance shows that 73% of capacity will be in the Caribbean, 18% in Asia-Pacific, and the remaining capacity spread across other itineraries.

The company has seen record levels of booked load factors and rates, resulting in significant yield growth for the first quarter. Net yields are expected to increase by approximately 15%, with Caribbean and Australian itineraries driving the growth. However, net cruise costs are also expected to increase, primarily due to increased drydocks and the startup of Icon. Despite this, the company expects adjusted earnings per share for the quarter to be between $1.10 to $1.20. The company has also made progress in strengthening their balance sheet and reducing leverage towards their goal of achieving investment grade metrics. They plan to continue paying down debt and reducing leverage in the future.

The company's priorities to address debt remain unchanged, and they are focused on executing their strategy and achieving their Trifecta goals. They are expecting another strong year of yield growth and a step change in earnings growth. The caller asks about their yield guidance for the year and the company breaks down the factors that contribute to their forecast, including core pricing, occupancy ramp, new hardware in CocoCay, and onboard yields. The company acknowledges that there may be some challenges in the back half of the year, but they are confident in their overall performance.

The strong yield in the first quarter is due to the pricing and load factor recovery. The company is seeing positive trends in booking and onboard spend, and there is no concern about a slowdown in the business for the rest of the year. The company is on track to achieve its Trifecta goals this year and is focused on setting new targets beyond that. The return to investment grade is being discussed with agency partners.

Trifecta is a major focus for the organization, with a goal of achieving strong returns for shareholders, providing an excellent guest experience, and reducing their impact on the planet. As they get closer to achieving Trifecta, they will consider their next financial performance program and evaluate their progress towards investment grade metrics. They are confident that with moderate yield growth, good cost control, and continued investment in destinations, they will see strong financial performance in terms of earnings, ROIC, and margins. They are also committed to maintaining a disciplined approach to capital allocation and plan to repay debt and reach investment grade metrics in the near future.

The company is focused on unsecuring the balance sheet and has plans to refinance or pay down any secured or guaranteed notes. They are in close contact with rating agencies and are not solely focused on ratings, but on financial metrics. There may be potential changes to itineraries in the Red Sea, but the company's EPS guidance for 2024 already takes into account potential issues like this. They do not plan for perfection in their guidance.

The speaker discusses potential tax changes and the global minimum tax, stating that it will not significantly impact their company until 2026 and they are confident they can mitigate any potential impact. The next question is about the European slowdown in bookings, but the speaker reassures that demand has picked up and there should not be any concerns about future quarters. They are seeing an increase in pricing and volumes from all key markets and deployments.

The speaker discusses the strong performance of the company in the first quarter, citing factors such as load factor and normalization of rate. They expect the second quarter to continue to be strong and yields to grow. They also mention that they are lapping high comps from the previous year. In terms of bookings, they do not disclose the percentage but state that it is significantly higher than last year and 2019. They have implemented advanced yield management systems that have performed well and helped them gain more market share.

The speaker discusses the company's focus on providing unique experiences for their customers, which has contributed to their strong financial performance. They mention specific examples, such as the Icon and Silver Nova ships, and highlight the importance of appealing to the multigenerational travel market. The speaker also addresses cost management and the company's strategy for maintaining a high level of customer satisfaction and profitability.

The company is expanding into the private island space and investing in technology to keep customers within their ecosystem. The addressable market for traditional cruise and land-based vacations is different, but the company believes they can attract demand from the land-based market with their new products. They are focused on the multigenerational family and the introduction of Icon is an example of this.

The company has introduced a new product that has seen incredible demand and pricing power. They have given guidance for 3.75% to 4.25% cost growth, which includes a 300 basis point impact from increased drydock days and the operations of Hideaway Beach. The company has a relentless focus on enhancing margins and controlling costs, which has resulted in strong financial returns. The formula for their success remains unchanged: moderate capacity and yield growth, along with strong cost control, leads to enhanced margins, cash flow, and earnings.

Conor Cunningham asks about the discount compared to land-based vacations and how Royal Caribbean plans to close the gap. Jason Liberty explains that they are focused on competing with land-based vacations and have seen success in increasing yields and attracting more customers. They are also working on creating a strong ecosystem and incentivizing loyalty to keep customers coming back.

The speaker discusses the company's innovations, such as the Icon and Perfect Day destinations, which they believe are superior to land-based vacations. They also mention their agnostic approach to booking channels and their focus on providing a seamless and frictionless shopping experience for customers through the use of technology. However, they acknowledge that this is an ongoing journey and they are continuously evolving to meet the changing needs of consumers.

The speaker discusses the success of the Icon class and its impact on customer satisfaction and financial success. They compare it to previous classes such as Oasis and Quantum and believe it is a game-changing hit that appeals to their target market. The combination of Icon and Perfect Day creates a top-notch vacation experience for multigenerational families.

The speaker discusses the success of the launch of the Icon of the Seas cruise ship, stating that it has received an unprecedented level of positive response and has exceeded all previous first in class launches. The bookings, rate, appreciation, interest, and employee and crew response have all been exceptional. The metrics show that Icon has doubled or tripled the response of previous launches, and the onboard product is comparable to popular vacation destinations like Orlando and Las Vegas. The speaker believes that Icon has been a perfect success.

The speaker discusses the lineup for Royal Caribbean, including the opening of the Royal Beach Club and the introduction of Utopia in the three and four day market. They believe this will lead to increased volume and rate performance and position the company as a world-class, multi-generational family option. They are optimistic about the potential for yield growth and see a lot of upside in the future.

The speaker is optimistic about the company's performance in Q2 and beyond, despite some focus on Q1 performance. They see a strong opportunity for growth with their curated destination experiences and the Icon class of ships. They are purposeful in their actions and plan to continue investing in their business and fleet.

The company plans to focus on moderate yield growth, good cost control, and moderate capacity growth going forward. They will continue to modernize their ships, including implementing successful features from other classes. While this may not be as exciting as new projects, it will keep their fleet competitive. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.