Royal Caribbean Group (RCL) — Q4 2018 Earnings Call Transcript

Thank you, Operator. Good morning, and thank you for joining us today for our Fourth Quarter Earnings Call. Joining me here in Miami are Richard Fain, our Chairman and Chief Executive Officer; Michael Bayley, President and CEO of Royal Caribbean International; and Carola Mengolini, our Vice President of Investor Relations. During this call, we will be referring to a few slides, which have been posted on our investor website. Before we get started, I'd like to refer you to our notice about forward-looking statements, which is on our first slide. During this call, we will be making comments that are forward-looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Please note that we do not undertake to update the information in our filings as circumstances change. Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined, and a reconciliation of all non-GAAP historical items can be found on our website. Unless we state otherwise, all metrics are on a constant currency-adjusted basis. Richard will begin with some color on last year and this year. Then I will go through a bit more detail on the figures followed by a Q&A session. Richard?

Thanks, Jason, and good morning, everyone. I'm pleased to have the opportunity to share more about our 2018 results and our outlook for the coming year. By any measure, 2018 was an unusually busy and successful year. Our teams achieved record financial results, while introducing four new vessels, acquiring a controlling interest in Silversea's cruises, opening two stunning cruise terminals, and implementing Excalibur on about half of our fleet. On the financial front, the simple point is that strong fundamentals are driving strong results. In 2018, we achieved net income of $1.9 billion, with earnings per share growth of 18%. Moreover, our EPS growth would have approached 25% had foreign exchange and fuel rates remained neutral during the year. This outcome should encourage those who watch on the sidelines concerned about weather, politics, trade wars, supplies, and whatever else. These strong fundamentals should not be a surprise as we have been very vocal about two important and positive consumer trends. First, the trend in favor of experiences over material possessions; and second, the favorable demographic shifts. We've been talking for a long time about how people have shifted their focus from buying TVs, cars, etc. to buying memories or experiences. And that shift has become so powerful that I think it's now obvious to everybody. At the same time, the demographic makeup of our population keeps shifting in our direction. These two trends have become increasingly powerful, and our company and our brands are well positioned to benefit from these trends. Obviously, no trend is perfectly linear, and no trajectory goes forever without interruption, but our direction and our overall progress appears inevitable. Now, our strong position rests on several pillars. The first is our product, where we have stunning hardware that appeals to the market, overindexes on guest satisfaction, and delivers superior profit. The second pillar is technology. As you all know, we are seriously invested in data analytics and in digitizing the guest and crew experience. We believe that the opportunity for growth is strong, but we also believe that the speed with which we need to adapt and evolve continues to accelerate. Several years ago, as I believe all of you know, when we initiated our Double-Double Program, we emphasized that our objective was not just to improve 2017 profitability. We emphasized then that 2017 was a steppingstone. We wanted to build a base and to solidify a culture that would serve as a springboard going forward. I believe our 2018 results demonstrate unambiguously that our objective was realistic. As we now work to execute on our 20/20 Vision program, I'm looking forward to achieving the same kind of positive momentum. These two programs also demonstrate the importance of planting seeds. Ours is a long-term business, and we deem to invest for the future, whether that is new ships, new digital systems, or new private destinations. We are reaping the benefits of past investments today, and we will reap the benefits of current investments tomorrow. Looking forward, we are starting 2019 with some very good cards. Among them is the first full year of operation from Symphony of the Seas, Azamara Pursuit, Celebrity Edge, and New Mein Schiff 1 as well as the delivery in 2019 of Celebrity Flora and Spectrum of the Seas. All of these new vessels carry significant premiums and help position 2019 for success. Happily, the record-breaking start to WAVE validates our confidence. With WAVE off to a wonderful start, our already good book position continues to strengthen. Bookings have been at higher levels than last year, and in fact, we received more bookings during the first week of WAVE than we have in any other week in our history — except for the second week in WAVE, which was even better. So we are very happy about how the year is shaping up. Despite all the noise in the economy and the volatility of the stock market, we have been impressed with consistent strength in demand from our markets. Actually, in preparing for this morning's call, I looked at how good our guidance has been in the past. During the past five years, we have consistently delivered or over-delivered on both yield and adjusted EPS guidance. I doubt that many other companies or industries have such a remarkable track record. I'm always impressed by how accurate our revenue management team has been. Of course, the future is always uncertain, but they have demonstrated an impressive ability in the past. And as you also well know, in past years, we have experienced all types of fears and challenges from the Zika virus and global tourism in 2015, to questions about China supply in 2016, weather threats and capacity in 2017, global macro concerns in 2018, etc. Yet during all these periods, we were able to generate record revenue, record operating income, and record earnings per share. Amongst the exciting things ahead of us this year, we are getting ready for the deliveries of Celebrity Flora and Spectrum of the Seas and Royal Caribbean International's Perfect Day project, which comes on stream in May. The island development will really shake up the short-term cruise market, and I am confident that our guests will love it. Now before I turn the call back to Jason, I would like to again express my admiration and my thanks for the amazing people at Royal Caribbean, whose passion and skills enable us to grow and prosper. With that, I turn it back to Jason.

Thank you, Richard. I'll begin by taking you through our results for the fourth quarter of 2018. For the quarter, we generated adjusted net income of $1.53 per share, beating the midpoint of our guidance by $0.06. Better-than-expected revenue and cost performance from our brands combined with better performance from our joint ventures more than offset a $0.04 headwind from currency and fuel. Net revenue yields are up 6.8% for the quarter, which was slightly above the midpoint of our guidance. On the cost side, net cruise costs, excluding fuel, per APCD were up 5.1%, better than guidance driven mainly by timing. I will now discuss our full-year results, which we have summarized. By all accounts, 2018 was another year of very strong performance. We generated approximately $1.9 billion in adjusted net income, resulting in an earnings per share of $8.86. This was $0.06 higher than the midpoint of our previous guidance and was up 17.5% year-over-year. This result also beat the midpoint of the January guidance by $0.21, despite the unfavorable impact from currency and fuel. Our leading brands supported this strong financial performance with net promoter scores at all-time highs and record employee engagement metrics. To summarize the revenue performance for the year, yields were up by 4.4%. Strong demand from our core products, better onboard experiential spend, and the addition of Silversea drove the year-over-year outperformance. On the cost side, net cruise costs, excluding fuel, were up 4.1%. The main drivers behind the year-over-year increase were more drydock days, the lapping of hardware changes, investments in technology, and the consolidation of Silversea's operations. Now I'll update you on what we are seeing in the demand environment. Over the past three months, bookings have been higher than same time last year, the positive variance growing further as we entered the all-important WAVE season. In fact, two out of the past three weeks have been record booking weeks for the company. These strong booking trends have further strengthened our overall book position, and 2019 is at a record high in both rate and volume. We've been particularly pleased with the trends we are seeing in North America. While the bookings from North American guests have been strong for sailings on both sides of the Atlantic, our Caribbean sailings are in particularly strong book position with rate and volume up in all four quarters. We have superior hardware in the Caribbean throughout the year, and the addition of Perfect Day to our portfolio has further improved our offering. The summer Europe season is also shaping up well with Celebrity Edge garnering significant price premiums in the Mediterranean, and the rest of the fleet is also in a good book position. Uncertainty surrounding Brexit has created some inconsistencies in demand from the U.K., however, our global footprint means that booking strength from North America and other key markets is more than compensating. Our Asia Pacific sailings have also been trending well. China continues to be an important market for us, and we saw significant yield growth for the product throughout 2018. 2019 China sailings are booked ahead of the same time last year. Over 0.5 million Chinese guests sail with us each year, mostly on sailings from China. However, we are seeing a significant growth in outbound travel with 75% more Chinese guests on a non-China itinerary in 2019 compared to just three years ago. Cruises in Europe and Alaska have seen the number of Chinese guests more than double. Now I'll give you a brief overview of our capacity and deployment changes for 2019. Our overall capacity will increase 8.6% year-over-year, with the addition of Silversea contributing just over 2% of the growth and the rest driven by our stunning new ships. The bulk of our capacity growth will occur in the Caribbean with Symphony of the Seas sailing year-round from Miami and a full year of sailings on two modernized ships, Mariner of the Seas and Navigator of the Seas. In total, just over half of our capacity will be in the Caribbean. While our European capacity will be similar to 2018, we have made a few changes to our deployment in the region. Most notable is the addition of Celebrity Edge, which will be sailing 7- to 11-night Mediterranean itineraries from both Barcelona and Rome. Europe will account for 16% of our capacity this year. The Asia Pacific region will account for 15% of our 2019 capacity with sailings in China, Australia, and Southeast Asia. China remains a core region for the Royal Caribbean brand with Spectrum of the Seas arriving to join her sister ship Quantum of the Seas in early June. Alaska only accounts for 5% of our full-year capacity, but is a key high-yielding product for us in the summer. This year, we are improving our hardware in the region with larger, newer ships for Royal Caribbean, Celebrity and Silversea along with Azamara's first-ever Alaska season. With 2018 now in the rearview mirror, we have entered what is arguably the busiest and most exciting year in our history. Firstly, 2019 will be our first full year with Silversea. Secondly, we will be welcoming Spectrum of the Seas in the spring and Celebrity Flora in the summer, while also enjoying the first full year of sailings for Celebrity Edge, Symphony of the Seas, and Azamara Pursuit. And finally, we have two exciting land-based initiatives coming to fruition. We are now welcoming guests at our new terminal here at Port of Miami. In May of 2019, we will launch Perfect Day at CocoCay, where our guests will experience stunning amenities like the tallest waterslide in North America. As I mentioned in October, the additions of Silversea, the terminal in Miami, and Perfect Day each increased both our cost and yield metrics in 2019. To provide transparency, I'll share our year-over-year yield and cost guidance both including and excluding these items. These items combined with the timing of new ship deliveries mean that there are a lot of contributing factors to the cadence of our yield and capacity changes throughout the year. In some years, we see a lot of variability in yield growth from one quarter to the next, whereas, in 2019, we expect more moderate differences. The majority of our capacity growth will occur in the first half of the year, which is the period where we have the greatest visibility. This position and the level of visibility we have further bolsters our confidence in our yield guidance. Taking all this into account, if you turn to Slide 5, you will see our guidance for 2019. Our yield outlook for 2019 is quite encouraging. We expect net revenue yields to grow 6.5% to 8.5% for the full year, which makes 2019 our 10th consecutive year of yield growth. This metric includes approximately 350 basis points from the operation of Silversea, the cruise terminal in Miami, and the Perfect Day development. When excluding these important elements, the underlying yield improvement is driven by strong demand for our core products, new hardware, and continued growth from onboard revenue areas. Net cruise costs, excluding fuel, are expected to be up 8.5% to 9% for the full year. Cost control continues to be a strong focus of ours. However, this metric includes 650 basis points from the operation of Silversea, the cruise terminal in Miami, and the Perfect Day development. As we have shared with you before, we strongly believe that these projects accelerate our competitive differentiation and advantage as well as deliver strong returns. Our depreciation for the year is growing faster in 2019 than in previous periods. As a reminder, our investments in technology projects like Excalibur are becoming a larger mix of our capital program and generally have a shorter useful life than our typical capital investments. Moreover, the addition of Silversea is also contributing to the elevated growth rate. We have included $690 million of fuel expense for the year, and we are 58% hedged. Based on current fuel prices, currency exchange, and interest rates, we expect another record-breaking year with earnings per share between $9.75 and $10 per share and therefore another year of double-digit EPS growth. Now I'd like to walk you through our first-quarter guidance. Net revenue yields are expected to be up in the range of 7.5% to 8%. This metric includes approximately 375 basis points from the operation of Silversea and the cruise terminal in Miami. As it relates to the core operation, first-quarter yield will benefit from the addition of Celebrity Edge, Symphony of the Seas in the Caribbean, and improvements in yields for core products. Net cruise costs, excluding fuel, are expected to be up approximately 10% for the quarter. This metric includes approximately 800 basis points from the operations of Silversea, the cruise terminal in Miami, and the start of operations of Perfect Day at CocoCay. As it relates to the core operation, the year-over-year increase is mainly driven by the timing and scope of drydocks related to our ship modernization programs and some shifts in costs from the previous quarter. Taking all of this into account, we expect adjusted earnings to be approximately $1.10 per share. With that, I ask our operator to open up the call for a question-and-answer session.

Obviously, with these results, you're not giving us a lot to worry about, but maybe I could ask you two things in terms of your booking outlook. One is just, with the increase in supply in Alaska and the market in general, I mean, is it fair to say with the kind of yield guidance you're giving, I assume you're seeing increases in yield in all of your major markets? And then I was also going to ask you about other European sourcing. You mentioned that there's a little bit of inconsistent demand in the U.K. I wonder if you have comments on other Europe and even just sort of quantifying. I think the U.K. is your biggest European market and don't actually have that much exposure to other Europe, but any comments there?

It's Michael. Alaska is and has always been a great market for us. It's a high-yielding market, and it performed exceptionally well last year, and it's looking good for this year as well. So we are quite pleased with how Alaska is shaping up. With European sourcing, I think Jason had mentioned earlier that we have the benefit of really a significant global international structure, and that really does allow us to balance any geopolitical issues in any one particular market. So I think we're kind of aware that there would be some volatility in the U.K. market with Brexit, and we planned accordingly, and we are hoping we'll move through it quickly, but our sourcing has been good out of all of the other international markets. And including the North American market as well, by the way, which has been particularly strong.

So actually outside of the U.K., there is nothing you'd call out in terms of softness in demand?

No. I think it's a U.K. story. I was there last week and watched the news pretty much every night, and there is a huge debate raging. Nobody knows what's going to happen. There is quite a lot of sentiment, and I think that's almost inevitable. So I guess, when March passes, hopefully we'll all be in a better position and know what's going to happen.

And Robin, just to add, just one comment on the U.K. side. I'd mentioned that we've seen volatility. So we have seen volatility, but all in all, it's also been still a very good and strong market for us and the bookings have come in quite well. There's just been more volatility in that market around the news cycle.

I guess, the first question is around your guidance. And Jason, you've always kind of talked about that 2% to 4% core yield growth as being a pretty good barometer for the business. But obviously, if we strip out Silversea and all the other stuff you guys have this year going on, you're essentially guiding to us 3% to 5% kind of core yield. So I guess, the question is, what gives you so much confidence in that range? And as we move forward, is that 2% to 4% range still the right way to think about the business? And I guess, another way to ask this is, if we stripped out your new hardware, whether it's Edge or Spectrum, would your like-for-like hardware still be trending better than what you would have thought maybe six months ago, if that makes sense?

Thank you for the kind words regarding our 2018 results. We're pleased with them. To address our guidance, our philosophy remains unchanged. I encourage you to refer to the chart Richard mentioned, which highlights our consistent forecasting of yield and earnings. We have built our business over a significant period, contributing to our confidence in these numbers. We currently have a strong business position in terms of both rate and volume, and this is expected to continue for several quarters. Most of our capacity growth this year will occur in the first half, where we have the clearest visibility of our bookings and available capacity, further strengthening our outlook for the year. The growth in yield isn't solely from new hardware; while part of it comes from that, a significant portion—around 3% to 5%, or roughly 4%—is driven by improvements in our like-for-like business. When we consider all these factors together, we have a solid basis for confidence in our performance this year. Regarding the 2% to 4% range, that's reflective of our trend over the past few years, which is why we maintain that guidance. In recent years, we've typically performed at the higher end of that range. We believe that moderate yield growth, effective cost management, and strategic investments will result in healthy earnings per share growth and enhanced returns on invested capital.

Okay. That's great color. And then the second question would be on the cost side. And again, if we strip out Silversea, CocoCay, all that stuff, you guys are forecasting kind of that core cost to be up 2% to 3%, which is probably a little bit higher, I think, than what some folks might have expected. And I guess, some of that bump there is kind of more drydock related and probably some technology as well. But I guess, the question is, without that drydock impact and without the technology component, do you still see the business being able to keep that cost pressure relatively low?

Yes. So one, if you back out Silversea, the Port of Miami, and CocoCay, our costs are approximately 2%. Certainly there are impacts from having more drydock days in 2019 than we have in 2018, but certainly investments in things like technology, data analytics, etc. are weighing more onto our costs, and that's because a lot of these investments or costs are not things that are being capitalized based off of how software providers are selling now into the market. But we do believe and we are very much committed to making sure that we are effectively managing our costs and trying to realize the scale that comes with the growth of our fleet.

Jason, you mentioned the revenue increase from Excalibur impacting 50% of your fleet. Can you provide more details on the magnitude of that revenue increase? Additionally, do you have any data on the returns from the investments you have been making?

Well, I think I was talking about specifically on Excalibur, was just the additional cost that it brings. Certainly, as we're rolling Excalibur out, what we're definitely seeing that's very tangible is our net promoter scores, our guest satisfaction is rising quickly as we are very focused on delivering on, taking friction out of the guest experience. That, we believe, is what is leading to higher yields for us, and you'll also see coming online ways in which we think it will be much easier for the customer to be doing business with us, making it easier to buy things from us, especially when they are on the ship, pre-cruise as well as when they're on the ship, that we think is going to deliver a very solid return for Excalibur.

Just a follow-up on that. Is there a noticeable difference in the revenue uplift from the vessels that had Excalibur versus those that don't in the fourth quarter?

We have observed a strong correlation between increased guest satisfaction scores and higher spending, both in ticket purchases and onboard. We are definitely seeing those advantages on the ships where we have implemented Excalibur.

Harry, if I could just amplify on that. One of the things is, a lot of these initiatives, they're hard to single out. We are a brand, and all of these things add to the brand. Obviously, Excalibur is easier to put on the newer ships, for example, which would otherwise do better anyhow. And so I'm not sure that we are very good at isolating out this initiative on food or this initiative on entertainment or this initiative on technology has such an impact. We're looking at them all in a holistic way, and we think them taking together is what drives improved guest satisfaction, word of mouth, and essentially all of those things are part of a brand. But a brand is an amorphous construct, and it's a little difficult to isolate out on a specific one and say this drove X.

I noticed that in the fourth quarter, you bought more stock in Royal Caribbean, but it seems the company didn't do the same. Is this due to the effect of the Silversea acquisition on the balance sheet, leading you to focus on your leverage ratio for now?

Jason?

Yes. So I'll let Richard comment on his stock purchase, if he would like. But Harry, that's exactly right. I mean, as we had commented before on the last call that the acquisition of Silversea did stress our credit metrics. We are focused on being an investment-grade credit. We are an investment-grade credit, and there are certain metrics, especially debt to EBITDA, that we focus on looking to maintain, which when you make an investment like Silversea can weigh on that a little bit, but as we burn off on some of that debt and our EBITDA gets better here in the short run, there certainly is opportunity to maintain that leverage and provide opportunity in an opportunistic way to buy back shares.

Probably more in the second half?

There is definitely more headroom in the second half of the year than there is in the first half of the year.

Can you help me understand the 350 basis point impact for 2019 regarding Silversea, the terminal, and the water park? How would you break that out among these three components? I'm a bit surprised that the contribution isn't higher since I believe Silversea alone contributed about 350 basis points to the fourth quarter with only two months included. I understand there is some seasonality, but could you clarify the reasoning behind this?

So first, just on the seasonality side, what we brought into the fourth quarter were two of the probably four most highest yielding months for Silversea, especially with August being in that consideration. So that's why it's a little bit more elevated in terms of the impact on the fourth quarter versus the 350 for the full year. I won't sparse out exactly what each one of these things as it relates to our Port of Miami and Perfect Day and Silversea is. Obviously, the vast majority of it is Silversea. What I would say is that the Port of Miami has come online, is doing exceptionally well, the volumes there are building as we will be adding more and more ships to that terminal over time. And obviously, we talked about CocoCay coming online — or Perfect Day CocoCay, I want to make sure we get the marketing right, coming online in May, and that will ramp up not just in terms of the amenities that we will be offering, but also the number of ships and the volumes of guests that we bring there will be ramping up over time as well.

Okay. And Jason, I'm going to be really shortsighted here for a second, and I know everything sounds really positive, but I think just given some of the macro concerns, it's relevant. You talked about how two of the last three weeks were record booking weeks, which, I think, implies that the last most recent week may have decelerated some. Is that just normally a lighter week in WAVE? Or anything else that you'd call out or point to there?

All three weeks have performed exceptionally well. However, the first and third weeks outperformed the second week. I wouldn't interpret this as a trend based on the first two weeks; it was actually the first and third. Even the second week was very close to previous records we've seen.

I just wanted to kind of continue some of the thought that Steve had earlier in the call, just on costs and you explained why you're looking at 2% this year. I'm just trying to understand if we should think about in the kind of medium term if that's the new norm or so, like as we are thinking about our 20/20 model, should we be starting at a base kind of cost of 2%? Or are your investments going to be tailing off by then?

I'm not entirely sure what the new normal will be, but this year we're looking at approximately 2%. I can assure you that we are dedicated to managing our costs effectively. We're always focused on this aspect, but it's important to note that we are making some investments which may impact the perception of our metrics. For instance, initiatives like Perfect Days generate revenue and incur costs but do not have associated APCDs, which can slightly elevate that metric. However, I won't provide a specific number, but I want to emphasize that we remain very focused on cost management.

Okay. And then I know you don't want to kind of break out these different buckets of your, kind of, the new aspects or the new drivers on your yield. But can you just — we get this question a lot and I'm sure you do too. Can you just kind of help us think about Perfect Day? I know a lot of folks are trying to model it. So maybe kind of give us some parameters, number of passengers that might be coming a year, utilization, pricing, just anything that you can help us with our modeling there?

Felicia, it's Michael. Yes, I think when you look at the total portfolio for Royal Caribbean Cruises, I think over 50% of our total capacity is in the Caribbean. When you look at Royal Caribbean International, we have, I think, 13 ships operating in the Caribbean during the year. And then when you look at the deployment of those ships to Perfect Day in 2019, I believe that 10 of the 13 ships are calling into Perfect Day. Our projections are that by 2020, so next year, we will be taking just shy of 2 million guests a year to Perfect Day. So — and certainly what we've seen in our bookings, not only in the Caribbean, but particularly for those ships that are scheduled to go to Perfect Day has been really quite positive, and we haven't officially opened it yet. So I hope that gives some context and paints a clearer picture for you. And then of course, the other element is the sales associated with the experience in Perfect Day, and we've seen our sales of activities and experiences really take off on our pre-cruise sales for the experience. So we're up by a factor of close to nine, I think, for our Perfect Day sales.

Felicia, if I can — it's Richard, and if I could just add something to try and address your question. When we identify the costs that we've said are associated with Perfect Day and the revenue and we've adjusted our cost, our yield and expense metrics to take that into account, we've only isolated out the actual costs in the — on — that are directly related to CocoCay and the revenues that occur on CocoCay. But one of the impacts of doing an initiative like that is that it improves the ticket revenue, and we can't and we don't isolate that out separately. And it's obviously very hard to measure. And that's actually part of what you see going on. We have a lot of things that we think are helping us on the revenue side that we aren't quantifying. We've really isolated these three things, Silversea's, Terminal A, and Perfect Day, but there are actually others, and it's a little hard to isolate those out. But as Michael said, and he has said even more emphatically on previous calls, we really think Perfect Day is a game changer for us and quite exciting, but it's in more ways than just appear when you isolate it out as a separate expense and a separate revenue.

Okay. And then Jason, on Silversea, I know most of the synergies are going to come next year when you can refinance the debt, but have you been able to generate any kind of or do you expect to generate any kind of cost synergies in '19? And then also on the earnings side, when we have time after the call, I'm sure we can sit down and calculate this, but maybe you can help, was there — what was the impact to EPS? Was it neutral or dilutive?

Yes. Sure. So one, at the same time that we had announced the Silversea deal, we said it was going to take a few years. A lot of that is tied to the financing for it to be accretive to our overall business. So I won't be specific in terms of the amount because it's really immaterial to our bottom line. The cost synergy effort or just synergies in general are going exceptionally well. The Silversea team is very engaged and very focused on growing the business and making the business as efficient and profitable as it can be. We are, I would say, a little bit ahead of schedule on the cost synergy side, and we do have some of the cost synergies accounted for within our guidance for this year.

Okay. And then just last question, just more housekeeping, but — and maybe this is an impact of Silversea. We're just looking at your fuel consumption versus your capacity growth, and typically your fuel consumption is below your capacity growth, excluding some quarters where seasonality might reverse that. But now your guidance implies fuel consumption above capacity growth. So I'm just wondering if Silversea is driving that?

Yes. That's exactly right. Those ships are not as fuel-efficient or really not even close to being as fuel-efficient as our overall fleet. And obviously, they don't benefit from scale as those ships are sailing with passengers between 100 and 600 passengers on them. So that's what's driving the consumption differential.

Do we see going forward, is there a rule of thumb that we should use or we just use the pattern that we're seeing this year?

Yes. I think once we get through this year, and obviously we're also very focused as part of the synergies on trying to employ many of the energy-saving initiatives that we have done on our existing fleet, trying to get some of those opportunities onto the Silversea fleet.

Great. For my first question, can you share any specific regions where WAVE performed particularly well? Is it primarily North America? Additionally, could you provide some insight on the year-over-year growth from pricing during WAVE? Was the booking unexpectedly positive, or did the pricing contribute more positively for you?

Yes. Firstly, regarding WAVE, the only market that experienced some volatility has been the U.K. Aside from that, we have observed significant strength in both volume and pricing. While we are still in the early stages of WAVE, the data from the past three to four weeks suggests positive trends in both volume and pricing.

I wanted to follow up and dig a bit deeper into the situation from 2020 and its implications for current bookings, particularly out of Europe. It seems that Germany is performing well, and you've mentioned some volatility from the U.K. How are the bookings for the TUI joint venture in Germany? Considering the changes in 2020 with ships coming in and out of the TUI joint venture fleet, how should we evaluate the TUI joint venture's contribution for 2019 and 2020, as it has become a significant and successful operation?

Yes. Sure. So first just talking on the EU side, which also ties into your comment around Germany. First, on the U.K. piece, we really said that there's just been volatility, but that volatility has certainly stabilized and again the volatility typically happens around the new cycle in the U.K. Broader Europe has actually done quite well. Germany is doing well, typically TUI is also doing well. So we don't comment specifically on TUI's yield guidance or specifically to their profitability. The one thing I would say in '19 is that TUI does take on another ship, which is good for us as it relates to the income that we will get, the equity pickup we will get from TUI. So that will continue to expand our equity pickups. In 2020, they do not have a new ship and so some of that uplift that we've seen now for the past several years will be a little bit lighter. We're more driven off of the margins that they get off of their existing fleet for the next couple of years. And so that's how I would think about those two line items.

Okay. And then, Michael, China, Jason alluded to earlier that China was up in bookings, you responded to the previous question that it's positioned well. How is pricing at this point going year-over-year, if you can have any commentary on that? And then CocoCay, just maybe a little more Perfect Day, how are your bookings and maybe price uptake, so to speak, tracking at this point versus the expectations of what you guys have built into the budget?

So we're not going to go into specific details on price increases by products or market, but I can tell you that overall the China market, I think, I mentioned earlier, we've seen good improvement in '18 over '17, and we are seeing similar improvement now coming through into '19. Of course, we've got the addition of our newest ship, Spectrum of the Seas, that's going into the China market. So we're excited about that and the consumer seems to be excited about the introduction of that new product as well as our trade partners. So things are looking quite good in the China market. Of course, overall, there has been an industry capacity decrease of somewhere in the region of 15%, 20%. So China is in good shape, even though there is quite a lot of negativity in terms of the news that we hear with regards to the trade battle that's occurring, but the consumer seems to be quite confident, and things seem to be relatively good in China. In Perfect Day, I think we mentioned earlier that we've been very pleased with the demand that we've seen coming through on the products that have course into Perfect Day, and that's been a real positive driver of our Caribbean overall health in terms of bookings. And we've also seen really good uptake in terms of the pre-cruise sales of experiences and products on Perfect Day. So both of these really are quite positive.

I'll take another stab at the additions of Silversea, CocoCay and Terminal A, if I could. I believe based on your guidance, the math implies all three of those will contribute about $15 million of EBITDAR. So first off, is that right? And second, if so, how should we think about how those investments will contribute in 2020? And is there any chance for upside in 2019, I think, as you may have alluded to before?

Yes. So as it relates to the EBITDA, the profitability of it, we are not guiding specifically on these items, but we were comfortable giving how it impacts our yield as well as our cost metrics. I think when you think about, as it goes into 2020, first off, we're into all of these investments for them to be accretive to our business and be high returning and certainly we expect in 2020 there to be more contribution from all three. The Port of Miami because we'll have more volumes, as Michael commented. On CocoCay, we will have almost 2 million guests going through CocoCay in 2020, and there will be more and more amenities available to those guests on the island. And a lot of our synergies will be implemented through 2020 on Silversea, and Silversea will also take on a new ship in 2020, which will even improve further their scale of their business.

Great. For my first question, I'd like to know more about the strength of WAVE. Were there any specific regions that particularly stood out? Is it primarily sourced from North America? Additionally, could you provide some insight into the year-over-year growth driven by pricing during WAVE? Did the bookings exceed expectations, or was it the pricing aspect that was more favorable for you?

Yes. So first, on the WAVE side, I mean, the only market which we did — we talked about that had a little bit more volatility to it has been the U.K. Outside of that, we have seen a lot of strength and both volume and benefits on the pricing side as well. So it's — again, I mean, we're still in the early days of WAVE, but at least what we have seen over the past three to four weeks is a good news story on both the volume and pricing.