Specialist
Former VP, Strategy & Business Development at Carnival Corp
Agenda
- Cruise line sector operating trends
- Competitive landscape, focusing on Royal Caribbean (NYSE: RCL) and Norwegian Cruise Lines (NYSE: NCLH)
- Impact of the novel coronavirus on demand, pricing and routes' occupancies
- Medium to long-term outlook
Questions
1.
What is your high-level overview of the novel coronavirus, COVID-19, pandemic? What are the most important things to consider as the situation unfolds?
2.
You mentioned some uncertainty around what happens with the shipyards and new builds. How flexible are the capital commitments to building new ships for the various cruise lines? Can they be delayed, or will players such as Royal Caribbean have to continue to pay for new ships?
3.
In a pre-coronavirus scenario, what are typical capacities or occupancy levels for cruise line operators during calendar year Q1 and Q2? What occupancy rates would you estimate for average routes? How does it compare with the more popular routes?
4.
How exposed are Norwegian and Royal Caribbean in the ever-expanding proliferation of COVID-19 in Asia and other regions? Which player is the most exposed?
5.
What could be the impact from customer cancellations on deferred revenue and company liquidity? How many customers are agreeing to take vouchers vs requesting cash refunds? Is there any historical precedent to reference here?
6.
You mentioned the CAPEX and OPEX trims, but does any business-interruption insurance cover lost revenues or any other incremental cost?
7.
You mentioned that there were several contractor lay-offs. Presumably some of the key vendors were cut off. Which vendors could be most impacted on that front?
8.
What percentage of cancellations typically request cash vs credit for future cruises? Do you have any historical context to share?
9.
What is the impact on unit economics in light of the updated cancellation policies you mentioned? How does it translate into potential losses for operators? What are the fixed costs of employees, port rents, etc, even when a cruise does not proceed or sail?
10.
You say there are unavoidable fixed costs, period. What percentage of those fixed costs are completely unavoidable regardless of the number of sailings?
11.
How much would it cost a cruise company if a cruise ship were to sit in a port for about three months?
12.
Is there any difference in how luxury brands are impacted with cancellations and/or how long it will take for rebookings and utilisation to rebound?
13.
Seattle shut down its ports for cruises and, as you mentioned, we’re approaching the beginning of Alaska cruise season. Where do these ships disembark?
14.
How much do cruises boost the economies of certain destinations? Would countries be unlikely to ban cruises because of the associated tourism boost?
15.
Do you think any areas or countries would say they no longer want cruise tourists, regardless of the potential economic boost?
16.
Would you expect the Caribbean cruise market to become flooded and have severely lowered pricing because of the depressed Asia market and the possible cancellation of Mediterranean season?
17.
What percentage of the customer base is comprised of customers aged over 70? And what would the impact be if the 70 plus ban is put into play?
18.
Roughly 25% of Royal Caribbean’s customer base is European. Do the recent European travel bans mean Royal Caribbean would lose 25% of its customers on cruises over the next 30 days or longer?
19.
What is the risk with Spain rolling out the policy to shut its ports to cruise lines?
20.
Ports in Italy are being shut down and with the approach of Mediterranean season, I believe passengers would typically have airfare costs covered to disembark from Greece. What happens if ports in Greece are closed? Would Mediterranean season get completely cancelled?
21.
The customer mix for Royal Caribbean is roughly 25% Asia, 25% Europe and about 50% North America. Do you think this positions Royal Caribbean at an advantage vs peers? Thinking overall, it could appear to be in a less-than-ideal position, given how those regions have been hit the hardest. What is your assessment here?
22.
How should we think about the recovery curves relative to previous one-off events such as the Costa Concordia disaster or SARS? Which other past events are comparable to the coronavirus outbreak?
23.
There was a 5% drop in occupancy in the quarter following 9/11. How much worse could this be?
24.
How should we trim our expectations in terms of yields for each operator, over the course of 2020-21 for example?
25.
We discussed the easing cancellation policies and how passengers can now cancel without any sort of repercussions. Why would the customer not take the cash up front? How much incentive is there to have customers go on a cruise at a later date? What sort of impact can we expect on the balance sheet if most end up asking for cash up front?
26.
How would you assess a best-case scenario and a worst-case in all this? What other catalysts might accelerate things for better or worse?
