RCI discussion on Cuba in financial call.

[MADflyer]

While the main focus was on China and the weakness in the MED in the RCL first quarter financial call, the subject of Cuba sailings did come up.

 

First the delay of Empress was presented as a 'Passenger Experience' issue.

 

Mr. Kent, Goldman Sachs - Analyst [58]

 

This was customer-facing stuff rather than engineering?

 

Michael Bayley, Royal Caribbean Cruises Ltd - President & CEO [59]

 

No, it was related to customer experience.

[MADflyer]

Later there was a discussion of the future of the Cuban market for RCI.

 

Mr. Shojaian, Wolfe Research - Analyst [90]

 

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As a follow-up, what are your expectations for timing on Cuba? Caribbean obviously has been very strong this past fourth and first quarter, and some people are wondering how you can drive incremental yield off some of these comps? Do you think Cuba could be that source of incremental yield growth as we head into 1Q 2017, or is it to soon to be talking about it?

 

 

 

Adam Goldstein, Royal Caribbean Cruises Ltd - President & COO [91]

 

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Jared, it is Adam. We have a keen desire, I think Michael might have expressed this before, to take our guest to Cuba. Obviously, if you think about what we have been doing since 1970, our ships keep cruising in a giant circle around Cuba without going there. We are excited about it, but this is a dialogue that continues with the Cuban government and the timing of permission to go is unclear, although we are optimistic. So it is hard to predict when any involvement in Cuba would have become part of our business. And as we've tried to express on previous dialogues, Cuba's infrastructure is very, very limited in terms of the overall amounts of capacity that it can take. If it develops well over the years coming, eventually it probably can become one of the mainstay marquee Caribbean regions, but that is a long way off. So we hope to be there in the short term but it would be on a fairly limited presence.

 

 

 

Richard Fain, Royal Caribbean Cruises Ltd - Chairman & CEO [92]

 

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I think we have made it pretty clear that we don't think even when it is operational it will be a major part of our business, so I wouldn't have thought that, that per se looked at in isolation would be a driver. However, I think two things; it actually will help general yields in the area because I think it does raise interest, the publicity about Cuba, discussions about Cuba, raises interest in Caribbean cruising. The other thing is I want to dispel any notion that we think the yield improvement that we are getting today is particularly high. We have got some terrific new vessels, we have got really very strong market position of our brands, of our operations, so we think the big driver, and we think it will continue, it has been a driver we think will be a driver is actually how powerful our brands are doing in the marketplace.

[MADflyer]

Port schedules at Key West now show the first Cuba sailing scheduled for April of 2017.

 

Empress still appears to sail on short sailings from Miami up until that point, but it is obvious that it is unclear when RCI will start to sail to Cuba.

 

It is also interesting that they do not see the market as having a huge impact on their short term future business in the region.

[Paulette3028]

Port schedules at Key West now show the first Cuba sailing scheduled for April of 2017.

 

Empress still appears to sail on short sailings from Miami up until that point, but it is obvious that it is unclear when RCI will start to sail to Cuba.

 

It is also interesting that they do not see the market as having a huge impact on their short term future business in the region.

 

Several months back people saw listing of Cuba as a stop in January 2017....and now from what you say it is April 2017. The truth is all of this is guessing. Keeping a spot open for 'something, maybe to happen'.

 

From the Royal conference call, they are doing very well as is. Return to stockholders will be strong again. From this stockholders POV, I really believe we can do with a little less 'cost cutting' and perhaps hire a few more wait staff and stateroom staff to return the cruiser experience closer to what it was a few years ago. Stockholders will still get good returns on their investment. Cruise fares admittedly (on the conference call) increased, along with onboard spending fueled by items like specialty dining, drink packaged and internet access sales.

 

From what was said about Cuba, it just doesn't seem as if they are in a rush to make a decision on how to approach it for the betterment of the line, and what they feel is the marketplace of the cruiser they attract.

[MADflyer]

They have already made their decision to go operational in Cuba. They have not received Cuban government approval.

 

Speculation is when there is no evidence. Port bookings are evidence and therefore not simple speculation.

 

What is most telling is that they do not see Cuban sailings to have a significant effect on their business one way or the other with the current level of infrastructure in place in Cuba.

 

I simply feel they are wisely proceeding cautiously.

[Paulette3028]

They have already made their decision to go operational in Cuba. They have not received Cuban government approval.

 

Speculation is when there is no evidence. Port bookings are evidence and therefore not simple speculation.

 

What is most telling is that they do not see Cuban sailings to have a significant effect on their business one way or the other with the current level of infrastructure in place in Cuba.

 

I simply feel they are wisely proceeding cautiously.

 

They will go operational in Cuba, no doubt.

 

I believe they feel that sailing to Cuba will not have a significant effect on their business 'due to the current level of infrastructure in place in Cuba' to me is because of the 'current cruise customer that Royal is trying to market to'. The Carnival/FATHOM type cruiser, that wants to go on a Cultural Exchange (People2People) mission with all the stops being in Cuba and the excursions controlled by the Cuban government, is not perhaps what is the attractive market that Royal sees for itself. The FATHOM ship is much smaller than Empress is as well.

 

Proceeding with caution is wise.