Harry Sommer: The only additional [technical difficulty] color that I’ll give is related to Europe, which is a large part of our deployment this year in Q2 and Q3, where — because we’ve had the benefit of a full booking cycle, we are seeing more Americans on our European deployment this year, which tends to elongate the booking curve a little bit and also tends to deliver slightly higher yields as opposed to selling those cabins a little closer into locals in Europe.
Patrick Scholes: Okay. Thank you for the color. [Indiscernible].
Harry Sommer: Thanks, Patrick.
Operator: Our next question comes from the line of Ben Chaiken with Mizuho. Please proceed.
Benjamin Chaiken: Hey, good morning. Thanks for taking my questions. Your comments on 2Q yields onboard booking — forward booking trends are all very helpful. Just attacking this a little differently. Curious how you’re thinking about 2Q yields on the net yield side. There are some headwinds and tailwinds, it’d be great if you could help us think about the different moving parts, specifically for 2Q, I guess I’m asking. So for example, there is less Caribbean, but as you’ve suggested earlier, it sounds like the mix is not a factor. You’ve got Red Sea, anything else just big picture. And maybe to put a finer point on it, however you cut it year-over-year versus ’19 sequentially, it just seems like optically, there’s a step down, and I guess I’m trying to open this up and understand the moving parts. Thanks.
Mark Kempa: Well, good morning, Ben. I think there is a step down from Q1, but that’s purely as a result of the comparison in the same quarter of 2023. So as we said on our last call and this call, we are not, and I will repeat this, we are not seeing deceleration. I don’t know how many more times I can say that across different calls and conferences. We are getting back to what we would we call a more normalized yield growth in terms of our business, which we have always said would be somewhere in the low to mid single digits. And obviously, we continue to pursue much better than that. So yes, there is a impact in both Q2 and Q4 as a result of the Mid East and Red Sea, we’ve been very specific about that. But even absent that, we still continue to see very healthy pricing and yield growth. So I just want to make it clear, it’s not a deceleration issue. It really is a comparison issue from quarter-to-quarter.
Benjamin Chaiken: Sure. The premise of the question was actually not a deceleration. It was that you’ve said that in the past, so I’m trying to understand the moving parts that might kind of help us explain the nuances, but that’s helpful.
Mark Kempa: Yes, Ben, the moving parts in Q2 are really the Mid East and Red Sea for the most part, and that also impacts Q4 as well as Q4 having a significant rollover versus the same quarter in 2023.
Benjamin Chaiken: Okay. And then as you think about Great Stirrup Cay, you announced the pier construction, which makes a lot of sense. Were you suggest — were you suggesting earlier in the call that you wait for the pier to be built and then wait a year or so to get kind of the demand picture under your belt before you start to invest in the island? Or is that not the correct interpretation?
Harry Sommer: I wouldn’t interpret it that way. I’m not prepared here to discuss our full long-term plans for Great Stirrup Cay, we’ll talk little bit more about that in 3 weeks. I’m just — my comment was meant to say that the pier was the gating item that before we committed and have a schedule for the pier, it would not have been prudent for us to make substantial additional investments to the island, which for the record, is already a great experience. But now that we have the pier, it allows us to have a slightly more long-term view towards that. But I don’t want to give any indication of whether it’s happening imminently or later. We’ll talk little bit more about that in 3 weeks.
Sarah Inman: Next question.
Operator: And our next question comes from the line of Lizzie Dove with Goldman Sachs. Please proceed.
Lizzie Dove: Hi, there. Good morning. Thanks so much for taking the question.
Harry Sommer: Good morning.
Lizzie Dove: To kind of belabor this net yield point, but I just want to understand the moving pieces in terms of the kind of quarterly cadence. Like as we think of your 2Q guidance of 4.3% growth and 3Q being higher, I would have thought that means quite a steep step down in 4Q, especially I would have thought you maybe get some occupancy recovery from the Hawaii comp last year. Anything you can say that can kind of help me think about that kind of quarterly cadence?
Mark Kempa: Hi, Lizzie. I think as we said, we believe in the back half of the year, second — third quarter will be the highest yielding quarter. Fourth quarter, there was — if you think about fourth quarter 2023, yes, there was a small impact on occupancy as a result of Hawaii. But I think as we look at the comp rolling over, again, if I recall correctly, somewhere in the zone of 14% pricing growth and maybe 9% to 10% yield last year, that’s a very quality comp to roll over. So I think stay tuned. I think fourth quarter, there’s still time and we are still building there. But we — everything we see today, the environment remains healthy, and we expect strong results across all our quarters.
Harry Sommer: Yes, I mean the only additional color I’ll add, which Mark talked about in an earlier question and not this one is a slight headwind related to Red Sea cancellations in Q4, which would be a little bit more — a little bit less, excuse me, than the headwind in Q2 because we had a little more time to have the replacement voyages on sale. And that’s why it was so critical for us to get well ahead of this for 2025. So we’ve already canceled all of our voyages that have previously [indiscernible] for 2025 and all the Red Sea crossings in the first half of ’25 so that we wouldn’t have the same headwind challenges to our 2025 growth.
Lizzie Dove: Perfect. That’s really helpful. Thank you. And it feels like the very premium luxury market is more focused, especially with the capital markets activity. Anything you can share there in terms of pricing on your more premium brands versus the Norwegian brands? And also any step it might take to protect share? Or is this competitor has some pretty aggressive supply growth targets?
Harry Sommer: So I’m trying to distill that question down into some thoughts in my mind. So obviously, we are excited to see new entrants into the market. We think anything that has — that draws more focused, if you will, to this market and the public market and the excellent opportunity that cruising represents is positive for all of us. So I [indiscernible] email congratulating this morning on a successful IPO, and we obviously wish him the best of luck. We see the growth that Viking has, and we have nice growth on the Oceania region brand that’s measured that we can absorb and that we are happy for.
Lizzie Dove: Perfect. Thank you.
Operator: Our next question comes from the line of Fred Wightman with Wolfe Research. Please proceed.
Fred Wightman: Hey, guys. I just wanted to come back to the Red Sea impact for next year. Are you expecting to fully offset the yield impact from this year? Was that a comment — is that a comment on costs? I just want to understand if it’s yield dilutive from a — if you do have to do repositionings and it’s less desirable itineraries?
Mark Kempa: Hi, Fred. So we have announced all cancellations of our Red Sea and Mid East itineraries for 2025, with the exception, I believe we may have one sailing still on sale in the back half of ’25 for the Oceania brand. Apart from that, we have canceled all those sailings. The — and the thinking there is, obviously, the earlier you reroute those and create better itineraries, the better sales cycle you have, so the — certainly, the improved yield and economics that you can garner from that should improve. That said, if I had a choice of doing other areas in the world versus those select Mid East and Red Sea, those are always a premium. But certainly, it won’t be a significant tailwind, but it won’t — at the same point, it won’t be a significant drag.
Fred Wightman: Okay. That’s fair. And then just trying to understand where there could potentially be some upside for yields throughout the year. It sounded like in response to an earlier question that you were saying the potential upside would come largely from onboard. I think that was in response to 2Q specifically. But just thinking about the back half of the year, especially in 4Q when that Caribbean exposure increases again? I mean you guys still feel like you have the ability to take price and grow yields from a ticket perspective later in the year, right?
Harry Sommer: Yes. So, Fred, that’s the job of our brands. We look at the booking curve, the consumer demand, and we do everything we can to raise price at any time that we can. I think as Mark mentioned, Q2 and most of Q3 is pretty big, given where we are in the booking curve. Is there potential in Q4? Absolutely, and we’ll do everything that we can to optimize that potential.
Fred Wightman: Perfect. Thanks a lot.
Operator: And our next question comes from the line of Robin Farley with UBS. Please proceed.
Robin Farley: Great. Thank you. I have two questions. One is, in your release, you showed that a percent change in net yield would add about $67 million to EBITDA. You raised by a point and raising EBITDA by $50 million. Maybe half of that looks like it’s from higher fuel of — the sort of kind of the — like looking for that other $17 million that was not in your EBITDA raise. Maybe half of that was due to higher fuel. Is the other half just sort of conservatism and leaving a little powder dry, which is fine? Or just — or is there another factor there that’s not getting it down to the EBITDA line. And then — my second question, just to there as well, is any color you can give us on your new ship orders in terms of the cost per berth kind of relative to previous ship orders, fully understanding that there would be inflation at the yards and all that, but just trying to quantify that in some way. Thanks.
Mark Kempa: Yes. Thanks for your — you’re exact in calculations, Robin. Obviously, there’s some slight rounding in there when you look at the yield and the sensitivity. So essentially, yes, we did carry over about 100 basis point increase. And I think if you look at my prepared remarks, most of that was — some of that was partially offset by higher fuel and then higher interest expense as — for two reasons. Number one, the portion of our debt portfolio that is not fixed, which is about 5%, 6%, but then also commitment fees related to some of our newbuild announcements that went effective as well. So all in all, I think when you look at the back half of the year, as I said, we are raising yield guidance, and that’s about $0.10 — $0.10, $0.11, offset by $0.04 or $0.05 of interest in fuel. And I didn’t catch the back end of your question. I apologize.
Harry Sommer: She asked about any color [technical difficulty] inflation.
Robin Farley: Yes, to see the cost per berth or kind of getting a sense of the change in building costs at the yards, understanding that there will be inflation there, but just trying to get a ballpark for it. And the prior questions have been about the EBITDA. I fully understand the interest expense impact on the EPS. I was looking for the extra $10 million in EBITDA. But anything on the cost per berth? Thanks.
Mark Kempa: Just to be really clear on the EBITDA side, we calculated the 1% raise that we had at just over $60 million. So it wasn’t exactly a full point. It was more like 97 basis points or something like that. So the 60 minus the fuels should get you to almost exactly the $50 million EBITDA range. So we apologize for that confusion between the $60 million and $67 million. Listen, in terms of inflation on newbuilds, I think what you’ll see is sort of two factors offsetting each other. I think the inflation on newbuilds is similar to the inflation you see in the general population, at least when we do our calculations. I think what we can do to help offset that inflation is the same as what you’re seeing in our general cost structure, the same transformation office process that looks to doing things more efficiently and effectively will allow us to offset part of the impact of inflation, certainly not all of it.
So that would be our guide, if you will, going forward. And then I think we have time for one last question, operator.
Operator: And our last question will come from the line of James Hardiman with Citi. Please proceed.
James Hardiman: Hey, good morning, and thanks for fitting me in here. So just quickly I wanted to circle back to the cost conversation. Obviously, a lot of noise around dry dock, pretty flattish, though ex the dry dock step up for the first half. Is that the assumption for the second half that ex the dry dock movement that costs are going to be pretty flattish year-over-year. And if so, how long can that last, particularly as dry docks flatten out in 2025?
