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Royal Caribbean Cruises Ltd  (NYSE:RCL)
Q4 2018 Earnings Conference Call
Jan. 30, 2019, 10:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning. My name is Jane, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Royal Caribbean Cruises Limited Fourth Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I'd now like to introduce Chief Financial Officer, Mr. Jason Liberty. Mr. Liberty, the floor is yours.

Jason Liberty -- Executive Vice President and Chief Financial Officer

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, www.rclinvestor.com.

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?

Richard D. Fain -- Chairman and Chief Executive Officer

Thanks, Jason, and good morning, everyone. I am 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 a successful year. Our teams achieved record financial results, while introducing four new vessels, acquiring a controlling interest in Silversea Cruises, opening two stunning cruise terminals and implementing Excalibur on about half of our fleet.

On the financial front, the simple point is the 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, whatever. 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 TV's, cars, et cetera, 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 inexorable.

Now, our strong position rests on several pillars. The first is our product, where we have stunning hardware that appeals to the market, over-indexes 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 guests 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 the 2017 was a stepping stone. We wanted to build a base and to solidify a culture that would serve as a spring port (ph) going forward. I believe our 2018 results demonstrate unambiguously that our objective was realistic. As we now work to execute on our 2020 Vision program, I am 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. And with WAVE off to a wonderful start, our already good booked position continues to strengthens. 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've been impressed with the 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. As you can see in slide two, 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 has 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, et cetera. 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 onstream 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 aberration (ph) and my thanks for the amazing people at Royal Caribbean, whose passion and skills enable us to grow and prosper.

With that, I'll turn it back to Jason.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Thank you, Richard. I will begin by taking you through our results for the fourth quarter of 2018. These results are summarized on slide three. For the quarter, we generated adjusted net income of $1.53 per share, being 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 were 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 on slide four. 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, which negatively affected earnings by approximately $123 million, or $0.58 per share. 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, from our key markets, 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 enter 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 for North American guests have been strong for sailings on both sides of the Atlantic, our Caribbean sailings are on 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 UK. However, our global footprint means that bookings 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 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 when 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 around 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 it's 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 rear view 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'll 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 own new terminal here at Port of Miami and in May of 2019, we will launch Perfect Day at CocoCay, where our guests will experience stunning amenities like the tallest water slide in North America.

As I mentioned in October, the additions of Silversea, the terminal Miami and Perfect Day each increase 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 of this into account, if you turn to slide five, 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 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 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. As previously discussed, being in the luxury and expedition segment, Silversea's depreciation per berth is significantly higher than our corporate average.

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 on slide six. 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 and 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 Miami and the start 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.

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from the line of Robin Farley from UBS. Go ahead, please. Your line is open.

Robin Farley -- UBS Investment Bank -- Analyst

Great. Thank you. Obviously, with these results you're not giving us a lot to worry about. But maybe I could ask you a few things in terms of your booking outlook. One, 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 given, I assume you're seeing increases in yield in all of the major markets.

And then I was going to ask you about other European sourcing you mentioned, that there is a little bit of inconsistent demand in the UK. I wonder if you've commented on other Europe and even to sort of quantifying I think UK as your biggest European margin don't actually have that much exposure to other Europe but any comments there? Thank you.

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

Hi, Robin 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're 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 were kind of aware that there would be some volatility in the UK market with Brexit and we had planned accordingly, and we're hoping we'll move through it quite 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.

Robin Farley -- UBS Investment Bank -- Analyst

So actually outside of the UK there's nothing you'd call out in terms of (inaudible) in demand?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

No, I think it's a UK story, I was there last week and watched the news pretty much every night. And there's a huge debate raging, nobody knows what's going to happen. There's quite a lot of the 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.

Robin Farley -- UBS Investment Bank -- Analyst

Thank you.

Jason Liberty -- Executive Vice President and Chief Financial Officer

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

Robin Farley -- UBS Investment Bank -- Analyst

Okay, great. Thank you.

Operator

Your next question comes from the line of Steve Wieczynski from Stifel. Go ahead, please. Your line is open.

Steven Wieczynski -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Hey, guys. Good morning. Congrats on a great quarter and the year. 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 a 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 assess, as we stripped out your new hardware whether it's Edge or Spectrum, would you like-for-like hardware still be trending better than what you would have thought maybe six months ago, if that makes sense?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Sure. Well, first, Steve, thank you for the nice comment on the 2018 results. We're obviously quite happy about it. So one, just talking a little bit about our guide. First, in terms of our philosophy on guidance, nothing has changed here. And again, I would really point to the chart that Richard was commenting on that we put up on a slide in terms of our consistency to forecast our yield and our earnings. There's a lot of things getting that bring us confidence into that number. So, one, this just happened overnight, we've been building this book of business for quite a long period of time. As I commented on, we are in a very strong book position on both a rate and volume basis and that continues on for several quarters here into the future.

The other thing which I'll comment on is that, most of our capacity growth for the year is really in the first half of the year. And so, that is where we have the greatest visibility in both how we're booking and the amount we have on our books, which further bolsters our confidence into our outlook for the year.

That yield growth is not just coming from new hardware, a portion of it is coming from new hardware but really what's balancing out that, as you commented, the 3% to 5% or approximately 4% is really being driven by the improvement in the like-for-like business. So I think when you kind of combine all that together, there's a lot that makes us feel very confident for the year based on everything that we know today.

As it relates to the 2% and 4%, I think really it's -- that's kind of how we've trended over the past several years, which is why that range has kind of been out there. The past couple of years we've obviously been on the higher end of that range going forward. But we think that moderate yield growth, good cost control and being thoughtful in our investments, improve our earnings per share at a very healthy rate and also improves our return on invested capital.

Steven Wieczynski -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Okay. That's great color. Thanks, Jason. And then 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 than probably some technology as well. But, I guess, the question is, without that drydock impact, or without the technology component, do you still see the business being able to keep that cost pressure relatively low?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. 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, et cetera, 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 on 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.

Steven Wieczynski -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Okay, great. Thanks guys. Appreciate it.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Thanks, Steve.

Operator

Your next question comes from the line of Harry Curtis from Instinet. Go ahead, please. Your line is open.

Harry Curtis -- Instinet, LLC -- Analyst

Good morning, everyone. Jason, you referenced the revenue uplift from Excalibur on, say, 50% of your fleet. Can you give us more detail on the extent of that revenue uplift? And can you share with us any -- are you -- do you have any data on kind of the return that you're getting on the investment that you've been making?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. 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 are definitely seeing that's very tangible is our Net Promoter Scores, our guest satisfaction is rising quickly, as we are very focused in delivering on taking friction out of the guest experience. That we believe is leading to higher yields for us. And you 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're 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.

Harry Curtis -- Instinet, LLC -- Analyst

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

Jason Liberty -- Executive Vice President and Chief Financial Officer

We definitely -- well, it's not just the fourth quarter. We have been seeing -- there is a strong relationship to where guest satisfaction scores go up, and people pay more both for their ticket, as well as onboard. Certainly, ships that we have put Excalibur on, we are seeing those benefits.

Harry Curtis -- Instinet, LLC -- Analyst

Okay.

Richard D. Fain -- Chairman and Chief Executive Officer

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 taken together is what drives improved guest satisfaction, word of mouth and essentially all 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.

Harry Curtis -- Instinet, LLC -- Analyst

Thank you very much, Richard. And while I've got you, I noticed that -- not noticed, but in the fourth quarter, you purchased more stock in Royal Caribbean. It would appear that the Company didn't, and is that just a reflection of the impact of the Silversea acquisition on the balance sheet that you're more focused on your leverage ratio for the time being?

Richard D. Fain -- Chairman and Chief Executive Officer

Jason?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. 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 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 buyback shares.

Harry Curtis -- Instinet, LLC -- Analyst

Probably more in the second half?

Jason Liberty -- Executive Vice President and Chief Financial Officer

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

Harry Curtis -- Instinet, LLC -- Analyst

Got it. Thanks very much.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Pleasure.

Operator

Your next question comes from the line of Jared Shojaian from Wolfe Research. Go ahead, please. Your line is open.

Jared Shojaian -- Wolfe Research -- Analyst

Hey, good morning, everyone. Thanks for taking my question.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Good morning.

Jared Shojaian -- Wolfe Research -- Analyst

So, can you just help me understand the 350 basis point impact that (technical difficulty) up for 2019 in terms of Silversea, the terminal and the water park? How would you break that out between the three components? And, I guess, I'm a little bit surprised that the contribution isn't higher for, one, because I think Silversea contributed about 350 basis points by itself to the fourth quarter with only two of the three months in the quarter. I know there's some seasonality to it, but can you just help me understand the thought there a little bit better?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. 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 parse out exactly what each one of these things as it relates to 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. It's 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 I 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.

Jared Shojaian -- Wolfe Research -- Analyst

Okay. Thank you. And, Jason, I'm going to be really short-sighted 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?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Actually, all three weeks have been very well -- have gone exceptionally well. It just happens that two of the three -- and actually I think it was the first and the third week were better than the second week. So it's -- I wouldn't read into it that it was the first two. It was actually the first and it was the third and even if you look at the second one, it was very close to records that we have seen in the past.

Jared Shojaian -- Wolfe Research -- Analyst

Okay, great. Thank you very much.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Pleasure.

Operator

Your next question comes from the line of Felicia Hendrix from Barclays. Go ahead, please. Your line is open.

Felicia Hendrix -- Barclays -- Analyst

Hi, good morning.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Good morning.

Felicia Hendrix -- Barclays -- Analyst

I just wanted to kind of continue some of the thought that you've had earlier in the call just on cost 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 normal. So like as we're thinking about our 2020 model, should we be starting at a base kind of cost as 2% or are your investments going to be tailing off by then?

Jared Shojaian -- Wolfe Research -- Analyst

Well, I wouldn't -- I'm not quite sure what to say would be a new normal. But this year there are approximately 2%. What I will tell you is that, we are committed to managing effectively our costs. We're always highly focused on it. But, of course, there are investments that we're making and some things that pressure some of the optics of our metrics, like the Perfect Days of the world that have revenues and costs but don't necessarily have APCDs associated with them that can elevate that metric a little bit. But I won't give you a specific number just to -- hopefully everybody knows that we continue to be very focused on it.

Felicia Hendrix -- Barclays -- Analyst

Okay. And then, I know you don't want to kind of break out the different buckets of your kind of the new aspects or the new drivers on your yields, but can you just -- we get this question a lot and I'm sure you did too. Can you just kind of help us think about Perfect Day? I know 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?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

Hi, Felicia, it's Michael. Yeah. 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. 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 9 I think for our Perfect Day sales.

Richard D. Fain -- Chairman and Chief Executive Officer

Felicia, if I can -- it's Richard, and if I could just add something to try and address your question. When we identify the cost that are 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 what are 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.

Felicia Hendrix -- Barclays -- Analyst

Okay. Thanks. 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 2019? And then also, on the earnings side when we have time after the call I'm sure we can sit down and calculate this, maybe you can help, was there -- what was the impact to EPS, was it neutral, or dilutive?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Sure. So, one, at the same time, 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 that is 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.

Felicia Hendrix -- Barclays -- Analyst

Okay. And then just -- last question, just more housekeeping but 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 or seasonality might reverse that. But now your guidance implies fuel consumption of both capacity growth. So I'm just wondering if Silversea is driving that.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah, that's exactly right. They're -- those ships are not as fuel efficient or really not even close to being as fuel efficient as a -- 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.

Felicia Hendrix -- Barclays -- Analyst

So as we think going forward as a rule of thumb that we should use the pattern that we're seeing this year?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. 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 and trying to get some of those opportunities onto the Silversea fleet.

Felicia Hendrix -- Barclays -- Analyst

Okay, great. Thank you so much.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Pleasure. Thanks.

Operator

Your next question comes from the line of Greg Badishkanian from Citi. Go ahead, please. Your line is open.

Gregory Badishkanian -- Citigroup -- Analyst

Great. Just -- for my first question just to do with the strength of WAVE. Any specific regions that really stood out, is it just North America outsourced (ph)? And also, just color on the year-over-year growth from pricing during WAVE, is was the booking surprisingly positive or which is the pricing side that was more than positive for you?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yes. So first on the WAVE side, I mean, the only market which we talked about had a bit more volatility to it has been the UK. Outside of that we've seen a lot of strength in 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've seen over the past three to four weeks is a good news story on both the volume and pricing.

Gregory Badishkanian -- Citigroup -- Analyst

Good. And then just China, I think you mentioned that bookings were up year-over-year for 2019. How do you think that market performs for you relative to your overall fleet? Is it can outperform in-line?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

It's going to outperform. This is Michael, Greg. Yeah. We're pleased with China. We've had many conversations over China over time. We've been in the market for 10 years and we continue our development. And as Jason mentioned, our 2018 performance was significantly improved from 2017 and 2019 is in a really good book position and we're feeling quite good about the dynamics there at the moment.

Gregory Badishkanian -- Citigroup -- Analyst

Good. All right. Thank you very much.

Jason Liberty -- Executive Vice President and Chief Financial Officer

You're welcome. Thanks.

Operator

Your next question comes from the line of David Beckel from Bernstein Research. Go ahead, please. Your line is open.

David Beckel -- Bernstein Research -- Analyst

Hey, thanks for the question. I'll take another stab at the additions of Silversea, CocoCay interminably, if I could. I believe based on your guidance, the math implies all three of those will contribute about $15 million of EBITDA. 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 if you may have alluded to before?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. So as it relates to the EBITDA, or the profitability of it we're 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 our CocoCay in 2020 and there'll 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 on their business.

David Beckel -- Bernstein Research -- Analyst

Great, thanks. And as a second question a bit higher level. Looks like you stand a reasonably good chance of hitting double-digit EPS this year, which would be a year ahead of schedule relative to 2020 Vision. So two quick questions, and please remind us, was the original guidance of double-digit EPA inclusive of a economic disturbance of a material sort? And the second, has the ROIC component of your Vision 2020 tracked according to your expectations thus far? Thanks.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Sure. So, first, on the 2020, we did say that we would reach double-digit growth. We didn't say exactly what that double-digit number would be. But as you commented, we -- the higher end of our guidance is $10 per share and we'll certainly work as hard as we can to do as well as we possibly can to reach high EPS growth.

The ROIC number in general is on track. Obviously, our investment in Silversea weighs on that a little bit, but our over -- our other investments have really outperformed, which is allowing us to see our ROIC continue to move north. So I think that's kind of how we see things to continue to evolve.

The one comment I would make just to put something into context, if you look at 2019, and the guide that we've given, if we had the same FX in fuel rates at this time last year, that number would actually be about $0.40 higher than what we're guiding today. And so, that is one factor that has changed for us. But you're trying to project what economic changes there might be going forward. That's not something that we do in our forecasting for the future.

David Beckel -- Bernstein Research -- Analyst

And was the original EPS target inclusive of economic disturbances?

Jason Liberty -- Executive Vice President and Chief Financial Officer

No. It was basically -- it was based on moderate yield growth, good cost control, and being measured in our capital investments.

David Beckel -- Bernstein Research -- Analyst

Got it. Thank you.

Operator

Your next question comes from the line of James Hardiman from Wedbush Securities. Go ahead, please. Your line is open.

James Hardiman -- Wedbush Securities -- Analyst

Hey, good morning. Thanks for taking my call. I wanted to circle back and maybe just get a little bit of a clarification on one of Steve's original questions. Obviously, the core yield guide to start the year is better than, at least I can remember. Jason, you sounded pretty positive and I think Richard has contributed to this as well on the like-for-like trend. I guess, my clarification is, is the like-for-like yield guidance once we obviously exclude Silversea and even the new hardware, is that better to start 2019 than it's been in previous years?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Sure. It is higher than what we have seen historically in the past on the like-for-like side. So if you look at just our -- the core, which we're calling that approximately 4%, more than half of that is coming from like-for-like growth, and the balance of that is coming from the new hardware.

James Hardiman -- Wedbush Securities -- Analyst

Got it. That's really helpful and really encouraging. And then just a housekeeping question from me, maybe save Carola some phone calls here. Can you give us the quarterly capacity numbers? And is there any way to give us the non-organic contribution stuff, the yield contributors, Silversea, CocoCay, Miami Port on a quarterly basis? Obviously, that's going to be a pretty big building block of how we build out our models. Is there any way to give us -- or at least directionally how to think about that over the course of the year?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Well, one, it is my job in life to make Carola's life easier. I want to make sure that she has a fruitful afternoon. So I'll leave her for more details. But certainly, as I said, most of our capacity growth for the year will take place in the first half of the year. And as I -- also as I commented, our yield or our cadence for our yield is pretty much the same within certain levels of moderation to the course of the year to consider.

James Hardiman -- Wedbush Securities -- Analyst

And that's on a total basis, it's a similar cadence, not on a organic or inorganic?

Jason Liberty -- Executive Vice President and Chief Financial Officer

That's exactly right. On a total basis, it's the same. On a combined basis -- on a gross basis, but also on the core, it's also has a similar cadence to it to the course of the year.

James Hardiman -- Wedbush Securities -- Analyst

Okay. And then just lastly, way too early question on 2020, but some of these non-organic contributors, I would assume that Silversea is going to be a wash in terms of yields and costs. I'm guessing that the Miami terminal will as well, but should we also assume some sort of a inflation from costs and also an addition to yields for Perfect Day given the timing in 2019?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Well, I mean, it is, as you said, it's early days to start thinking about 2020. But I would focus more on the Port in CocoCay and even with Silversea. Silversea is going to grow next year. There's going to be more volume coming out of the terminal and there's going to be more volume coming out a Perfect Day, all of which will have both yield and cost considerations to it in 2020.

James Hardiman -- Wedbush Securities -- Analyst

Got it. Very helpful. Good luck and (Multiple Speakers) guys.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Timothy Conder from Wells Fargo. Go ahead, please. Your line is open.

Timothy Conder -- Wells Fargo Securities -- Analyst

Thank you. First of all, congratulations to the whole team and crew on 2018. I did want to follow-up, drill in a little bit more here. And maybe James was alluding to on 2020 a little bit and your implications for the current state of bookings also out of Europe. So, it appears that Germany is OK, because you only called out a little volatility from the UK. But how are -- it's early obviously, but how are the bookings with the TUI JV out of Germany? And then, considering 2020 and some changes with ships coming in and out, that TUI JV fleet, how should we think about the TUI's JV contribution in 2019 and then 2020? Just to make sure that's become a pretty significant and very nice JV operation obviously.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Sure. So first, I was talking on the EU side, which also ties into your comment around Germany. First, on the UK piece, we really said that there's just been volatility. But that volatility has certainly stabilized. And again, the volatility typically happens around the news cycle in the UK.

Broader Europe has actually done quite well. Germany is doing well. And Germany 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 2019 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 pick up 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, but we've 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.

Timothy Conder -- Wells Fargo Securities -- Analyst

Okay. And then, Michael, China, Jason alluded to earlier that China was up in bookings, you responded to a previous question that you're -- 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, the -- 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?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

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 had mentioned earlier, we've seen a good improvement in 2018 over 2017 and we're seeing similar improvement now coming through into 2019. Of course, we've got the addition of our newest ship Spectrum of the Seas is 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. And, of course, overall there has been a industry capacity decrease of somewhere in the region of 15%, 20%. So, China is in good shape, even though there's 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 had mentioned earlier that we've been very pleased with the demand that we've seen coming through on the products that have course (ph) 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 product on Perfect Day. So, both of these really are quite positive.

Timothy Conder -- Wells Fargo Securities -- Analyst

Okay. And lastly, Jason, you had alluded to with Excalibur coming on and the trends that you were seeing there. If I remember right at an Analyst Day you talked about maybe an enhanced e-commerce engine being laid over the top of that in the latter half of 2019. Any additional color you can provide there?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. So, there's lots of elements and attributes that are being added to the Excalibur platform. One of that will be for us to be able to -- it will be easier for the customer as we are able to curate and have recommendation engines to allow our guests to more easily book things before they get onto the ship. And as we know in the past that if we can get the consumer to book ahead of the cruise, we also are able to get them to also spend when they're on the ship. So those capabilities will be coming online through the course of 2019, but I really -- I would expect more of a full year impacting us in 2020.

Timothy Conder -- Wells Fargo Securities -- Analyst

Okay, great. Thank you, gentlemen.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Sure.

Operator

Your next question comes from the line of Stephen Grambling from Goldman Sachs. Go ahead, please. Your line is open.

Stephen Grambling -- Goldman Sachs -- Analyst

Hey, thanks. I guess, two follow-ups. First, I guess, coming at the Perfect Day, terminal and Silversea cost question from a different angle. What percentage of the costs are one-time versus ongoing expenses? And then as you think about the ultimate ROI on Perfect Day, are there other opportunities or regions you've identified to develop something similar? Or is it still early that could further differentiate and strengthen the brand?

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. So, as it relates to the one-time, I think the only thing that I would call out because there's nothing really relating to CocoCay or Perfect Day that is one-time. As we announced many, many months ago when we bought Silversea, we announced Project Invictus, which was really to help modernize their ships. And so, they do have more -- they had more drydock activity in the fourth quarter of 2018 and, of course, if it's on a quarter lag that is an inflating our cost metric a little bit in the first quarter, which is why that's the highest cost quarter for us on a gross level.

I would say that on the Perfect Day side, just to quickly comment, we will -- there's obviously a major focus of ours, we want to get this thing launched, understand how the consumer takes to that, and then consider whether or not there are future opportunities for us to consider.

Stephen Grambling -- Goldman Sachs -- Analyst

Nice, helpful. And one other follow-up on China. Can you just give us any update on the efforts to kind of alter the distribution model there? And perhaps whether the incremental demand for non-China itineraries can potentially play into that?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

Yeah. Stephen, it's Michael. Yeah, we've been on the journey to develop distribution for the past few years and we feel pretty pleased with the journey that we're on and the progress that we've been making. And I think that's been part of the success that we are having now in China is the growth of the distribution system. So we're feeling pretty good about that.

And sorry, the second part of your question was?

Stephen Grambling -- Goldman Sachs -- Analyst

It was just -- I guess, it plays into it, but whether the non-China itineraries can potentially accelerate that if you're just seeing greater demand there or maybe earlier booking?

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

Yeah. I mean, there was a few elements to our strategy in China, one was the distribution, the other one was adding longer itineraries for the China market itself, ex-China, which had proven to be quite successful. And then, of course, the third element, you pointed out, is the focus on outbound, it is the world's largest outbound travel market and things are changing with regard to visa restrictions and group travel and what have you. And we're starting to see an improvement in terms of the number of Chinese guests who are going through our products in Alaska and the Mediterranean and Europe and we think that's an opportunity, particularly as the brand becomes more and more well-known in the China market and as we establish wider, broader, deeper, distribution then it becomes a really good opportunity for us in terms of that outbound growth.

Stephen Grambling -- Goldman Sachs -- Analyst

Great. Thank you.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Operator, we have time for one more question.

Operator

Thank you. And your last question comes from the line of Brandt Montour from J.P. Morgan. Go ahead, please. Your line is open.

Brandt Montour -- J.P. Morgan -- Analyst

Good morning, everyone. Thanks for you being here. I was just hoping you could maybe unpack your fuel guidance a little bit more and help us understand what you're assuming in terms of at the pump pricing if you're giving full credit for the backwardation of the curve or if you're -- what you're seeing for the MGO spread, I think that would be helpful? Thanks.

Jason Liberty -- Executive Vice President and Chief Financial Officer

Yeah. Sure. So, as it relates to our guidance on the fuel side, obviously, we're about 58% hedged for the year. And then when you look, at it relates to fuel price, we forecast based on what fuel prices are today and we don't speculate or pivot off of the forward curve.

Great.

Brandt Montour -- J.P. Morgan -- Analyst

And that includes MGO spread as well that would be just today?

Jason Liberty -- Executive Vice President and Chief Financial Officer

That's exactly right. That's right.

Brandt Montour -- J.P. Morgan -- Analyst

Okay. Thanks very much.

Jason Liberty -- Executive Vice President and Chief Financial Officer

You're welcome. Thanks, Brandt. Thank you for your assistance, James, with the call today, and we thank you all for your participation and interest in the Company. Carola will be available for any follow-up you might have, and I wish you and we wish you all a very great day.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 62 minutes

Call participants:

Jason Liberty -- Executive Vice President and Chief Financial Officer

Richard D. Fain -- Chairman and Chief Executive Officer

Robin Farley -- UBS Investment Bank -- Analyst

Michael W. Bayley -- President and Chief Executive Officer, Royal Caribbean International

Steven Wieczynski -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Harry Curtis -- Instinet, LLC -- Analyst

Jared Shojaian -- Wolfe Research -- Analyst

Felicia Hendrix -- Barclays -- Analyst

Gregory Badishkanian -- Citigroup -- Analyst

David Beckel -- Bernstein Research -- Analyst

James Hardiman -- Wedbush Securities -- Analyst

Timothy Conder -- Wells Fargo Securities -- Analyst

Stephen Grambling -- Goldman Sachs -- Analyst

Brandt Montour -- J.P. Morgan -- Analyst

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