Carnival Corp. (CCL) Q4 2023 Earnings Call Transcript

Carnival Corp. (CCL -0.66%)
Q4 2023 Earnings Call
Dec 21, 2023, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Beth Roberts

Good morning. This is Beth Roberts, SVP, investor relations. Welcome to our fourth quarter 2023 earnings conference call. I'm joined today by our CEO, Josh Weinstein; our chief financial officer, David Bernstein; and our chair, Micky Arison.

Before we begin, please note that some of our remarks on this call will be forward-looking. Therefore, I will refer you to the cautionary statement in today's press release. All references to ticket prices, net per diem, net yields, and adjusted cruise cost without fuel will be in constant currency unless otherwise stated. References to per diems and yields will be on a net basis.

Our comments may also reference cruise costs without fuel, EBITDA, net income, net loss, earnings per share, free cash flow, and ROIC, all of which will be on an adjusted basis unless otherwise stated. All these references are non-GAAP financial measures defined in our earnings press release. A reconciliation to the most directly comparable U.S. GAAP financial measure and other associated disclosures are also contained in our earnings press release and in our investor presentation.

Please visit our corporate website, where our earnings press release and investor presentation can be found. With that, I'd like to turn the call over to Josh.

Josh Weinstein -- Chief Executive Officer

Thank you, Beth. It's safe to say, we ended the year on a high note and closed another quarter with record revenues, record booking levels, and record customer deposits. In fact, we consistently set records in all four quarters this past year. We also achieved per diems, EBITDA, and net income for the fourth quarter that all exceeded the high end of our September guidance range, with cruise costs, ex fuel, in line with expectations.

Fourth quarter yields continued on a positive trajectory, significantly higher than a very strong 2019 and even higher than we had anticipated, and enabled us to overcome four years of high cost inflation to deliver per unit EBITDA that eclipsed 2019, holding fuel and currency constant. It was encouraging to see both North American and European brand occupancy levels exceed 101% in the fourth quarter, with per diems for our North American brands up double digits over 2019 and our European brands just shy of a double-digit increase. We delivered per diem improvements of more than 7 points for the full year, with even stronger acceleration in Q4 while closing the double-digit occupancy gap at the start of the year to reach historical levels for the second half of 2023. An absolute spending on board was consistent across all four quarters as we drove improvements in ticket prices.

We delivered 85 million more dollars to the bottom line in the fourth quarter than forecasted, which pushed us through to positive adjusted income for the year. Strong EBITDA and cash from operations also propelled us on our journey to reduce the debt load necessitated during the pause in operations. We've made debt payments of $6 billion this year alone, and we still have well over $5 billion of liquidity on top of strong and improving cash flow, which will contribute to further debt reduction over time. All of this leaves us firmly placed on our path back to achieve investment-grade leverage metrics by 2026.

And most importantly, our brands delivered happiness to over 12 million guests this year, laying the foundation upon which all of our SEA Change targets are built. Turning to bookings. We reached an all-time high in booking volumes for the two weeks around Black Friday and Cyber Monday, and ended the year in the best-booked position we have ever seen on both price and occupancy, setting 2024 off to an amazing start. We now have nearly two-thirds of the business on the books for 2024 and at considerably higher prices.

And during the fourth quarter, we essentially maintained the significant occupancy advantage we had built for 2024 going into the quarter while improving the year-over-year price position of our booked business even further. At this point, much of the first half is already behind us. With approximately 85% of the business on the books, we've essentially closed the double-digit occupancy gap to historical levels on higher capacity and at higher prices. For our peak summer period, all major products are better booked at higher prices, benefiting from an improving trend in both occupancy and price during the fourth quarter.

Our yield management strategy to base load bookings has clearly set us up for another record year. And again, we have seen no signs of our business slowing. The booked position for our North American brands remains as far out as we have ever seen and well ahead of last year at pricing that is considerably higher. Our European brands just delivered record fourth quarter booking volumes at considerably higher prices and with a booking window now fully back to historical norms.

As expected, our European brands are poised to become an even greater contributor to our 2024 operating improvement. At the same time, we are continuing to pull forward onboard revenue through bundling and pre-cruise sales. This strategy, coupled with even more features on board our newer ships for our guests to enjoy, positions us well for further onboard revenue growth next year. All told, we expect occupancy for the full year to return to historical levels on 5% higher capacity while delivering nicely higher per diems, building on this year's record results.

In 2023, we captured over 3.5 million new-to-cruise guests and remain well-positioned to continue to take share from land-based alternatives. In other words, we are gaining momentum in our ability to close the unwarranted value gap to land-based alternatives. And to aid in that effort, we can further champion the fact that while many land-based alternatives have pulled back on service levels, we still deliver incredible service to our guests, thanks to our amazing crew. This pairs exceedingly well with the expansive amount of guest-pleasing amenities offered on board our newer fleet.

In fact, while almost four years have passed since the pause in our operations, our fleet actually came out of the pod a year younger through our fleet optimization efforts. This past year alone, we benefited from three fantastic new ships, including Carnival Celebration and P&O Cruises' Arvia, both of which are flagships for their respective brands, yet leverage our scale as the seventh and eighth vessels in our popular and exceptionally efficient series of XL flagships. And we welcomed Seabourn Pursuit, our second expedition ship. Seabourn has truly raised the bar for expedition cruising in extreme luxury.

And while not technically new, Carnival Cruise Line also welcomed Carnival Venezia into its fun Italian-style platform via the transfer from Costa, and it has been going gangbusters. It's the biggest example yet of how we leverage our scale and will be doubling down when we bring over her sister ship, Carnival Firenze in 2024. Looking forward, this year is set to match the excitement level with the introduction of Carnival Jubilee, a new icon for Carnival Cruise Line and which, no doubt, will be the pride of Texas as she has her inaugural home in Galveston. The innovative Sun Princess, the first of its class and a real game changer for Princess.

And Queen Anne, a new flagship for Cunard and its first new ship in 14 years. With all of these additions, roughly 30% of our capacity will be newly delivered ships. We also made meaningful headway on other strategic asset projects. We began construction on Celebration Key, which will be the largest and closest exclusive destination in our destination portfolio and a real game changer for Carnival Cruise Line.

We'll bring 18 Carnival ships departing from nine home ports to Celebration Key. And while we are still about a year and a half from go live, we are already amping up the awareness and excitement around this fantastic destination. We've also started the process for a significant upsize in guest traffic at Half Moon Cay, our exclusive and beautiful pristine island destination in the Bahamas, with the creation of a pier-side berth that can accommodate even our largest vessels. We've begun work with our Grand Bahama Shipyard partners on the construction of two floating dry docks, one of which will have the largest lifting capacity in the world.

This will result in significant benefit in the future as we reduce travel time, preserve revenue days, and at the same time, reduce our fuel consumption. As you know, we've also been investing more in advertising over the last 18 months, and it has definitely paid off with elevated awareness and consideration for our brands and record booking levels and revenue results. In fiscal 2023, our web visits were up over 35%, our paid search was up roughly 50%, and our natural search was up almost 75%. All many, many multiples of our 5% capacity growth.

In the fourth quarter, we carried more new-to-cruise and more new-to-brand guests than we did in the fourth quarter of 2019. Given our success on generating demand, at this point in time, we plan to maintain a similar level of advertising on a unit basis in 2024 compared to 2023, optimizing around each brand. This will help us continue to build demand and bookings well outside of the current year. We're working aggressively to keep our strong momentum going through wave season and beyond.

Just to list a few examples, Costa recently launched a spectacular new campaign in its core markets, focusing on moments, where guests are left speechless; Holland America launched a sequel to its highly successful Time of Your Life campaign; and AIDA just kicked off its new campaign, Experience Yourself Differently, in conjunction with the holiday season. Carnival will launch a new marketing campaign highlighting Celebration Key in times of waves. P&O Cruises' new campaign, Holiday Like Never Before, launches Christmas Day in the U.K. And Cunard has planned a welcome fit for a queen to introduce Queen Anne early next year, which is sure to capture huge fanfare.

We've been talking about upping our game across the commercial space, and we've made good progress. Of course, we're not done. And as you'd expect, we never will be as there is always room to improve. There's much more to come as we roll out advancements to our yield management tools and lead generation techniques, continue to invest in sales and sales support, and build on already strong relationships with our trade partners.

Turning to costs. As we previously indicated, unit cruise costs, ex fuel, for 2024 are expected to be higher than inflation due to the impact of closing the occupancy gap and the higher volume of dry dock days. David will walk you through in more detail. With that said, we have been working aggressively to mitigate inflation through our cost optimization initiatives, including leveraging our scale.

In some cases, we're investing today for future benefits. Just to cite a couple of examples of initiatives underway, we're essentially complete with the rollout of Starlink across the fleet. This will produce more than a 20% reduction in cost per megabit in 2024 and significantly increase our bandwidth pipeline, resulting in both better guest experience and higher onboard revenues. A clear win-win.

And with our new vendor-neutral platform, we are positioned to quickly capture cost savings in future years. We've also launched our Maritime Asset Strategy Transformation, or what we refer to internally as MAST. MAST is a centralized system developed to optimize the management of equipment and machinery across all brands and all of our ships. MAST will allow us to leverage spare parts more effectively across the entire fleet and optimize our maintenance schedules and practices, all of which will strengthen our efficiency and reduce unplanned maintenance over time.

While we won't see the P&L benefits for MAST this year as we ramp up its implementation in 2024, we expect a multiyear benefit well in excess of $100 million that really begins to ramp up in 2026. All the efforts we're making to drive revenue and manage costs are expected to lead to a 4-point margin improvement in 2024. We're guiding of record EBITDA of over $5.5 billion, which is 30% higher in 2023. Thanks to a strong second half of 2023, we're already tracking ahead of our plan to achieve SEA Change, our three-year financial targets calling for the highest ROIC and EBITDA per ALBD in nearly two decades.

And our 2024 guidance delivers another step change toward these deliverables. EBITDA per berth day is expected to be up by more than 25% over our target starting point, hence more than halfway to the 50% increase expected in our SEA Change targets. Today's guidance would also deliver 9% ROIC, a 4-point increase from the starting point of our target. This leaves just 1.5 point annual increases in 2025 and 2026 to hit our 12% target.

Not surprisingly, our brand dedicated to a single market, Carnival, AIDA, and P&O Cruises in the U.K. are again leading the charge with the highest ROIC levels in the company. And with regard to our greenhouse gas target included in our 2026 SEA Change program, our GHG intensity in 2024 is expected to be just shy of the 20% reduction from 2019 we're targeting. It's worth noting, this was a 2030 goal.

We had already pulled forward by four years. We have been and continue to work aggressively to reduce our environmental footprint and fuel costs at the same time. This deep commitment has not only resulted in industry-leading fuel efficiency, it has also resulted in lower absolute GHG emissions. Our absolute emissions are over 10% lower than the 2011 peak, and that's despite capacity growth of 30% since then.

Last year, we also exceeded our industry-leading shore power capability goal. We are ahead of the curve and now have twice as many ships capable of shore power than there are ports around the world available to plug into. Again, I credit all of these important achievements to our people, ship and shore. Collectively, they continue to outperform, allowing us to make good headway on our SEA Change targets.

We're poised for another step change in operating improvement this year with nearly two-thirds of the business on the books at considerably higher prices, ongoing momentum from improvements across the commercial space, the amazing vacation experiences we deliver day in, day out at way too good of a relative value to land-based alternatives, and an even greater experienced staff, all while growing onboard revenues and managing costs. All of this combined sets us up well to deliver another year of record revenues and record EBITDA. Our cash flow strength, coupled with excess liquidity, the return of credit card reserves in a few weeks, and the lowest order book in decades, will allow us to continue to actively manage down debt and aggressively reduce interest expense over time. It will also propel us on our path to deleveraging, investment-grade credit ratings, and higher ROIC.

I remain confident in our continued execution with an unparalleled portfolio of best-in-class brands, an amazing fleet that just keeps getting better and better, and our greatest assets, our people. This has been a truly remarkable year, and we've come a long way in an incredibly short amount of time. I would like to thank our team members, ship and shore, the best in all of travel and leisure, for delivering unforgettable happiness to over 12 million guests this year by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit, and life we touch. And thank you for the strong support from our travel agent partners, as well as our loyal guests, destination partners, investors, and our many other stakeholders.

With that, I'll turn the call over to David.

David Bernstein -- Chief Financial Officer

Thank you, Josh. I'll start today with a summary of our 2023 fourth quarter and full year results. Next, I will provide a recap of our refinancing and deleveraging efforts during 2023 and finish up with some color on our 2024 full year and first quarter December guidance. Our fourth quarter bottom line exceeded the better end of our guidance range as we outperformed our September guidance.

The $85 million improvement was driven by favorability in revenue from higher ticket prices as net per diems were up over 10%, 3 points better than the midpoint of our September guidance range. In fact, fourth quarter revenues of 5.4 billion were a fourth quarter record, and net yields were up nearly 8% as compared to 2019. A great way to close out the year and another indication that we do not see a slowdown in our consumers. For the full year, thanks to the tremendous efforts of our team members, ship and shore, we closed the books on 2023 with positive adjusted net income.

That is a far cry from our March guidance as we delivered over 550 million more dollars to the bottom line, which was partially offset by a drag from fuel price and currency exchange rates of over $100 million. The improvement was driven by delivering a 7.5% increase in net revenue per diem versus 2019, which was over double the 3.5% midpoint of our March guidance, while closing the double-digit occupancy gap at the start of the year to reach historical occupancy levels. Absolute spending per diems on board were consistent across all four quarters as we drove improvements in ticket prices on both sides of the Atlantic and ended the year with net yields up nearly 1% over 2019. Next, I will provide a recap of our refinancing and deleveraging efforts during 2023.

As Josh indicated, our full year 2023 strong EBITDA of 4.2 billion and strong cash from operations of 4.3 billion propelled us on our journey to pay down debt and reduce the debt burden necessitated by the pause in guest cruise operations. During 2023, we made debt payments of $6 billion and ended the year with just over $30 billion of debt, which is 3 billion better than we forecasted just nine months ago during our March conference call and almost 5 billion of the first quarter peak, transferring enterprise value from debt holders to shareholders. During 2023, we proactively addressed our debt profile as we successfully started our refinancing and deleveraging program. We accelerated our debt repayment efforts and aggressively managed down our interest expense.

In 2023, we effectively stretched out the 2025 maturity on favorable terms by replacing it with a 1.3 billion Term Loan B facility through 2027 and a $500 million offering of senior secured notes through 2029. This refinancing, along with our optimism about our future and the return of customer deposit reserves, gave us the confidence to accelerate our debt repayment by calling 1.2 billion of our highest-cost debt. In addition, we opportunistically prepaid 2.8 billion of additional debt for a total of 4 billion of debt prepayments, including the 1.2 billion of debt cost. Our credit card processes returned to us 800 million of credit card reserves, and we now expect an additional 800 million to be returned this current quarter, representing substantially all of the remaining credit card reserves at year-end.

We took actions in both 2022 and early in 2023 to increase the fixed rate percentage of our debt portfolio to over 80%, up significantly from our 58% fixed levels at the end of 2021, which provided us protection from rising interest rates. Our overall average interest rate is just over 5.5%. All these actions to address our debt profile, alongside our improved business performance, drove 200 million of interest savings compared to our March guidance. Our maturity towers have been well managed through 2026 with just 2.1 billion of debt maturities next year, 2.2 billion in 2025, and 3.2 billion in 2026.

And looking forward, we will continue to evaluate refinancing opportunities and opportunistically prepay additional debt. So, in 2024, we will be replacing higher-cost fixed-rate debt with lower-cost export credit financing as we take delivery of ships during 2024. Our leverage metrics will also continue to improve throughout 2024 as our EBITDA continues to grow. Now, turning to our 2024 full year December guidance.

We are forecasting a capacity increase of about 5.5% compared to 2023. We are expecting to deliver strong 2024 net yield improvement, with our guidance forecasting an increase of approximately 8.5% for the full year 2024 when compared to 2023. And that is on top of our improved 2023 results, where we delivered a 7.5% increase in net revenue per diem versus 2019. The strong improvement in 2024 net yields is a result of the increase in all the component parts: higher ticket prices, higher onboard spending, and higher occupancy, with all three components improving on both sides of the Atlantic.

We are well-positioned to drive 2024 ticket pricing higher with significantly less inventory remaining for sale at the same time last year despite a capacity increase of over 5%. Occupancy for the full year 2024 is on track to return to historical levels. Keep in mind, 2019 was a high watermark for occupancy. For 2024, we forecast to be well within our historical occupancy range as we balance price and volume to optimize total revenues and achieve record yields.

Now, turning to costs. Cruise costs without fuel per available lower berth day, or ALBD, is currently expected to be up approximately 4.5% for 2024 versus 2023. Broadly speaking, there are four main drivers of the cost change. First, our forecast is for decelerating inflation, but nonetheless inflation, with an average 3.5% increase across all our cost categories globally.

Second, with occupancy returning to historical levels, the impact on costs should be 1.5 percentage points to 2 percentage points higher in 2024 as compared to 2023. Third, in 2024, we are expecting 586 dry dock days, an increase of 14% versus 2023, which is expected to impact our overall year-over-year cost comparison by about three-quarters of a point. And fourth, countering these headwinds, we expect these cost increases will be somewhat mitigated by a couple of points given economies of scale from our capacity growth, which is enhanced by taking delivery of larger, more efficient ships, along with various other cost optimization initiatives. Fuel consumption per ALBD is expected to decrease another 4%, and that is on top of the 15.5% reduction achieved from 2019 to 2023.

The net impact of fuel price and currency is expected to favorably impact 2024 by $90 million, with lower fuel prices favorable by 94 million, while the change in currency exchange rates slightly goes the other way. And finally, a few things to note about the outsized increases in the first quarter 2024. The higher net yield guidance for first quarter 2024 of 16.5%, versus the full year 8.5%, is driven by the larger improvement in first quarter occupancy. Let's not forget that we did not reach historical occupancy levels until the second half of 2023, so there is much more occupancy-driven net yield opportunity in the first half.

On the cost side, the higher cruise costs without fuel per available lower berth day guidance for the first quarter of 2024 of 9.5% is driven by four main factors. First, the largest improvement in occupancy will occur in the first quarter. And while it drives greater yield increases in the first quarter, it also drives greater cost increases, which means a total of 3-point to 4-point cost drag in the quarter. Second, while dry dock costs impact our full year guidance, the seasonality of dry dock costs in the first quarter of 2024 as compared to the prior year drives the cost increase of about 1.5 points in this quarter.

Third, the seasonality of advertising expense and a variety of other expenses between the quarters differs in 2024 as compared to 2023, which will put a total cost increase of approximately 3 points into this quarter. Advertising alone is one of the 3 points. And fourth, like the full year inflation mitigated by economies of scale from our capacity growth, along with various other cost optimization initiatives, given the higher first quarter cruise costs without fuel per available lower berth day, the implied guidance for the cost in the second to the fourth quarter is approximately 3%. In summary, putting all these factors together, our net income guidance for the full year 2024 is approximately 1.2 billion, with EBITDA forecasted at 5.6 billion, a significant improvement from 2023.

For those of you who are modeling EPS, let's not forget that when you calculate diluted EPS, you need to add back to 94 million of interest expense related to the company's convertible notes. Our improved financial results and our successful refinancing and deleveraging efforts in 2023, along with our 2024 December guidance, leaves us firmly placed on our path to achieve our 2026 SEA Change goals, moving us further down the road to rebuilding our financial fortress and delivering long-term shareholder value. And now, operator, let's open up the call for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Steve Wieczynski with Stifel. Please proceed.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Yeah. Hey, guys. Good morning and happy holidays to all of you. So, Josh or David, you know, if we think about the yield guidance, you know, for the year, just based on the fact that your occupancy should return to, you know, somewhat normal levels, and then pricing has momentum at this point, it seems to be, you know, pretty strong or healthy across the majority of your geographies.

You know, it seems like that plus 8.5% yield guidance might end up being, you know, somewhat conservative when we have this call, you know, a year from now. So, you know, I guess the question is can you give us a little color about the -- you know, more of the makeup of the -- you know, of your yield forecast? And it seems like, you know, you might be taking a somewhat conservative view around onboard trends and then potentially, you know, underestimating the opportunity around, you know, taking close and pricing. Thanks.

Josh Weinstein -- Chief Executive Officer

Hi, Steve. Happy holidays to you, too. So, I hope you're right. I look forward to the call in a year.

Look, we've given our good faith estimate on how we're seeing the world right now. We come in with a good amount of visibility because of how well-booked we are. And as you said, we have seen accelerating momentum in the volume and the price. So, we're very pleased with the trajectory that we've been seeing.

Obviously, this is also before wave, and we do have a little bit of a disadvantage of doing this in December versus, you know, end of January, into February. So, you know, all I can tell you is we've baked in what we see, and we always want to outperform. I mean, obviously, that's a given. So, I think the best thing I can tell you is we'll talk in March with wave under our belt.

Having said that, you know, wave hasn't ended since last year, so we'll continue to ride it as long as we can.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Let me ask that in a different way then, Josh. So, if we think about what you guys are embedding in terms of onboard, you know, is it fair to assume you are being pretty conservative with the way onboard should shake out in '24? Basically, meaning, you know, you potentially could see, you know, a little bit of a slowdown in onboard or, you know, are you still, guys, kind of assuming that onboard remains as robust as it has been?

Josh Weinstein -- Chief Executive Officer

You know, we're coming off a great performance when it comes to onboard, and we expect our onboard per diems to be increasing in 2024 versus 2023. You know, brands are doing a really good job of pulling forward more spend, providing differentiated experiences, so we absolutely expect an increase in '24 versus '23.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK. Gotcha. Then real quick, one more question if I could. David, in terms of the cost, you gave some pretty good color around, you know, the impact to the -- you know, everything that's going into the first quarter and why it's so high.

You know, as we think about the rest of the year, the cadence of costs, I think you said, if we think about the third -- the second quarter through the fourth quarter, those should all be, you know, around 3%. I just want to make sure I heard that right. And if there is anything, you know, in 2Q through 4Q that we should be thinking about that might, you know, move one of those quarters one way or the other?

David Bernstein -- Chief Financial Officer

Yeah. No. So, I was not trying to give individual guidance for each quarter. What I was trying to do is say that the three quarters collectively together would average 3%.

We will see some, you know, year-over-year differences versus 2023. A great example of that is that the dry dock days will be down in second quarter, but they'll be up in fourth. So, there will be differences. There's also advertising seasonalization differences and other things.

So, I was not trying to say 3% every quarter, just 3% on average for the three.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK. That is great. Thank you very much, guys. Happy holidays.

Appreciate it and great quarter.

Josh Weinstein -- Chief Executive Officer

Thank you very much. Take care, Steve.

Operator

Our next question comes from Brandt Montour with Barclays. Please proceed.

Brandt Montour -- Barclays -- Analyst

Great. Thanks, everyone, and congratulations on the results this morning. So, Josh, you gave us an update on the SEA Change long-term targets and the drastic improvement toward that target and -- that you've made so far in '23 and then '24 expected. And I guess, you know, fuel has been a nice tailwind.

If you take fuel out and maybe just focus on your yield growth target within '24 guidance, is that in line with your internal expectations for that three-year ramp, or how do you think about it?

Josh Weinstein -- Chief Executive Officer

Yeah. I think it's fair to say that, you know, when we talked about it in June for the first time and we laid out, you know, what will it take, we talked about the fact that, excuse me, getting back to, excuse me, historical occupancy, we expect pretty much all of that in '24 versus 20 -- where we were in '23. And that's -- you know, as far as we can tell, that's exactly how it's going to play out. And on top of that, we predict pricing -- we estimate pricing to be up low to mid-single digits every year: '24, '25, '26.

And so, you know, we feel like we are -- we entered the year a little bit ahead given how we ended the second half of 2023, and we'll keep pushing forward.

Brandt Montour -- Barclays -- Analyst

OK. Great. Thanks for that. And then you said you were two-thirds booked for '24.

That struck me as incredibly impressive. I mean, if you can give us a sense of what that would have been in prior years? But also, the crux of the question is, did that base loading strategy, do you think that impacted your pricing meaningfully versus what it would have been if you had just kept this sort of historical booking curve? And then as you go into January and wave season, you know, you've never been this booked, so has that changed your strategy with pricing as you move through wave?

Josh Weinstein -- Chief Executive Officer

So, this is playing out as we would expect it to play out. By pulling forward all the volume, it gives us better control over our pricing environment and our ability to keep pricing at an elevated level. And so, it's literally playing out as it should. This is -- we are 10 points higher than we were, you know, when we entered the Q1 of '24, 10 points higher year over year.

It's higher than 2019 as well. But --

Unknown speaker

With a very long booking window.

Josh Weinstein -- Chief Executive Officer

Which is a very long normalized booking window. And it's important that we do that, right? I mean, let's keep in mind, you know, being 10 points above last year is good progress, but we expect to end our occupancy significantly higher than last year. So, that's all feeding into the strategy, and pricing is playing along. As I tried to say in my notes, I'm not sure how clear it was, you know, when we entered the fourth quarter of this year, we were about 10 points higher than prior year in the occupancy position and prices were higher.

As we've made our way through the quarter, we've managed to pretty much keep that occupancy advantage, and prices on everything that's booked is now considerably higher. So, it is working the way we anticipated.

Brandt Montour -- Barclays -- Analyst

Crystal clear. Thanks, everyone.

Josh Weinstein -- Chief Executive Officer

Excellent. Thanks, Brandt.

Operator

Our next question comes from James Hardiman with Citi. Please proceed.

James Hardiman -- Citi -- Analyst

Hey. Good morning, guys. Thanks for taking my question. So, I'm going to ask I think Steve's question in a slightly different way.

There was a lot of conjecture that you would only give first quarter guidance, similar to last year. Obviously, your peers are at a bit of an advantage because they get that first month of wave as they try to assess what the demand environment looks like. Obviously, you gave us the full year guide anyway. As we interpret that guide then, you know, take us through that thought process and whether or not that plays into sort of your level of conservatism being effectively ahead of wave.

Josh Weinstein -- Chief Executive Officer

You know, well, we're -- we are, you know, effectively back to normal. This is what we used to do before the last few years, and I think it was quite important that we get back into this cadence. Now, good news, we are the highest booked we've ever been, so we do have more visibility than even we had before 2020. So, I think that's setting us up well to be able to be in a pretty good position to give you this preliminary guidance for 2024.

Obviously, we have -- I have high expectations in my brands and what I expect them to achieve, including during wave. And you got to remember, the whole focus of wave this year, we have the benefit of being able to focus on different things. Last year in wave, a lot of what we were trying to accomplish and our brands were trying to accomplish was just filling the ships because we were in such a different position from an occupancy perspective. This time, we actually get to go through wave and really be more strategic in how we are trying to advance the needle, not just on the short term, but on the longer term.

So, I think it sets us up well. And I keep asking David to change the fiscal year-end and like can we please start on January 1st like everybody else? But apparently, that's a lot of work, so we're not going to do that.

James Hardiman -- Citi -- Analyst

Got it. And then there was a comment in the prepared remarks about not only are you seeing better new-to-cruise numbers, but better new-to-brand numbers relative to 2019. Josh, you talked about having confidence in your brands, but that latter point seems like a big one, right? So much of the conversation just seems to be about the cruise industry, but maybe talk to what you think might be a Carnival-specific story as -- in terms of improving consideration among people that are already into cruising?

Josh Weinstein -- Chief Executive Officer

Yeah. I think our brands are doing phenomenally in really understanding who that target audience is and how to speak to them with their creative marketing. And then on the performance side, just making sure that that consideration and awareness gets converted into bookings. So, you know, we gave a -- you know, I said in my prepared remarks, we've got several campaigns that are either started or about to start, and we've got a few examples.

You can click through on the prepared materials, the slides that have been put up. They're doing a great job at captivating the market and I think getting cut through not just with new-to-brand and new-to-cruise on the value that we have. And it's -- unfortunately for us, as much as we've improved on the pricing front in 2023, it's still a big gap versus land. So, all of those things are wind at our backs, and I expect more of that over time.

James Hardiman -- Citi -- Analyst

Got it. Thanks, guys, and good luck during wave.

Josh Weinstein -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Jaime Katz with Morningstar. Please proceed.

Jaime Katz -- Morningstar -- Analyst

Good morning. Thank you. I'm hoping you can talk a little bit about changes to the sourcing strategy. I know it shifted back a little bit more to North American cruisers in the last couple of years.

But given the strength in the European market or the fact that they might be closing the gap, should we expect that to move back to a normal mix?

Josh Weinstein -- Chief Executive Officer

Well, good morning, Jaime. So, I think we should, you know, kind of take a step back and think about our portfolio and how we operate. You know, we've got dedicated brands to European markets, you know, with P&O Cruises in the U.K. and AIDA in Germany, Costa, not just for Italy, but really Italy, Spain, and France.

And all of those are either the biggest in their market or the second biggest, in the case of Costa, across the Mediterranean. And we didn't deviate from our strategy when it comes to our dedicated market brands. And so, they have continued to view those markets as the right thing to be in the long term, and we absolutely support that. And we're starting to see the strength of that really come through as we've started talking about the last few quarters.

With respect to our North American brands, you know, Carnival has been and will continue to be America's cruise line, and they're knocking the cover off the ball. And there hasn't been that much dramatic change when it comes to sourcing for Holland America and Princess other than the fact that for Princess, they had so much sourcing that was really geared toward markets that have been slow to open in Asia, etc. So, we've repositioned. We've done a bit of that.

But I think we are very well-positioned to take the strength of the European consumer and the U.K. consumer and continue to ride that into 2024.

Jaime Katz -- Morningstar -- Analyst

OK. And then there was a lot of positive commentary obviously on this call, so I'm curious if there's anything left out there that concerns you that you would like to share with the audience. Thanks.

Josh Weinstein -- Chief Executive Officer

No. Great question. No. Thank you.

Jaime Katz -- Morningstar -- Analyst

OK. You're welcome. Thanks. Happy holidays.

Josh Weinstein -- Chief Executive Officer

You, too.

Operator

Our next question comes from Patrick Scholes with Truist. Please proceed.

Patrick Scholes -- Truist Securities -- Analyst

Hey. Good morning, everyone.

Josh Weinstein -- Chief Executive Officer

Good morning, Patrick.

Patrick Scholes -- Truist Securities -- Analyst

Good morning. Josh, I am not going to ask you if you are planning on hedging fuel this time, but I do have another question. Yeah.

Josh Weinstein -- Chief Executive Officer

Thank you, Patrick.

Patrick Scholes -- Truist Securities -- Analyst

Sometimes you should listen to us, sometimes not, but here we are. I want to hear from you, you know, what trends of late, you know, especially around Black Friday, Cyber Monday, you've seen with new-to-cruise. You know, is that becoming a larger part of the booking mix? And, you know, if so, you know, what would be the impact on your margins? I imagine new-to-cruise typically, you know, calls the 800 number, books direct, which probably saves you travel agency commissions. You know, just talk about those trends and the potential impact on, you know, revenues and costs.

Thank you.

Josh Weinstein -- Chief Executive Officer

Thank you. So, candidly, I don't have -- literally for the period that you're referencing, the Cyber Monday and Black Friday, I don't have a breakdown of new-to-cruise versus new-to-brand versus brand loyalists. I do have the fourth quarter, obviously, which includes some of that, where our new-to-cruise is obviously up significantly year over year, 51%. And so, you know, that is part of the strategy, right, taking -- oh that was sale, pardon me.

I'm sorry, that was sale. But taking a greater share of folks who have never cruised before is part of the strategy to increase overall demand, get them in our pipeline and allow us to raise pricing over time for, frankly, everybody. With respect to what's the most cost-efficient, obviously, coming direct on the web is always going to be the most cost-effective. I wouldn't make a categorization, though, that new-to-cruise comes in a particular way because it really depends on the characteristic of the new-to-cruise guests themselves, what brand it is, what's the itinerary length, you know, etc.

Now, clearly, a lot of new-to-cruise will over-index on the shorter cruises because they're trying it out for the first time, and that lends itself to maybe also a younger crowd, which is more comfortable, just playing around on the net and doing things direct. But I mean, frankly speaking, historically, and I expect this to continue, our trade partners are absolutely critical in driving new-to-cruise to us, and we've relied on them for decades to do that, and we will rely on them for decades more. And they have done a great job of really catching up to where we've been in the curve, and year over year, they're showing great strength as well.

Patrick Scholes -- Truist Securities -- Analyst

OK. Thank you very much.

Josh Weinstein -- Chief Executive Officer

Thanks, Patrick.

Operator

Our next question comes from Robin Farley with UBS. Please proceed.

Robin Farley -- UBS -- Analyst

Great. Thank you. I wanted to circle back to your yield guidance, and just looking at the recovery in occupancy to previous levels being, you know, maybe 600 basis points to 700 basis points kind of implies that your per diem guidance is maybe less than 2% growth. So, I just -- I don't know if I'm doing the math wrong there.

If there's anything to clarify. And then also, you've talked about the price on the books for next year are being considerably higher, but your yield guidance for the year, it's just nicely higher, which I think in the David Bernstein glossary is like a -- would be a deceleration in yield. So, I'm just wondering --

Josh Weinstein -- Chief Executive Officer

I'm laughing at the glossary. Yeah, keep going, Robin.

Robin Farley -- UBS -- Analyst

Well, if I remember -- if I'm interpreting the glossary correctly, I think that implies a sort of a deceleration in the price there. So, just -- is that just because the onboard growth rate while up is lower and so that brings like considerably a higher price to just nicely higher yield, or maybe my glossary definition is wrong, but maybe you could help us with that and with the math on the per diem to begin with. Thanks.

Josh Weinstein -- Chief Executive Officer

Hey. Thanks, Robin. Well, actually, you know, David said it in the prepared remarks. I thought he said it pretty well.

So, David, do you want to repeat what you said?

David Bernstein -- Chief Financial Officer

Yeah. So, you know, keep in mind that 2019 was the high watermark for occupancy. And we look back to like 2005 and the historical occupancy levels were in the range of 104% to 107%. So, what we're saying is we will be solidly back to historical occupancy levels, but we weren't saying we're going to be back to the high watermark of 2019.

So, keep that in mind. The other thing about the considerably higher versus the nicely higher, keep in mind that, you know, last March when we gave guidance, you know, we had thought that -- our expectation for per diem increases was about 3.5%. And we wound up up 7.5%. So, we saw some very strong pricing in the back half of the year.

And as a result of that, on a year-over-year comparison basis, you know, our book position may be considerably higher, but what we're looking to see is at least nicely higher pricing on a per diem basis built into our guidance. So, when you put those two factors together, hopefully, you can understand how we built our guidance.

Josh Weinstein -- Chief Executive Officer

Yeah. And the only thing I'd add -- let me just add one thing, Robin, which is our focus is on generating the most revenue possible when that ship leaves on its cruise, and that's going to be a combination of optimizing that price and occupancy relationship. So, there's no magic to getting back to 2019 high watermark of 107%. And we play in the fringes.

We play in that 104% to 107% to make sure that when you combine that ending point along with the pricing, it's the happiest we can be.

Robin Farley -- UBS -- Analyst

Understood that occupancy right, that you don't manage to a certain occupancy once you're in that range. But just the -- that the price comment that you're -- what you're saying on the books being considerably up versus the nicely up does seem to imply like that you would be expecting a deceleration from current levels. And so, I mean, maybe the answer is you're just being conservative, but I just -- if that's correct in interpreting considerably moving to nicely as being a lower rate of growth, that's -- I guess that's what I was trying to clarify.

Josh Weinstein -- Chief Executive Officer

So, one thing to stress, right, we just came off of the fourth quarter, which everybody is glossing over real quick, but it was up 10.5 points in price. That's what we're going to lap, you know, when we get through 2024. If you think about our booked business, we have the most to go in the fourth quarter, not surprisingly, it's the farthest out. So, as we build toward that and we cycle through the first quarter and the second quarter where we're the most booked, we just have to fill and get over a larger hurdle, which we expect to do.

But we have to take that whole thing into the equation when we're giving full year guidance.

Robin Farley -- UBS -- Analyst

Oh, that makes perfect sense. Thank you. Thank you. And then just one last clarification.

On your SEA Change on the expense side, you've talked about the three-year being up low single digit in like '24, '25, '26 each year. This year, up for -- or '23 and '24 guidance up 4.5%. You know, probably above low single digit kind of implies very, very low expense growth in '25 and '26. Is that how we should think about? In other words, there's not a change in your -- the three-year average would be up low single digit, even though it's up a bit more in '24 than that would suggest.

And again, possibly, you're just being conservative, but I don't know if you had a thought on how we should think about how much better that would be in 20 -- would have to be in '25 and '26 to keep your SEA Change expense target? Thank you.

David Bernstein -- Chief Financial Officer

Sure. So, you know, when we were presenting our SEA Change program, I guess it was, you know, in June, we were talking about the fact that low single digits, but I did say we'd have some outsized impacts in 2024 due to occupancy, both on the yield and on the cost. So, the 4.5%, I also had indicated that occupancy would probably cost 1.5 points to 2 points this year. So, we are, you know, in that low single digits equation that was built into the model.

So, I feel like we are very well-positioned. And as Josh indicated, we're ahead of where we expected to be on our way toward achieving those targets.

Robin Farley -- UBS -- Analyst

Thank you.

Josh Weinstein -- Chief Executive Officer

I would say, Robin, I didn't think we'd get through the call without you trying to get ahead of '24 guidance and looking at '25.

Robin Farley -- UBS -- Analyst

Well, I almost didn't get in the last five minutes of the call. I'm glad I got it in. So, thank you.

Josh Weinstein -- Chief Executive Officer

There you go. No problem.

Operator

Our next question comes from Dan Politzer with Wells Fargo. Please proceed.

Dan Politzer -- Wells Fargo Securities -- Analyst

Hey. Good morning, everyone, and thanks for taking my questions. I just actually wanted to touch on the fourth quarter a little bit more. You know, the uptick in revenues on pricing certainly was impressive.

Can you maybe unpack that a little bit more? I mean, was that really just, you know, the Carnival-centric line or was it Europe or, you know, North America more broadly or was this, you know, alternatively related to your strategy of more base loading and maybe benefiting from some of the compression we've seen?

Josh Weinstein -- Chief Executive Officer

This was portfoliowide, so we're very pleased with where we headed into the fourth quarter. Dave, I don't know if you want to give any color.

David Bernstein -- Chief Financial Officer

Yeah. No, I mean, you're right, it was all brands, and we saw strength in bookings, and, you know, our brands did a great job yield managing the revenue and taking price up. And so, as a result of that, you saw the end result.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Then Grand Bahama, I know you've started to talk a little bit more about that. Are there any parameters you can give us there in terms of capacity per day, amenities, you know, the capex or return profile you're looking at? And also, I know you've started to see some booking activity that's going there. Are you receiving, you know, premiums on those bookings? I think you mentioned like hundreds of sailings in the release.

Josh Weinstein -- Chief Executive Officer

Yeah. Well, let me start with that. We have -- it's tiny in the grand scheme of things still. I mean, because you're talking about Carnival Cruise Line, which, you know, doesn't -- has a lot of short programs, etc.

that don't really start booking. So, it's a tiny amount now. We'll give color as we get through 2024 in that respect, so we'll come back to that. With respect to your other points, you know, we've said this is a big investment.

This is a $0.5 billion type of investment, you know, and we can do that. Obviously, in 2025, we only have one ship, and we have none in 2026. So, we think this is a right way to optimize our resources and really benefit the Carnival brand. And you've heard us say, 18 ships from day one.

So, we are very, very excited about that. I don't want to get ahead. I really want to do a good job of disciplining myself to not get ahead of Christine Duffy, who really wants to and should talk about what this experience is going to be like, and more to come in 2024. And I can't wait for you to listen to Christine and hear all about it.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. And then just if I could squeeze in one quick housekeeping. Panorama, that was, I think, out of service a little bit in the fourth quarter and in the first quarter. Is there any way to just quantify the impact of that?

Josh Weinstein -- Chief Executive Officer

You know, in the grand scheme of things, it's probably a couple of pennies.

David Bernstein -- Chief Financial Officer

Between like maybe one penny in the fourth quarter and a couple in the first.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Thanks so much and happy holidays.

Josh Weinstein -- Chief Executive Officer

Thanks. Frank, we have time for one last question.

Operator

We have a question from Assia Georgieva with Infinity Research. Please proceed.

Assia Georgieva -- Infinity Research -- Analyst

Got to be the lucky one. Congratulations, guys, on a great Q4. So, happy that we're back to looking at deals as opposed to per diems, and 10.5% was a great metric, but the 7.8%, I like better. So, I apologize, but again, I wanted us to finally get back to where we're looking at the more usual metrics.

Given that we have a very healthy outlook in terms of yields in Q1 and Q2, dry docks, I think, I at least understand well. So, we have a good view into EBITDA throughout the year. David, would you mind taking us through sort of the debt and interest expense burdens that you may be trying to modify, including as part of the SEA Change program, by fiscal year-end 2024?

David Bernstein -- Chief Financial Officer

Sure. So, to start with, you know, you saw our interest expense guidance in the press release. It was a -- close to $100 million less than 2023. And keep in mind that while we did pay down, you know, quite a bit of debt, the average balance for the year is -- for 2024 is probably like 2.5 billion less than 2023, so that will lower interest expense by 200 million.

But also, keep in mind that we have less cash on the books. And with declining interest income rates, that probably is offsetting the savings by about 100 million. So, that's why it's a net decline of about 100 million in interest expense on a year-over-year basis. Looking at the debt level, I actually said this in my notes, you know, in 2024, we are looking at about two point -- I think it's 2.1 billion of scheduled maturities, but we will be replacing that debt with the 2.3 billion of export credits that we take on.

So -- but in addition to that, we have built in some prepayments of debt into our guidance. And as I said, we are evaluating that. So, we do expect to see debt to go down in 2024. However, we do expect to see strong deleveraging from a metrics perspective because our EBITDA grows substantially, so our debt to EBITDA will also improve.

Assia Georgieva -- Infinity Research -- Analyst

Makes perfect sense. And just as a quick follow-up before I ask my second question, if I may, would we be looking at refinancing as opposed to repayment?

David Bernstein -- Chief Financial Officer

So, we are looking at both. You know, as far as -- we expect to continue to prepay debt and to continue the deleveraging. But on top of that, we also expect to look at some potential refinancing, which really would drive the interest costs down. And so, we'll see how -- what opportunities present -- are presented to us in 2024.

And if it makes sense, we'll take advantage of them.

Assia Georgieva -- Infinity Research -- Analyst

This sounds great. And so, if I can ask my second question, and I don't think anyone has touched on this. Given geopolitical pressures and we're comparing -- used to be comparing 2023 to 2019 when we had Saint Petersburg, which, clearly, the Eastern Baltics have been kind of off the books. Now, we have an issue with the Middle East, and Costa Toscana, I believe, is in the Persian Gulf, but will be one of the ships that will have to come back to Europe and going through, you know, a strait that is -- have been targeted by Yemeni military cells.

Any thoughts on this --

Josh Weinstein -- Chief Executive Officer

Yeah.

Assia Georgieva -- Infinity Research -- Analyst

Or --

Josh Weinstein -- Chief Executive Officer

Obviously, we -- you know, our first priority is going to be safety, and we have -- we -- that's already on our radar screen, and we've got mitigation plans should we need it. But keep in mind, this is months away. And so, we will -- we'll do the right thing, but there's always something. You know, I hate to say it that way, but there is always something.

And our brands --

Assia Georgieva -- Infinity Research -- Analyst

I've been around long enough, you know, 26 years. So, there is always something, Josh. I agree.

Josh Weinstein -- Chief Executive Officer

Yeah. So -- all right. I think with that, we do have to end it, but I'd say happy holidays to everybody and thank you very much. Have a good new year.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Beth Roberts

Josh Weinstein -- Chief Executive Officer

David Bernstein -- Chief Financial Officer

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Brandt Montour -- Barclays -- Analyst

Unknown speaker

James Hardiman -- Citi -- Analyst

Jaime Katz -- Morningstar -- Analyst

Patrick Scholes -- Truist Securities -- Analyst

Robin Farley -- UBS -- Analyst

Dan Politzer -- Wells Fargo Securities -- Analyst

Assia Georgieva -- Infinity Research -- Analyst

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