Jason T. Liberty - Chief Financial Officer and Senior Vice President Richard D.

Fain - Chairman of the Board and Chief Executive Officer Adam M. Goldstein - President and Chief Operating Officer Michael W.

Bayley - Chief Executive Officer and President

Steven E. Kent - Goldman Sachs Group Inc., Research Division Felicia R.

Hendrix - Barclays Capital, Research Division Steven M. Wieczynski - Stifel, Nicolaus & Company, Incorporated, Research Division James Hardiman - Longbow Research LLC Andrea Ferraz - Morgan Stanley, Research Division Assia Georgieva Timothy A.

Conder - Wells Fargo Securities, LLC, Research Division Robin M. Farley - UBS Investment Bank, Research Division Brian H.

Dobson - Nomura Securities Co. Ltd., Research Division

Thank you. April.

Good morning. I would like to thank you for joining us today for our first quarter earnings call.

Joining me here in Miami are Richard Fain, our Chairman and Chief Executive Officer; Adam Goldstein, our President and Chief Operating Officer; Michael Bayley, President and CEO of Celebrity Cruises; and Laura Hodges, our Vice President of Investor Relation. 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 would 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.

Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined. And also, a reconciliation of these items can be found on our website.

Richard will begin by providing a strategic overview of the business, and I will follow up with a recap of our first quarter results. We'll provide an update on our business environment, and Adam will provide an update on Quantum of the Seas, China and Caribbean.

Michael will provide an update on Europe, Alaska and onboard, and then I will walk you through our outlook for the second quarter and the full year. We will then open the call up for your questions.

Richard?

Thanks, Jason, and good morning, everybody. It's a pleasure to provide some commentary on what's happening in 2014.

And certainly, we have a lot to comment on. Most importantly, it's a real pleasure to be talking today about how we're beginning to realize the potential of our business model, rather than having to point out how resilient we are.

Of course, we have a long way to go, but the fact that we're able to present such a very positive picture demonstrates the excellent trajectory that we're on. Now as you know, the first quarter ended up near the low end of our previous guidance, but that's accounted for by several small incidents during the quarter.

Any business expects some anomalous events impacting individual quarters, but our plan is to make sure that we compensate for that in the course of the year. I'm particularly proud of the cost discipline our teams have exercised and what that means for our ongoing results.

They have accomplished this while maintaining focus on the things that make us money. For example, they continue to focus on a product quality that astounds our guests, and they remain focused on communicating this amazing product ever more effectively.

The biggest improvement in our returns will come from getting paid better for the tremendous vacations we offer. Getting that message out there is one of our biggest opportunities, and the results show that our teams are working hard to maintain that balance.

We've also had some big announcements during the quarter. First of all, Adam's promotion to President and Chief Operating Officer of the group is exciting for him and for all of us.

After 12 years of ably running the Royal Caribbean International brand and, of course, 26 years with the company, we think this move will allow us to do an even better job of exploiting best practices across all of our shared services areas. Next, we announced that we completed the sale of Pullmantur's non-core businesses.

This is an important step in shifting Pullmantur from one of our biggest challenges to one of our biggest opportunities. Then, our joint venture German cruise line, TUI Cruises, takes delivery of our new ship, Mein Schiff 3, in almost precisely 1 month from today.

Actually, as we speak, the vessel is out on sea trials, and she is spectacular. We do talk a lot about new ships in our market over here, but Mein Schiff 3 is a dramatic addition to the German scene, and I don't think that we put enough emphasis on that on this side of the ocean.

One interesting feature of this ship is that she will be the first cruise ship ever constructed with the new advanced emission purification system already installed. This system, this AEP system, also known as scrubbers, purifies the exhaust and removes the sulfur down to less than 0.1%.

We've had one of the first successful prototype AEP systems in the industry on Liberty of the Seas. We've had that for some time.

But this ship, Mein Schiff 3, will be the first new building to incorporate this technology as a new ship. We are also -- we earlier announced a major strategic move with Quantum of the Seas dedicated to the China market.

We consider this a very important market for our future, and we intend to maintain a preeminent position. And obviously, Quantum will do that for us -- help do that for us.

Lastly, I'd like to talk about something that may sound technical but, strategically, is really very important. That announcement was an increase in internet bandwidth.

I would refer you to the slide here that shows a progression of our internet bandwidth on Oasis of the Seas. Over a year -- so we originally had what's shown on the slide as legacy systems, which gave us 4 megabytes per second download capability.

And over a year ago, we changed out these old legacy satellite systems to a much better system provided by Harris CapRock. The new Harris CapRock system has substantially improved our internet capabilities, and they, today, give Oasis of the Seas one of the fastest internet services at sea, some -- more than 5x as fast as what had been there.

But now, we're in the process of installing a new satellite system on Oasis, which offers not just a substantial improvement, but a truly transformational one. The new system is provided by a very innovative company called O3B, and their mission is to bring internet to the parts of the world that don't yet have good connectivity.

Until now, you could include cruise ships in that category. And that new system, which is providing some 500 megabytes per second of download capability, is already functioning on a test basis on Oasis, and we expect it to be completely rolled out by early this summer.

Interestingly, this system, by itself, will give Oasis of the Seas more internet bandwidth than every other cruise ship of every other cruise line in the world, combined. Now this is not only an important feature for so many of our guests; we believe it will be of particular help in attracting Millenials to us.

We're starting out with this on Oasis and Quantum Class ships, but if it's as successful as we expect, we would consider rolling it out to more ships as well. By the way, I'd just also mentioned that not only is it more bandwidth, but the latency, the time it takes for the signal to go back and forth, goes down from a norm of 750 microseconds to 140.

So it'll be very fast and very helpful to us. As you can see, our company and our people are on a roll.

So with that, I get to turn it back to Jason.

Thank you, Richard. Now I'd like to talk to you about our results for the fourth -- first quarter.

Now unless I say differently, all metrics will be on a constant currency basis. We have summarized our first quarter results on Slide 3.

For the quarter, we generated adjusted net income of $0.21 per share, which was at a low end of the $0.20 to $0.30 range that we had provided in January. So unfortunately, we had to shorten or cancel 6 voyages in the first quarter, which cost us $0.05.

Some examples of these disruptions included the oil spill by a cargo ship collision with a barge in the Gulf of Galveston, which caused the port to close and affected the sailing. To give you another example, a steel fishing net that was floating beneath the surface in the Tokyo shipping channel had damaged a propeller, which affected 2 of our sailings.

So if not for these unplanned events, our earnings would've been slightly above the midpoint of our previous guidance. Net revenue yield were down 30 basis points for the quarter.

Exclude these voyage disruption, yields were slightly better than flat and in line with our previous guidance. It is worth noting that, in the first quarter, we were up against a very high comparable.

The first quarter of last year was one of the highest-yielding first quarters ever. Ticket revenue yields declined as a result of voyage disruptions and the expected lower pricing in the Caribbean.

Now as a reminder, we have our greatest exposure to the Caribbean in the first quarter, where the Caribbean represents approximately 2/3 of our capacity. While not enough to offset lower Caribbean yields, we continue to see strong yield growth on sailings in Asia, even with the significant capacity increase in the region.

The onboard revenue yields continued to advance. In the first quarter, onboard yield increased 3.4% as we continued to see the benefits of our fleet upgrades and onboard revenue management initiatives.

Net cruise costs, excluding fuel, were up 1.3% for the quarter, which was better than our previous guidance of 2% to 3%. The favorability was driven mainly by timing.

We ended the quarter with over $900 million in liquidity. Now during the quarter, we utilized our liquidity to settle the maturity of our approximately $1 billion Eurobond.

Last year, we took a series of actions as part of our profitability improvement program, which included a global restructuring and the sale of Pullmantur's non-cruise business. As we discussed at that time, the accounting rules dictate that some of these charges for these decisions are spread out over a period of time in 2014.

In 2014, we will recognize $23 million in expenses associated with restructuring, as well as losses of $11 million associated with the sold business, which closed at the end of the first quarter. $19.6 million of this was included in the first quarter results, and the rest will be recognized later this year.

Note that these items are excluded from our key statistics and adjusted earnings. More detail for the reconciliation of these non-GAAP measures can be found in the press release.

Now I'd like to update you on what we're seeing in the booking environment. Since our last call, booking volumes have been accelerating.

The past 8 weeks have been much stronger, with bookings up more than 20% year-over-year. While the strong demand trends have been partially driven by promotions available for Caribbean sailings, we are also seeing elevated levels of quality demand for itineraries not being discounted.

So as a result, our book load factors and APDs for the year are higher than same time last year. While revenue expectations at the itinerary level have shifted slightly, revenue guidance for the full year remains unchanged, as we've been able to offset the voyage disruptions experienced in Q1.

Looking forward, we are even more bullish than we were at the beginning of the year for China and European sailings and have incorporated a more conservative outlook for the Caribbean. While we were seeing strong bookings for the Caribbean, with recent booking volumes trending well above last year's levels, the environment remains very promotional.

The pressure on pricing has almost -- has mostly been limited to 7 night and shorter Caribbean itineraries, as we are seeing continued yield growth on long Caribbean sailing. So although pricing is down overall, we are still generating historical premiums for newer hardware and expect to see higher Caribbean load factors than last year during the summer.

So as Caribbean capacity for the industry is up more in Q2 than in all other quarters, that is subsequently where we expect our largest yield decline for the Caribbean. European sailings have exceeded expectations and are booked at significantly higher load factors and prices than same time last year.

Demand and pricing have been broadly strong for these itineraries, with all key source markets trending ahead. Trends have been particularly strong for North America, and we are finally starting to see a recovery in pricing from Southern Europe.

We are expecting European [indiscernible] areas, which account for 22% of our capacity this year, to generate double-digit improvements versus 2013 and higher yields than 2008. For Asia Pacific sailings, which account for 12% of our capacity, continued to exceed both pricing and volume expectation.

China sailings, which represent about 1/3 of this capacity, those are expected to generate double-digit yield improvements. This is in spite of a 30% year-over-year capacity increase in the market.

As Richard discussed, we are very proud of the cost discipline ingrained throughout our culture. Last year, as part of our profitability improvement program, we took several steps to significantly reduce our cost in 2013 and expect to be flat to slightly down in 2014, despite inflationary pressures, rising insurance premiums, as well as nominal capacity growth.

To achieve this, we focused on reducing our global acquisition cost by also improving service levels, which included outsourcing our call centers and further centralizing back office functions. We also went through an extensive benchmarking process that brought our running cost closer to the best-in-class while not affecting the guest experience or crew welfare.

Another major initiative was recapturing scale in back office areas that had grown excessively. While we are very proud of these achievements today, we continue to identify further opportunities through benchmarking, as well as synergy opportunities amongst our brands that help maintain our cost discipline while allowing for further investments in our product and business expansion.

I would now like to ask Adam to give you an update on the Caribbean, as well as Quantum of the Seas and our much-anticipated arrival in the Chinese market, and Michael to provide an update on Europe, Alaska and onboard. Adam?

. Thank you, Jason.

There is a lot going on in our business at the moment. Our main focus is to continue to drive strong revenue in the Caribbean, given the competitive trading conditions that exist in this important market.

As you have heard, the Caribbean sector continues to experience significant promotional activity. Fortunately, the additional flexibility to craft attractive promotions that we recently instituted in our system has enabled us to compete more effectively in a tactical environment than we would have been able to do in past years.

As a result, our bookings in March and April, relative to the same time last year, have improved double digits, thus improving our occupancy positions overall. Directionally, short and 7-night Caribbean sailings are the most impacted by the promotional environment.

As a result, we still expect Caribbean itineraries to be down slightly year-over-year. While we are now entering the summer Caribbean season with the annual reduction in capacity, we expect, and our forecast expects, continuation of a promotionally-oriented Caribbean market environment for the remainder of 2014.

Before leaving this topic, I will add that, while no Caribbean products are immune from the prevailing tactical environment, we are fortunate that our Oasis-class ships continue to command the highest premiums in the Caribbean market, notwithstanding the newer ships that have entered the market since 2010, when Allure of the Seas entered into service. They clearly set the standard for family cruising in today's industry.

Moving to Quantum of the Seas, we are now 6 months from her delivery, and we are increasingly excited about Quantum on several fronts. In addition to the fact that she is currently in a very encouraging booked position in terms of both load factor and pricing, we recently unveiled her culinary approach under the name Dynamic Dining.

Departing from our traditional main dining room concept, Quantum will offer 5 distinctly themed complementary restaurants, one of which is reserved for the use of suite guests. In total, she will offer 18 culinary venues, including the new Wonderland specialty restaurant concept, as well ass restaurant featuring our relationships with Jamie Oliver, Michael Schwartz and Devin Alexander.

Dynamic Dining was exceptionally well received by the media, travel agents and our loyal guests. Last week, we were in the news for the announcement that Quantum will move to Shanghai, China, at the conclusion of her inaugural winter season out of Bayonne, New Jersey.

This is obviously a significant strategic move that will clearly establish Royal Caribbean International as the leader in the rapidly emerging Asia Pacific cruise market, with a particular focus on China. We continue to be very pleased with the performance of Mariner and Voyager of the Seas in Shanghai and Tianjin, respectively.

Our 2014 summer China season is booked far ahead of the same time last year at a higher rate. The travel agents and tour operators are increasingly comfortable resuming itineraries, which include Japanese ports.

We believe our already strong onboard revenue on China-based cruises will improve even further based on our greater experience and the world-class retail brands, which we continue to bring on board with each passing year. As you have heard, we are expecting a double-digit yield increase in 2014.

At the same time we announced Quantum's move to China, we also announced that we will relocate Liberty of the Seas to Bayonne, New Jersey, for the summer 2015 season. Liberty will become our first Freedom-class ship to serve the Bermuda market.

For the winter 2015, '16 season, Quantum's sister ship, Anthem of the Seas, will take over the Bayonne, New Jersey, program, offering cruises to the Bahamas and the Caribbean. We are pleased to be able to strengthen our presence in the New York area, even as we are pursuing our interests on the other side of the world.

With the third Quantum-class and the third Oasis-class ship arriving in 2016, we will enjoy additional flexibility with which to accomplish our strategic market objective. Finally, as it relates to my assuming a new management position at RCL, the parent company, I'm very enthusiastic to participate more broadly across the company's brands and functional areas.

We are fortunate to have a very strong shared services capability. However, there is always room for improvement and for wider dissemination of best practices.

That will be a focus for me, along with the further development of our global footprint. In closing, I would like to thank the outstanding management team at Royal Caribbean International for their support and their excellence over the last 12 years, and especially the men and women onboard the ships who have relentlessly delivered the WOW.

It has been a great honor to lead such a brand. Michael?

Thank you, Adam, and good morning, everyone. European deployment remains a key driver of our profitability, with extremely strong demand driving premium yield.

Capacity-adjusted bookings have been outpacing last year by more than 25% for the past 3 months. And as a result, both APD and load factor are significantly higher than same time last year, with load factor at its highest since 2007.

We are seeing strength across global source markets for our European itineraries. And as Jason noted, demand from North America has been particularly strong at increasing prices, and we already have more than 80% of our forecasted United States and Canadian revenue on the books.

This is considerably more than same time last year. Our brands are leveraging our relaunched ChoiceAir program to offer North American guests simple, convenient and easy-to-purchase European cruise vacations.

ChoiceAir provides the lowest airfare guarantee, assured arrival, your choice of flights and 24/7 support. The percentage of guests booked on European sailings who have purchased their air through us has doubled year-over-year.

An added benefit of our ChoiceAir program is that it increases the retention of the booking. Both our Mediterranean and Northern European products are a higher booked position in prior year and are driving elevated PDUMs [ph], with Mediterranean sailings doing particularly well.

The new Celebrity Cruises collection of 7-night round trip and open-door Mediterranean itineraries, which are combinable into 14-, 21- and 28-day sailings, continue to surpass our expectations. In addition, the mini-European season for Oasis of the Seas in 2014 is also performing very well.

We're expecting a second-year of significant yield growth for the Europe product, with yields to be up double digits versus 2013. Alaska was a key product for us during the highly profitable summer months, where it accounts for around 10% of our revenue.

The product continues to be a solid performer, and we anticipate -- anticipate it to be one of our highest-yielding products for Q2 and Q3. We expect Alaska yields to increase in the low to middle single-digit range and to be similar to yields in our record 2011 season.

It is encouraging to see that both Europe and Alaska are shaping up very well for the all-important summer season. Shipboard revenue yields increased in the first quarter by 3.4% on a constant currency basis, marking 9 consecutive quarters of year-over-year onboard revenue yield growth.

We continue to optimize each of our onboard revenue channels, driving margin improvement, and focus on the areas of most opportunity. Our Celebrity Cruises brand has formed a partnership with Canyon Ranch, one of the world's leading spa and wellness brands.

And today, onboard 10 Celebrity Cruise ships, guests can now enjoy the Canyon Ranch SpaClub at Sea experience. We are differentiating our shore excursion program, offering a range of branded tours; for example, Azamara Club Cruises has added their Insider Access and Nights and Cool Places program, and Celebrity Cruises has launched Celebrity Exclusives and Celebrity Family Challenge.

In February of 2014, we completed the first full revitalization of our Voyager-class ship for the Royal Caribbean International brand with Navigator of the Seas. Two more Voyager-class ships, Voyager of the Seas and Explorer of the Seas, will be completing -- completed in the upcoming 12 months.

A key feature of the Voyager-class revitalization is adding additional capacity, which will drive improvements in both tickets and shipboard revenue. Additional revenue-generating features, which includes pervasive Wi-Fi, multiple new dining venues, upgrades to the casino, retail and photography areas.

Jason, back to you.

Thank you, Michael. Taking into account all we just told you, now I'd like to summarize our guidance for the full year and second quarter.

If you turn to Slide 4, you'll see our updated guidance for the full year 2014. Net revenue yields and net cruise costs, excluding fuel, are expected to be consistent with our previous guidance.

Net yields are expected to increase between 2% to 3% for the full year. And net cruise, excluding fuel, for 2014 are expected to be flat to slightly down.

Strengthened pricing for European and Asian sailings, combined with stronger onboard revenue expectations, is offsetting the competitive pressures in the Caribbean. Our cost guidance is unchanged.

We intend to invest more in sales and marketing efforts in China. Our fuel costs for the year have increased the $957 million, driven mainly by rate, and we are 55% hedged at a price of $616 per metric ton.

In the first quarter, we continued to leverage our improving credit profile in a healthy banking market to further reduce our interest expense for the balance of the year. These savings, combined with a weaker dollar and further operating improvements in TUI Cruises, are expected to improve our bottom line by approximately $0.05 in 2014.

Based on current fuel prices, interest rates and currency exchange rates, we are raising our adjusted earnings per share guidance to be between $3.25 and $3.45 for the year. Now I'd like to walk you through the second quarter guidance.

On Slide 5, we have provided guidance for the second quarter. Net revenue yields are expected to increase between 1.5% and 2.5%.

Strong pricing for European and Asian itineraries is offsetting the promotional Caribbean environment. Net cruise costs, excluding fuel, are expected to be down 2% to 3%, and we have included $245 million of fuel expense for the quarter.

We expect adjusted earnings per share to be in the range of $0.45 to $0.55 for the quarter. With that, I will ask our operator, April, to open up the call for questions-and-answer session.

April?

A couple of questions. You mentioned that European bookings are improving.

What are the expectations for the European consumer? Is it just you're offering different and maybe more innovative product, or is it just broader European consumer trends?

And then Jason, maybe you can just give us a little bit more discussion on the 6 unplanned voyage disruptions. You gave 2 examples.

I frankly don't remember seeing these in the press, and I don't remember an EPS estimate change during the quarter on them. So I'm wondering how you think about these disruptions and when, in the future, would you give us an update on any impact to EPS?

Steven, this is Michael. I'll take the first question on Europe and the European consumer.

It's difficult to pinpoint one particular item. I think it's a variety of benefits that we believe our brands have in the European market as it relates to the European source market.

I mean, obviously, we've done a lot of work in making our products easier to sell. We have what we believe are phenomenal products, very innovative itineraries and significantly superior hardware.

So when you combine all of those things together with a -- I think the fact that we are leveraging the European source market infrastructure that we've set up over the past several years, we're beginning to really see the benefit from that investment over time, and we've continued to do that. So, for example, in the U.K.

and Irish market over the past 12 months, we've invested more, and we've created single-branded sales and marketing teams in that market, and we're seeing positive results from that investment. So I think it's really a combination of factors.

And I think the underlying, probably, factor is the fact that the European market seems to be fairly strong, and we're seeing a bounce-back from the Southern European market as well.

On the incident side, all of these, individually, were small in nature, and that's why there wasn't any specific disclosure about them. I mean, some of them were -- in the press was on Explorer with the norovirus, as an example.

But this is really a unique amount of affected sailings within the quarter. We will consider, as we always do, as these come up, on whether or not they're disclosable events.

Everyone, your comments on the current state of the industry was encouraging. I just wanted to talk about the Caribbean in more detail for a minute.

I was wondering if you've seen a change since the end of March in terms of bookings or pricing. We've just heard that call volumes have slowed a bit, so I wanted to have you touch on that.

And then, also in terms of the competitive pricing environment that you are seeing, is there any change there, again, since the end of March relative to euro pricing programs, your ability to price your product?

It's Adam. So as you get further away from the WAVE, the bookings are normally trending somewhat down, so other things being equal, you would always expect to see April somewhat slower than March.

So even at an equivalent level of promotional intensity, that would be an expectation. The point that we've tried to make in general, looking across the 2 months, is that they have had more volume than we would have expected for a normal March and April, and so we have been able to eliminate a good portion of the Caribbean load factor deficits that we've had prior.

So -- and I think I mentioned in my commentary that if you compare March and April this year to March and April last year, we were up double digit booking volume. So the combination of the 2 show that there is a market reaction to promotional intensity, and we're pleased about that, but April is normally slower than March.

Okay. The slowdown that you're seeing this year isn't any different than what you've been seeing in the past?

I don't know the percentage point, I just know that it's -- we would expect that to be the case, and that has been the case.

I think, Felicia, I think the point, as Adam said and as we mentioned in the release, we really have been a little bit surprised that the post-WAVE period has been as strong as it's been. The volumes have just been unprecedented.

The WAVE that we described earlier as typical, and that is what the WAVE ended up being, and I think that generated a little bit of concern on our part if that continued. And then slightly to our surprise, the volumes really picked up in the post-WAVE period, which isn't the normal pattern.

But as Adam said, we drove a lot of that by the promotional pricings that we did. And actually, both the Royal Caribbean International brand and Celebrity had some very good and innovative ways of packaging.

So the 123Go! and then Pick Your Perk and the "kids sail free" were ways of doing promotional pricing by adding on as opposed to by simply discounting the price, so giving the consumer more for the same price rather than giving them the same amount for a lesser price.

And that actually turned out to be surprisingly effective.

That's very helpful color. Jason, just quickly, I appreciate the color on what was driving the $0.05 increase to full year guidance.

But you also are making up the $0.05 that you lost in the first quarter from the loss by voyages. So I was just wondering what was driving that, since your yields are essentially changed for the full year?

Yes. I mean, it's really driven around the commentary around the strength in Asia, Europe, as well as onboard.

The collection of that is really making up that $0.05.

So I don't know who wants to take this, if Adam wants to take it, but if you look at the Caribbean, your view on the Caribbean now versus where it was about 6 months ago, can you comment on how you see that market today versus, again, a couple of months ago? Is it the same?

Is it getting a little bit better? Is it getting worse?

Maybe some commentary around that would be helpful?

Well, we understood, and I know we talked about in the last couple of quarters, the fact that we saw the Caribbean as having a promotionally-oriented outlook to it, and that has continued to be the case. What we have also now seen, though, which was the news since the previous call, which Richard was just commenting on, is that we've been able to cause a pretty strong reaction, strong positive reaction in terms of generating volume in the Caribbean, with effective promotions.

So we're clearly in a promotional environment. Our forecasting takes that into account and does not expect that to change substantially for the rest of the year.

And we've made our guidance on that basis, so it incorporates our expectation for the Caribbean. So we would have loved to have been able to say that we're onto a different and less promotional chapter.

But at the moment, we expect that to continue.

Actually, and Steven, it's Richard again, as well. Can I -- just adding a little more color because I think we have tried to be clear that, directionally, the Caribbean is actually weaker today in terms of total yield than it was at the end of January, when we gave the last guidance.

As Adam says, it's really been much more promotional. So we've generated the volume.

And so when we talk glowingly about how the other markets are doing, we also -- that -- the implication, the converse is that the Caribbean is probably -- is, in our view, weaker than we thought it was going to be.

Okay. And then second question, Adam, you gave a lot of color on Quantum and the decision to move that over to China.

But I guess, bottom line, is that the decision -- a longer-term call on the quality of the Chinese market, or is it a call that, over time, you think the Caribbean will be a very tough market over the next couple of years?

Definitely the former of those 2. We have, step by step, going back to at least 2008, been ramping up our presence in China.

And we had -- we started with one of our smallest ships. I think we pointed out at the time that, from a research and development standpoint, that was an immaterial amount of our capacity to devote to an interesting opportunity.

And we're now up to the point where, last summer and also this summer, we have Voyager of the Seas and Mariner of the Seas there, 2 Voyager-class ships, clearly doing very well. And our sense was that the brand's capability and the attributes of Quantum of the Seas made sense for us to take a bold next step for 2015.

So it's not a commentary on any other market. It's a commentary on what we believe is an important future opportunity for the company that's actually delivering results right now.

So obviously, a lot of hand-wringing about the growth in Caribbean capacity this year. You guys are moving an enormous ship out of the Caribbean into China for next year.

I think Norwegian announced that they are moving one of their Caribbean sailings to Europe. I know that all of the itineraries aren't set in stone, but given all this reallocation of capacity, how should we think about the growth overall, on a net basis, that we're going to see in the Caribbean in 2015?

How do you guys think about that?

On a Caribbean perspective, I think, for next year, with Quantum moving into China, I would expect Caribbean capacity to be very slightly up for next year. Obviously, not knowing what is going to happen with the other players in the industry, but for us, that's what our expectations are at this point.

Okay. And then on Quantum, when they make the move from the Caribbean to China, should we expect pricing to generally be the same across those 2 regions or a little bit up, a little bit down?

How should we think about that?

I just want to be clear that -- are you contrasting the China region with the Caribbean region? Are those the 2 that you're talking about?

Yes, with specific focus on the move of the Quantum. Will it benefit from pricing as it makes that move on those Chinese itineraries, or is it going to be a net neutral?

Okay, thank you. Understood.

So Quantum, as I remarked upon earlier, is in a very favorable position for her inaugural winter season serving Bahamas and the Caribbean out of New Jersey. So she is doing very well.

And we also expect her to do very well in China, both from a ticket and on onboard perspective. So it's too early to say the exact comparison, but there is -- we're very confident that she will maintain a high level of performance in both respects.

James, if I could just also ask -- add one other thing. You asked about the revenue, but I think we also should maybe round it out by saying, as we've said before, it is more expensive to operate in China.

You do have to go after the market. You do have to build a strategic foothold there, et cetera.

So there are costs. I think, as Adam says, we would expect the net of that to be positive.

But you asked about one side, and I just want to make sure we're also answering the other part.

It's very helpful. And then just last quick housekeeping question here.

It looks like sort of your guidance today versus where it was 3 months ago, it seems like you're getting a little bit of benefit from currency, but it looks like your -- it looks like that benefit's yields haven't changed costs, is that how I should think about that, or is that just sort of a rounding thing?

Yes. It's definitely more of a rounding thing.

On the cost side, some of the currencies that have either helped or affected us are -- some positions were long-end, some were short-end. But for the most part, it's rounding that's causing that differential.

Just one question from me. You've mentioned that you are expecting Caribbean capacity to be very slightly up next year.

Given that this is the -- being the weakest market and the increasing promotional activity, is this just because you didn't have enough time, perhaps, to change the capacity? Or is it just too challenging to put ships in other regions over Q1 and more the winter months?

It's Adam. It's actually, mostly, a mathematical function of the fact that our long-disclosed Caribbean deployment through first quarter this coming year has a first quarter increase that's still relatively higher.

According to our disclosed deployment for the back 3 quarters of next year, to Jason's commentary, it's basically flat.

And -- but the year after that, would you be considering perhaps moving some capacity out. And also, specifically on the Anthem, for example, it's going to be based in Southampton for the summer and then moving on to New York.

Is that coming back to Southampton, or is that going to stay there?

Okay. So we have not disclosed any particular deployment decisions far into 2016.

Obviously, one of the great advantages of our business model is the ability to move ships around, particularly amongst the 3 regions of the world that are now very important to us: North America, Europe and Asia Pacific. So we continue to evaluate what our choices are from second quarter 2016 forward.

And we will make those announcements as they -- as we get to the point where we need to in the regular deployment cycle. But we do understand, and we evaluate all the market performance very carefully and what we believe -- where we believe the ships can perform better.

One quick question for you, Adam. And first of all, congratulations on your new position.

Could you let us know whether China is profitable at this point?

Thank you, Assia. Yes, China is profitable for us at this point.

Even understanding, to Richard's earlier commentary, that we have a lot of work to do in building consumer awareness, creating travel agent familiarity with all -- with the concept of a cruise, not to mention our own products and services. There is more effort to be put in there in the near term.

But the revenue performance of the market is very strong, and we are in a profitable position today.

That's great. And going back to another market that seemed very promising and fast growing, South America, one of your competitors' brands had to scale back because of the high cost of operation.

And you don't seem to be talking about South America so much. Could you let us know whether that has taken a back seat to expansion in China?

Well, China is clearly very, very significant to what we're doing and inherent in the conversation, I believe, that we're having about it on this fall, particularly with the news about Quantum moving to Asia. We still see opportunity in Latin America.

But it is true -- and we've been vocal and the whole industry has been vocal about there are cost pressures in Brazil that we would really love for the Brazilians to address because there's this market opportunity down there if the country would have a more favorable regime for cruising. So that's an opportunity, hopefully, for the longer term for us.

But we don't mean, by the fact that we haven't been talking about it, that it isn't interesting to us or that we haven't been building up of our capabilities there. We have the Pullmantur brand, which is -- sees opportunity in becoming a brand known for its appeal to Latin American cruisers.

But I think, from an overall strategic standpoint, particularly with respect to news for today, China is in the leadership position.

I see. And a quick question for Mike...yes, Richard?

I think, just to comment more on Pullmantur because we are making a thrust there, and talking about South America is a little bit like talking about Europe. It's -- although we talk about it as a place, it's really a series of quite individual countries.

And while I think all of us have experienced the challenges that Adam referred to in Brazil, there's quite a few opportunities there, and our Pullmantur brand will be focusing on that, and we think that is an opportunity for the brand.

I appreciate that color. And one last question for Michael.

With Canyon Ranch onboard Celebrity, I would imagine a transition like can be somewhat like disruptive, especially when the ships are not in dry dock and you're doing it as you have ongoing Voyages. Can you describe to us, in a little bit of financial terms, I guess, how Canyon Ranch has performed relative to your prior operator?

Yes. I mean, we've actually, literally last week, finished the entire transition of Canyon Ranch onto the Celebrity fleet.

We accomplished that in pretty much less than 4 weeks. And obviously, during that 4-week transitionary period, there was, inevitably, disruption.

We managed to isolate, we think, the disruption quite well. So literally, the last day of the cruise and the turnaround day and the first day of the next cruise were disrupted.

But I think we got ourselves through that pretty well. As it relates to revenue performance of Canyon Ranch versus the other operator, it's way too early to make a comment on that.

We're literally one week post the transition of 10 spas. So I think we would probably be able to give you more color on that during the next call.

But we're very optimistic. We are extremely pleased with the relationship.

We believe we've got the perfect partner for our target market, and we certainly believe that we're on the right track with this relationship.

And part of the 3.4% onboard increase, was that driven by spa or other items?

No. It was -- we saw a lot of strength with the gaming and beverage in the first quarter.

So spa was not a key driver of the incremental revenue in Q1.

Okay. And last quick question, are you protected on the downside in terms of minimum guarantees, et cetera, in case Canyon Ranch is able to scale having taken on so many new ships?

Yes, we are.

Given that Europe has -- you've commented here for, now, 2 quarters in a row that it's been booking well, can you give us any color what you've seen specifically out of the European source passengers as you're in the WAVE season? I mean, you gave us a little bit already, but just some additional color that their WAVE season's begun here in April?

And then, as it relates to the Med in particular, your comments that, that was getting better. What's driving that in particular for what you're seeing in the Med?

Mediterranean, I think, again, it's difficult to pinpoint one factor. I think it's a combination of factors.

Part of it is probably capacity related. There's less capacity in the Mediterranean this year versus last year.

I can't recall the exact percentage change, but there is less capacity. We're seeing a little bit more strength coming out of the European markets, particularly out of Southern Europe.

And of course, we feel very good about our brands and the products that we've got on offer in those markets. So -- and we've worked hard at making these brands and products easier to sell through our distribution channels, plus, over the years, as I pointed out earlier, we've really invested and built what we think is a good European infrastructure as it relates to sales and marketing and revenue management capability in Europe, and we're beginning to leverage and see the results of that.

So I think that's -- again, it's just a whole series of different factors. As it relates to, I think, the question on European bookings or a WAVE Period, we're seeing -- usually, around this time, we see a kind of a transition between U.S.

bookings and European bookings for European product. And we're beginning to see the bookings from the European markets pick up quite nicely.

So we feel quite good about what we're seeing out of the European markets, and it's really across all markets. One of the markets that we've been particularly pleased with, is the Spanish market that seems to have picked up quite nicely for us.

And we're seeing strength out of the U.K. and Irish market as it relates to pricing.

Okay. And back to the Caribbean, correct me if I'm wrong here, it seems that your tone on the promotions -- and again, you'd said that overall, since the beginning of the year, your outlook for the Caribbean has weakened a little bit while other areas of the globe have strengthened.

But between the 3- to 5-day market versus the 7-day market, in particular, it seems like maybe the 7-day as a whole, your comment there, it has become a little bit more promotional. And -- or has that -- the promotional activity really intensified, even more so, in the 3 to 5?

We really haven't been that sharp in our distinctions. What we've said is 7-night and shorter cruises is where the most of the promotional intensity has been.

And to the extent that the Caribbean area is somewhat weaker than we were expecting it to be 3 months ago, I think, you could characterize that weakness as pertaining to 3 through 7 nights. Not going into microscopic detail as between them.

So it's just generally shorter cruise have felt the impact more than long Caribbean-type cruises.

I wanted to clarify, on the tour business that you're showing you have it held for sale, and if I'm reading it right, it looks like that added $0.05 to your reported earnings by taking the $0.05 loss and putting it in kind of unusual items now or one-time items. So I guess, I just wanted to clarify then, on a full year basis, does selling that add to earnings just from, basically, having the loss out of your recurring earnings?

Kind of -- I just want to get a feel for that number. And then also, on your expense per day being flat to slightly down, is that excluding the tour business from both years, or is that -- is some of that improve helped by having the tour business out?

Robin, I'll take first of those. The tour business has been plus or minus 0 for a while now.

And it's had a couple of years where it's been marginally positive, a couple of years where it's been marginally negative. When we gave our guidance, we assumed it would be sold, and we left it out.

We weren't sure exactly the closing date, so the exact amount of the loss. Obviously, January is the worst month of the year.

So if we had finished something before that, we would have had less of a loss. And actually, it ended up closing at the end of January.

So we had to absorb that month of loss. But none of that was in our projections, none of that was in our guidance.

So the guidance remains like-for-like comparable. And I'll let Jason answer the second one, but basically that -- we kept the guidance so that the tour, when we talk about cost, is not a factor.

So it's -- we're comparing like-for-like without the tour, without the tour. So when we're talking about cost being flat to slightly down, if we had included the tour, it would be actually down quite a bit because the tour was a big expense.

But we took it out of both the before and the after.

Okay, no, that's helpful clarification. Is there any way just to quantify what the decline if tour -- with tour in last year and not in this year, just to get a sense of the decline?

We could certainly offline, Robin, just walk you through, because those numbers are physically out there for us to show you.

Okay, great. And then the other question was just the onboard was up nicely, and you mentioned some new programs, direct programs and things that you sell onboard, And I'm just wondering if there is a point where that anniversaries because when I look last couple of quarters, you've had really nice onboard, so there doesn't seem to be like -- it's not like there's -- I mean, you had 2 very strong quarters at the end of last year, but generally, you've had onboard up.

So I'm just trying to get a sense of is there a point when that program started that it would anniversary and we would expect, maybe, the increases to be more in line with ticket price increases?

A lot of that are -- is initiatives, but the initiatives we keep working on, I don't know that it's a point in time that one thing suddenly happened and we did it, but it's a series of things we've been working on. For example, the -- one of the big drivers has been the revitalizations.

Those have been very successful for us, and they have been coming on or will come on. I think, last year we had a 7.5% improvement in onboard revenue, which was exceptional.

But we keep working on improving it, but I think, obviously, we don't expect to continue to be generating 7.5% annual increases.

April, we have time for one more question.

It's Brian Dobson in for Harry Curtis. Just a quick question on China.

Can you maybe elaborate a little bit on the breadth and depth of your sourcing operation over there and where you plan to source your passengers for the new ship?

Okay. So we have 3 areas, which are developing nicely, with the main area of those 3 being the provinces in and around Shanghai.

So with Quantum of the Seas herself going to Shanghai, that will be the most hurdle source market area for her. We have also been working very hard over -- since, again, going back again to 2008, in the Tianjin, Beijing northern area, where we have a Voyager-class ship on a regular basis there.

The newest of the 3 areas that we are interested in, in the near term, would be the Pearl River Delta and the South of China plus Hong Kong. And all of those communities are obviously near to the coast.

That's where most of the incoming wealth generation is taking place in the country. And over the longer term, we believe we will have opportunities in the inland cities and provinces.

But for the near term and to support Quantum, it will continue to be mainly the coastal communities featuring Shanghai area.

Thank you for your assistance, April, with the call today. And we thank you all for your participation and interest in the company.

Laura will be available for any follow-ups you might have, and I wish you all a great day.