WEBVTT - Chief Future Officer: Naftali Holtz, Royal Caribbean Group 0:00:02.279 --> 0:00:06.439 In early as COVID triggered a global public health crisis, 0:00:06.720 --> 0:00:10.240 the travel and tourism industry cutback service and slowed down. 0:00:10.800 --> 0:00:17.400 The cruise industry went further. It completely shut down as 0:00:17.400 --> 0:00:21.280 ships at idle. Operators scrambled to survive with no financial 0:00:21.320 --> 0:00:24.760 precedent to guide them. All of a sudden, the revenue 0:00:24.880 --> 0:00:27.840 just turns off. They did not teach this in business school, 0:00:27.840 --> 0:00:30.000 by the way, so you know it turns off and 0:00:30.360 --> 0:00:33.160 you you have to figure out how you're going to 0:00:33.280 --> 0:00:35.479 ensure that the company has liquidity needs in order to 0:00:35.479 --> 0:00:36.879 be able to get to the other side of it. 0:00:37.000 --> 0:00:40.879 No revenue at all, but you have costs and expenses. 0:00:40.920 --> 0:00:43.320 That's right. What you learned in the pandemic is that 0:00:43.440 --> 0:00:47.239 leadership really matters. For Royal Caribbean Cruises, the lesson was 0:00:47.280 --> 0:00:50.920 stark and clear. After generating almost two billion dollars in 0:00:51.000 --> 0:00:54.840 annual profit before COVID, the company lost more than five 0:00:54.920 --> 0:01:01.440 billion dollars in both At the end of one longtime CEO, 0:01:01.560 --> 0:01:05.040 Richard Fain, stepped down after thirty three years, handing the 0:01:05.040 --> 0:01:08.720 reins to CFO Jason Liberty. What was it like that 0:01:09.080 --> 0:01:12.400 transition going from CFO to sea and we were still 0:01:12.480 --> 0:01:14.240 kind of coming out of the pandemic. We were still 0:01:14.319 --> 0:01:17.680 ramping up our fleet, ramping up our occupancy, and so 0:01:17.720 --> 0:01:19.399 we had to keep our eye on the ball on 0:01:19.880 --> 0:01:23.039 because historically we would bring about three ships up a 0:01:23.120 --> 0:01:26.039 year um and here we brought up sixty four ships. 0:01:26.200 --> 0:01:29.920 And it's a big change to herculean efforts helping the 0:01:29.920 --> 0:01:33.960 new CEO meet those challenges. New CFO and if Tally Holt, 0:01:34.240 --> 0:01:37.160 who moved up from VP of Finance, I had hired 0:01:37.240 --> 0:01:39.959 him I think about six months before the pandemic. I 0:01:40.000 --> 0:01:41.800 was looking for somebody with with a lot of really 0:01:41.840 --> 0:01:44.959 strong work ethics, somebody who was strategic, um, you know, 0:01:45.000 --> 0:01:48.600 somebody who who understood how to you to get things 0:01:48.640 --> 0:01:51.360 done inside of an organization. And I saw those qualities 0:01:51.360 --> 0:01:53.640 and off Tolly. And he has done an exceptional job 0:01:53.760 --> 0:01:57.120 coming into the role. He hit the ground running. That 0:01:57.280 --> 0:02:00.280 dynamic in the C suite is help Royal Caribbeans come back, 0:02:00.320 --> 0:02:05.320 maintain momentum. What's it like becoming CFO working for the 0:02:05.360 --> 0:02:09.200 individual who was CFO and is now CEO. I feel 0:02:09.320 --> 0:02:11.960 very fortunate because I have someone who has been in 0:02:11.960 --> 0:02:14.639 the job for many years is still with a company. 0:02:14.840 --> 0:02:18.880 Obviously as much more responsibly. But he understands what what 0:02:18.919 --> 0:02:21.960 I what, what what it means to be in my job. 0:02:22.200 --> 0:02:24.120 So what was that like for you? Having been in 0:02:24.160 --> 0:02:26.440 the CFO role for so long? What did you expect 0:02:26.440 --> 0:02:27.959 of him? I rely on him very much to be 0:02:28.040 --> 0:02:30.799 my eyes and ears, my strategic partner. And I'm also 0:02:30.919 --> 0:02:33.400 very transparent with him in terms of what I'm thinking 0:02:33.440 --> 0:02:35.800 about and doing um And sometimes he will sit there 0:02:35.800 --> 0:02:37.000 and did we really need to spend money on that? 0:02:37.040 --> 0:02:38.680 And also, yeah, we really need to spend money on that. 0:02:39.000 --> 0:02:41.960 I'm a very direct person and I care and I 0:02:41.960 --> 0:02:44.160 feel that that's that's important for me to make sure 0:02:44.160 --> 0:02:47.560 that if I feel differently, you know, at least we 0:02:47.600 --> 0:02:50.720 have a conversation. And you know, many times I would 0:02:50.880 --> 0:02:52.840 I would I would think one way and then he 0:02:52.880 --> 0:02:56.760 would point his point of view and it would make sense, 0:02:56.760 --> 0:02:58.440 and I would say, you know what you're write and 0:02:58.639 --> 0:03:01.880 you know and I get behind advancing the company's long 0:03:02.000 --> 0:03:05.799 term mission through honest conversation. That's how enough Tally Holt 0:03:06.040 --> 0:03:10.160 takes the CFO roll forward. And maybe many years ago 0:03:10.240 --> 0:03:12.480 we was about making sure that the numbers are correct 0:03:12.560 --> 0:03:16.720 and everything is on time and and we report correctly 0:03:16.760 --> 0:03:19.280 and I think involved today too much more than that. 0:03:19.360 --> 0:03:22.400 You know, what is the strategy that we're going to 0:03:22.480 --> 0:03:25.960 embark on, what does that mean to the financial performance 0:03:26.000 --> 0:03:28.320 of the company, and how does how do we invest 0:03:28.360 --> 0:03:31.240 a view dot um. That's one aspect of it, and 0:03:31.280 --> 0:03:33.720 the other is just making sure that we are always 0:03:33.720 --> 0:03:50.440 on the polls with its full fleet returning to the season, 0:03:51.960 --> 0:03:56.720 Royal Caribbean has enjoyed a financial rebound booking or robust 0:03:56.880 --> 0:04:00.280 and they've been accelerating every quarter. In novemb Or, the 0:04:00.280 --> 0:04:04.080 company announced the Trifecta Program, a three year initiative designed 0:04:04.080 --> 0:04:08.120 to exceed performance in key financial metrics by the end 0:04:08.120 --> 0:04:12.240 of Inside the industry, they're going to fit in because 0:04:12.280 --> 0:04:14.880 there's bent up demand. People want to travel. We have 0:04:14.880 --> 0:04:17.680 a hundred and thirty thousand people sailing with us right 0:04:17.680 --> 0:04:20.480 now as we talked, and they are spending more than 0:04:20.520 --> 0:04:22.680 they did a month ago. They're spending more than they 0:04:22.680 --> 0:04:24.440 did a year ago. They're spending more than they did 0:04:24.480 --> 0:04:27.560 pre COVID on travel experience. We know the ships that 0:04:27.600 --> 0:04:30.960 are coming in. These ships are huge money makers, very 0:04:31.040 --> 0:04:33.640 high yielding. Because of the inventory mix, there's more space 0:04:33.680 --> 0:04:36.960 for onboard revenue venues they're very fuel efficient. Intent to 0:04:37.080 --> 0:04:40.880 cruise is climbing. Whether or not that can be sustained, 0:04:41.080 --> 0:04:43.440 I think is a question to be answered. And there 0:04:43.480 --> 0:04:47.880 are a couple of different elements of that, the first being, UH, 0:04:48.040 --> 0:04:51.280 the economy. Do you get a little nervous with all 0:04:51.279 --> 0:04:55.520 the recession talk or another black swan who would have thought, right, 0:04:55.640 --> 0:04:58.039 what happened the last couple of years. It's hard to 0:04:58.040 --> 0:05:00.640 plan for it right. So what we are focused on 0:05:00.760 --> 0:05:05.080 is to making sure that we have the best business 0:05:04.839 --> 0:05:09.000 the right so the business is run well. We are 0:05:09.040 --> 0:05:11.880 obviously are focused on liquidity and and our and our 0:05:12.000 --> 0:05:13.760 on our financial metrics, and we want to fix the 0:05:13.800 --> 0:05:18.360 balance sheet, um, you know, to to get to back 0:05:18.400 --> 0:05:21.240 to where we were. Fixing the balance sheet, that's a 0:05:21.279 --> 0:05:25.320 heavy lift. Royal Caribbean is carrying nearly twenty four billion 0:05:25.360 --> 0:05:28.320 dollars in debt. Though it's paid down most of its 0:05:28.320 --> 0:05:31.720 short term obligations, the debt still looms large. It's a 0:05:31.800 --> 0:05:35.599 dark cloud over the entire cruise industry. The valuations for 0:05:36.120 --> 0:05:39.400 the major cruise lines have gone down and UH and 0:05:39.520 --> 0:05:42.360 the debt levels are very high, so they will have 0:05:42.440 --> 0:05:46.560 difficulties to to receive more debt and it might be 0:05:46.680 --> 0:05:49.080 very high interest rates. The debt that we took on. 0:05:49.200 --> 0:05:51.400 Half of it was in order for us to deal 0:05:51.440 --> 0:05:54.480 with UH not operating for those for those eighteen months 0:05:54.480 --> 0:05:58.000 and ramping our business back up, staying a lot, that's right. UM. 0:05:58.080 --> 0:06:00.000 The other half of it was actually because we were 0:06:00.000 --> 0:06:02.440 growing and we were taking on new ships, and those 0:06:02.480 --> 0:06:05.440 new ships we get incredible export credit financing for and 0:06:05.480 --> 0:06:07.880 we've done a lot of refinancing and we do believe 0:06:08.040 --> 0:06:10.200 over the coming years we're gonna be a much better 0:06:10.200 --> 0:06:13.160 place to do two things, one is de leverage and 0:06:13.200 --> 0:06:16.440 also improve our rating, and so that will also lower 0:06:16.480 --> 0:06:19.040 our capital costs. Are you comfortable with that level of 0:06:19.080 --> 0:06:22.680 debt and being able to service it, well, we were 0:06:22.720 --> 0:06:24.680 not happy with it. We want to get Our goal 0:06:24.760 --> 0:06:26.880 is to get back to the balance sheet we had 0:06:27.120 --> 0:06:30.920 um which is an investment, great profile. We're back sailing 0:06:31.200 --> 0:06:37.400 UM You occupancies were generating cash flow from operations, so 0:06:37.600 --> 0:06:39.960 you know we Our goal is now to continue to 0:06:40.000 --> 0:06:43.080 grow Ibada, continue to grow the cash flow so we 0:06:43.120 --> 0:06:45.920 can pay down to debt and bring the balance sheet back. 0:06:46.200 --> 0:06:49.279 This business is very resilient. We always said that we 0:06:49.320 --> 0:06:51.240 wanted to have a balance sheet that could take a punch, 0:06:51.720 --> 0:06:53.520 and we proved that we had a balance sheet that 0:06:53.520 --> 0:06:56.640 could actually take a meteor um And so I think 0:06:56.720 --> 0:06:58.880 that's why you know, NOF is very focused. I'm very 0:06:58.920 --> 0:07:02.479 focused on getting back to a investment grade balance sheet. 0:07:02.720 --> 0:07:05.279 I'm getting back to an unencumbered balance sheet. You know 0:07:05.320 --> 0:07:07.520 that that sets us up for events as they as 0:07:07.600 --> 0:07:10.760 they as they come forward, can Royal Caribbean perform its 0:07:10.760 --> 0:07:14.840 way back to unencumbered financial stability. The cruise line generates 0:07:14.840 --> 0:07:18.240 about six revenue from sales of tickets. Most of the 0:07:18.280 --> 0:07:22.040 rest comes from on board spending. At the moment, higher 0:07:22.080 --> 0:07:26.000 prices aren't holding down demand in either category. On the 0:07:26.040 --> 0:07:28.680 ticket pricing side as well as on onboard spend, um 0:07:28.720 --> 0:07:31.480 you are pricing is up versus nineteen. We use nineteen 0:07:31.480 --> 0:07:36.080 as our reference point. Onboard experiences have really been become 0:07:36.120 --> 0:07:39.360 a much more integral part of the experience. What we 0:07:39.400 --> 0:07:41.960 have seen in the past couple of years is that 0:07:42.480 --> 0:07:46.040 we we have a much more penetration of onboard board 0:07:46.080 --> 0:07:49.920 experiences for a guest. So people just want to consume more, 0:07:50.000 --> 0:07:53.080 They're willing to spend more, and that's obviously much um 0:07:53.160 --> 0:07:56.280 that helps them. The yields and the revenues as well 0:07:56.320 --> 0:08:00.000 as the margin pre pandemic. Unless we're impressed by Royal 0:08:00.080 --> 0:08:04.800 Caribbeans margin expansion. Operating margins double during Jason Liberty's first 0:08:04.840 --> 0:08:08.640 seven years as CFO. The barriage ahead may not be 0:08:08.760 --> 0:08:12.800 a smooth especially if inflated costs eat into revenue gains. 0:08:13.320 --> 0:08:18.200 We've seen huge inflation costs on the on the food. However, 0:08:18.320 --> 0:08:21.000 you are supply chain teams have done really an exceptional job. 0:08:21.160 --> 0:08:23.720 So we do believe as which is what the basis 0:08:23.760 --> 0:08:27.800 of our Trifector program is moderate yields and good cost control. 0:08:27.840 --> 0:08:29.920 And for us, good cost control is is low single 0:08:29.960 --> 0:08:32.960 digit um change your ear. If you think about the 0:08:32.960 --> 0:08:36.480 cruise industry, there's a course that vantage full labor because 0:08:36.520 --> 0:08:39.880 they don't have debate the minimum weights is and there's 0:08:39.920 --> 0:08:43.440 also ghost advantage in supplies like food and beverage supplies 0:08:43.440 --> 0:08:45.840 because they buy it in quantity. Jason, what are the 0:08:45.840 --> 0:08:48.959 conversations you have with enough Tolly about costs because it's 0:08:49.000 --> 0:08:51.840 such a big component of of you know, when you 0:08:51.880 --> 0:08:54.439 look at your financial statements, where I really focused no 0:08:54.480 --> 0:08:57.040 off on is where can we become more efficient? Where 0:08:57.040 --> 0:09:00.000 can we use technology for us to become more efficient? 0:09:00.160 --> 0:09:03.040 The food side, what we we want to make sure 0:09:03.160 --> 0:09:05.720 is that the experience that we offer to the guests 0:09:06.520 --> 0:09:10.400 is great, because that's our mission. Maybe we can source 0:09:10.440 --> 0:09:13.200 more locally, maybe we need some of it to source 0:09:13.240 --> 0:09:16.040 more globally. Just reimagine of how do we deliver on 0:09:16.080 --> 0:09:19.400 the service and on the fuel side. UM, we have 0:09:19.480 --> 0:09:22.720 an active hedging program and you know, we're very focused, 0:09:22.800 --> 0:09:25.199 which is good for also for our environment, is to 0:09:25.840 --> 0:09:30.760 minimize the reduced the consumption of fuel UM and that 0:09:30.920 --> 0:09:33.000 is UM. You know, obviously one of the things that 0:09:33.040 --> 0:09:37.240 we can control the most. What Royal Caribbean can't control 0:09:37.640 --> 0:09:41.400 head winds caused by world events that threatened growth. COVID 0:09:41.520 --> 0:09:44.520 zero has meant zero cruising in China since the start 0:09:44.559 --> 0:09:49.000 of war in Ukraine and recession signals are concerns in Europe. 0:09:49.520 --> 0:09:52.280 All this put strain on the supply chain that provides 0:09:52.400 --> 0:09:57.360 Royal Caribbean's most important commodity passengers are sourcing for Our 0:09:57.400 --> 0:10:00.720 guests come from a hundred different locations around the world, 0:10:00.880 --> 0:10:02.880 and we created a platform for it to be very nimble, 0:10:02.920 --> 0:10:05.400 and so we're always sourcing the highest shielding guests from 0:10:05.400 --> 0:10:10.160 anywhere in the world. But our assets, our business moves. 0:10:10.440 --> 0:10:13.400 It's fluid, so when events do happen around the world, 0:10:13.480 --> 0:10:15.480 we have we have the ability really on a dime, 0:10:15.600 --> 0:10:18.240 to move our deployment around or move our sourcing around 0:10:18.640 --> 0:10:20.880 to help mitigate that. So yeah, we're, you know, like 0:10:20.920 --> 0:10:23.280 we always are. We're nimble, and we've you know, are sourcing, 0:10:23.320 --> 0:10:27.199 and our deployment is going to be different. Um and 0:10:27.200 --> 0:10:30.600 then we'll see what brings. Uncertainty about the future of 0:10:30.640 --> 0:10:33.400 travel has weighed on crew stocks over the last two years. 0:10:33.800 --> 0:10:37.679 Despite suns of a rebound, investors remain cautious. What was 0:10:37.679 --> 0:10:39.320 it going to take for Wall Street to be like, 0:10:39.520 --> 0:10:41.800 we're comfortable with this. Well, I think they're getting more 0:10:41.840 --> 0:10:44.360 comfortable with it and and and I think once they 0:10:44.360 --> 0:10:48.199 start seeing guidance and they see the level of profitability, 0:10:48.200 --> 0:10:50.079 the level of cash flow, I think at that point, 0:10:50.120 --> 0:10:53.000 you know what, we'll we'll start to see the the 0:10:53.000 --> 0:10:57.400 the overall crystallization of where we are um and then 0:10:57.559 --> 0:10:59.280 and then begin to think about where we're gonna be going. 0:10:59.720 --> 0:11:02.680 It's Ason Liberty took over as Chief executive of Royal 0:11:02.720 --> 0:11:07.560 Caribbean Cruises in January two, replacing Richard Fayne, who had 0:11:07.600 --> 0:11:12.160 been CEO since and remains chairman of the company's board. 0:11:12.559 --> 0:11:16.280 Liberty's promotion fits with a trend. According to Christ Colder's 0:11:16.280 --> 0:11:19.720 annual survey, more new CEOs are coming to the job 0:11:19.800 --> 0:11:23.520 directly from a CFO chair than ever before. The role 0:11:23.520 --> 0:11:25.800 of the CFO. I think has changed over time, right. 0:11:25.800 --> 0:11:28.560 They become much more strategic, um, you know, and of 0:11:28.559 --> 0:11:30.960 course this world has become more data driven UM, and 0:11:31.000 --> 0:11:32.840 so being able to you know, to to think in 0:11:32.920 --> 0:11:34.920 that way, and and of course being brought up that 0:11:34.960 --> 0:11:37.959 way and putting people in the CFO position that think 0:11:38.040 --> 0:11:42.640 that way versus maybe just doing accounting or treasury related activities. 0:11:43.200 --> 0:11:45.679 I think that's why you're starting to see more CFOs 0:11:45.840 --> 0:11:49.079 rise into the CEO spot, which because there's a lot 0:11:49.080 --> 0:11:51.560 of that kind of commonality that comes in the day 0:11:51.600 --> 0:11:54.360 to day of the CEO job. Royal Caribbean CFO and 0:11:54.360 --> 0:11:57.400 of Tally Holtz brings a strategic and data driven background 0:11:57.440 --> 0:12:00.920 to the CFO role, and he's mission driven as well. 0:12:01.559 --> 0:12:04.240 I was born and raised in Israel UM and like 0:12:04.320 --> 0:12:07.960 everybody else, I enlisted into Israeli Air Force. I had 0:12:08.000 --> 0:12:12.040 a four very meaningful years serving my country and giving back, 0:12:12.200 --> 0:12:14.320 and then I always wanted to be to move to 0:12:14.320 --> 0:12:16.560 the United States. I had some family here, but I 0:12:16.600 --> 0:12:20.160 was just aspiring to the country the opportunity, and I 0:12:20.200 --> 0:12:22.480 thought that the best way for me to do it 0:12:22.559 --> 0:12:25.080 is through going through business school. And I was fortunate 0:12:25.120 --> 0:12:27.959 to get into Chicago Booth and learned from the best 0:12:28.160 --> 0:12:33.120 and get some of those finance skills and knowledge UM. 0:12:33.320 --> 0:12:35.400 And then I started on Wall Street and it was 0:12:35.440 --> 0:12:38.880 just the natural I was, you know, transition. I really 0:12:38.920 --> 0:12:43.440 felt compelled and and interested about UM investments and the 0:12:43.559 --> 0:12:48.240 markets and companies and their stories. And I really learned 0:12:48.240 --> 0:12:51.960 a lot UM and you know, through transactions interacting with 0:12:52.040 --> 0:12:54.560 CEOs and CFOs. So how do you think having a 0:12:54.600 --> 0:12:59.760 career on Wall Street finance background maybe makes you a 0:12:59.800 --> 0:13:03.239 better CFO. Obviously, all the skills that I had UM, 0:13:03.320 --> 0:13:05.840 you know, in my career on Wall Street, understanding how 0:13:05.880 --> 0:13:09.360 to raise capital, what investors are looking for, helped us 0:13:09.559 --> 0:13:12.200 in the beginning of the pandemic when we had to 0:13:12.280 --> 0:13:15.600 raise capital UM to make sure we get to the 0:13:15.600 --> 0:13:19.720 other side. So, you know, just understanding the different instruments 0:13:19.880 --> 0:13:22.520 in the different ways to raise the capital, understanding the 0:13:22.600 --> 0:13:26.559 capital a location, how we will prioritize investments, how we 0:13:26.600 --> 0:13:30.000 were prioritizing the cash flow that this business generates a 0:13:30.000 --> 0:13:33.240 lot of cash low um is something that I'm focused on, 0:13:33.280 --> 0:13:35.839 and obviously I've seen a lot of those in my 0:13:36.000 --> 0:13:39.200 career on Wall Street. A cruise ship is much more 0:13:39.240 --> 0:13:42.360 than a flotilla of financials and numbers. If Tally Holt 0:13:42.360 --> 0:13:45.920 shown me around the celebrity beyond Royal Caribbeans newest ship 0:13:46.440 --> 0:13:50.360 rolling out, not the red carpet, instead the magic carpet, 0:13:50.760 --> 0:13:55.240 an example of investment that's yielding returns in several different ways. Originally, 0:13:55.240 --> 0:13:58.440 actually we designed it because we wanted to have a 0:13:58.440 --> 0:14:01.000 really nice platform for tender in because sometimes we can't 0:14:01.000 --> 0:14:05.320 homeport exactly value functional. And then we looked at it 0:14:05.360 --> 0:14:07.560 and said, why don't we just make it a really 0:14:07.600 --> 0:14:11.200 cool feature spot where people can enjoy it beyond the 0:14:11.240 --> 0:14:13.480 functional space, and we may create that this bar it 0:14:13.559 --> 0:14:16.160 went up and down. It take about the Instagram conues 0:14:16.400 --> 0:14:19.120 become bad at about that I can instagram a moment 0:14:19.360 --> 0:14:22.240 with the sunset, having a drink with your friends or family. 0:14:22.440 --> 0:14:24.440 I mean, that's that's that's amazing. So what does it 0:14:24.520 --> 0:14:26.600 take to do something like this? And I'm thinking cost 0:14:26.680 --> 0:14:30.720 engineering time, Yeah, a lot of effort, from a lot 0:14:30.760 --> 0:14:33.440 of people. So starts from just the design and the 0:14:33.480 --> 0:14:36.480 conceptual aspect of it. Then we need to figure out 0:14:36.880 --> 0:14:40.000 a lot of technical factors, the wait, the wind, and 0:14:40.200 --> 0:14:43.600 so lots of lots of hours of really hard work. 0:14:44.120 --> 0:14:46.440 And every time we up the game, we see that 0:14:46.560 --> 0:14:49.440 customer willing to spend more. Is there like a bunch 0:14:49.480 --> 0:14:52.000 of other innovative ideas that you guys are working on. 0:14:52.120 --> 0:14:53.840 Is there other things that maybe are in the hopper 0:14:53.960 --> 0:14:55.800 that might be like this that we might see in 0:14:55.840 --> 0:14:59.240 future ships. Yes, you know, obviously the ships are core 0:14:59.320 --> 0:15:03.560 to to We delivered the bestifications in the world, um 0:15:03.600 --> 0:15:05.840 and a couple of years ago we saw an opportunity 0:15:06.080 --> 0:15:08.320 to extend that even to land, so we built some 0:15:08.360 --> 0:15:12.960 private islands and exclusive destinations. Cook is one example of it. 0:15:13.200 --> 0:15:16.600 And we have a lot of great ideas and projects 0:15:16.640 --> 0:15:18.800 in the hopper. And you know, we're very focused on 0:15:18.880 --> 0:15:22.520 being discipline. You know, we we deploy billions of dollars 0:15:22.520 --> 0:15:25.520 on behalf of our shareholders, so we we have for 0:15:25.560 --> 0:15:28.920 ourselves and for them, you know, a return expectations. So 0:15:28.960 --> 0:15:31.360 we just to make sure that as we as we 0:15:31.480 --> 0:15:34.080 invest the money, it's it's it's it's getting the returns 0:15:34.120 --> 0:15:38.480 we want in every corner of celebrity beyond, there's evidence 0:15:38.480 --> 0:15:42.320 of careful investment designed to give customers every opportunity to 0:15:42.360 --> 0:15:45.320 spend money. And for passengers who want to spend a 0:15:45.360 --> 0:15:49.320 little more money, there's ample opportunity to upgrade. So this 0:15:49.360 --> 0:15:54.280 is our exclusive retreat area and guests can upgrade right 0:15:54.360 --> 0:15:58.320 and and buy a room a stateroom here and enjoy 0:15:58.400 --> 0:16:01.360 the exclusive access to those facilities. And you can see 0:16:01.360 --> 0:16:04.840 there's a pool, there's cabanas obviously, lots of opportunities for 0:16:04.960 --> 0:16:09.479 food and beverage. The segmentation of giving you know, passengers 0:16:09.520 --> 0:16:11.760 and opportunity to have a different experience, maybe pay up 0:16:11.760 --> 0:16:14.000 for a more premium experience. Is this kind of where 0:16:14.000 --> 0:16:16.160 it's all going. Yeah, And I think it's really about 0:16:16.320 --> 0:16:20.000 every Everyone has maybe a little bit different um you know, 0:16:20.360 --> 0:16:23.840 um desire of what their ultimate vacation is. Some people 0:16:23.880 --> 0:16:26.120 want to go and meet people. Some people just want 0:16:26.200 --> 0:16:29.080 to because it came in with their their where their family, 0:16:29.360 --> 0:16:31.960 just to go and spend their time alone. So it's 0:16:32.000 --> 0:16:35.240 really designed to do to be like the ultimate vacation, 0:16:35.280 --> 0:16:38.120 depending on what do you want. Royal Caribbean is one 0:16:38.160 --> 0:16:41.080 of three companies that together control about three quarters of 0:16:41.160 --> 0:16:46.080 the global cruising market. Its capacity share was second only 0:16:46.080 --> 0:16:48.960 to Carnival and more than twice that a third place 0:16:49.120 --> 0:16:53.240 Norwegian cruise line. Royal Caribbean operates it ships under three 0:16:53.240 --> 0:16:57.200 brands with three distinct profiles. And the Royal Caribbean brand, 0:16:57.240 --> 0:17:01.120 you know, they're more family focused, multigenerational. Our Celebrity brand 0:17:01.200 --> 0:17:03.480 is more of a premium luxury and then we have 0:17:03.520 --> 0:17:08.480 Silver Sea which is ultra luxury and expedition. So it's 0:17:08.520 --> 0:17:11.520 not a one size fits all business. And as passengers 0:17:11.520 --> 0:17:15.200 demand more choices, one way to fulfill them is bigger ships. 0:17:15.520 --> 0:17:18.440 In October, Royal Caribbean unveiled plans to launch what will 0:17:18.440 --> 0:17:21.400 be the largest ship in the world, Icon of Disease. 0:17:21.960 --> 0:17:25.760 It will carry over seven thousand passengers. Its first cruise, 0:17:25.880 --> 0:17:30.000 set for January, sold out within hours. If you're going 0:17:30.040 --> 0:17:31.920 on a on a seven day void, you're going to 0:17:31.960 --> 0:17:33.960 be able to do anything and everything that you could 0:17:34.000 --> 0:17:36.600 possibly dream of and and you know, it might be 0:17:36.640 --> 0:17:38.320 what you want to do, it might be what your 0:17:38.400 --> 0:17:40.040 daughter wants to do, it might be what your parents 0:17:40.080 --> 0:17:43.080 want to do, and everybody can have different experiences on 0:17:43.119 --> 0:17:45.240 a We describe it as the thrill and the child. 0:17:45.359 --> 0:17:48.400 We offer much a lot more on the ship. They 0:17:48.440 --> 0:17:51.920 become much more profitable because there's so much more to do. 0:17:52.119 --> 0:17:55.920 There's economies of scale um and their efficiencies and operations, 0:17:55.920 --> 0:17:58.959 so it ship that we deliver is actually much more profitable. 0:18:00.119 --> 0:18:03.480 Caribbean is also investing in technology to drive profits to 0:18:03.560 --> 0:18:05.760 say that cruising industry is actually one of the leaders 0:18:05.840 --> 0:18:08.439 when it comes to digital transformation, and I see that 0:18:08.640 --> 0:18:10.800 accelerating in the future. We want to make sure that 0:18:10.880 --> 0:18:15.240 we create a frictional ness experience. Right. The expectations today 0:18:15.440 --> 0:18:18.920 from the consumer is that the experience is friction less. 0:18:19.000 --> 0:18:22.840 Especially through the pandemic, people got very comfortable for on 0:18:22.920 --> 0:18:25.520 demand services. They wanted groceries, they went to instacart and 0:18:25.760 --> 0:18:28.520 so for here all through your phone. That's exactly right. 0:18:28.640 --> 0:18:31.560 People want to organize themselves well in advance of getting 0:18:31.560 --> 0:18:33.159 on our ships. So they want to be able to 0:18:33.200 --> 0:18:34.720 book their spa appointments, they want to be able to 0:18:34.760 --> 0:18:37.400 book their short excursions well in advance of them ever 0:18:37.440 --> 0:18:39.520 getting onto the ship. And of course when they do that, 0:18:39.560 --> 0:18:41.480 they actually tend to spend more money, which is also 0:18:41.560 --> 0:18:44.840 a a good thing. So we have to take friction 0:18:44.880 --> 0:18:46.960 and we have been taking friction out of that experience. 0:18:47.080 --> 0:18:50.280 Is there some application where there's the app and there's 0:18:50.359 --> 0:18:51.920 kind of a metaverse where I can kind of walk 0:18:51.960 --> 0:18:53.879 through the ship before I even get on and decide 0:18:53.920 --> 0:18:55.520 what I want to do or where I want to go. Yeah, 0:18:55.600 --> 0:18:57.280 I think it's even I think it's even greater than that. 0:18:57.320 --> 0:18:59.080 I actually think in the metaverse, where we're gonna be 0:18:59.119 --> 0:19:01.640 able to do is to help people begin to dream 0:19:01.760 --> 0:19:03.520 what their vacation is going to be and to be 0:19:03.560 --> 0:19:06.919 able to put on either oculus is or using their phones, 0:19:07.440 --> 0:19:10.200 um to really understand what they're going to expect location 0:19:10.280 --> 0:19:14.720 by location. We are working on this already and it's 0:19:14.800 --> 0:19:16.639 and I think it's going to change. Um, it's going 0:19:16.680 --> 0:19:19.719 to change how people book cruises. And then that that 0:19:19.760 --> 0:19:21.920 content helps us understand how we need to modify and 0:19:22.000 --> 0:19:26.520 change our product not a beautiful thing, that's awesome. Royal 0:19:26.560 --> 0:19:30.400 Caribbean already understands the need to make its operations greener. 0:19:30.760 --> 0:19:32.879 The company just opened a state of the art zero 0:19:33.000 --> 0:19:36.240 energy cruise terminal in Galveston, Texas at a cost of 0:19:36.280 --> 0:19:40.720 one million dollars. Even the behemoth Icon of the seas 0:19:40.960 --> 0:19:44.560 is being built with sustainability in mind, that ship will 0:19:44.600 --> 0:19:47.320 have l en g um as as the base fuel 0:19:47.359 --> 0:19:50.040 for that ship. Now LG is not perfect um to 0:19:50.160 --> 0:19:54.720 transitional fuel UM, it will produce less carbon. We're putting 0:19:54.760 --> 0:19:57.840 a mega watch fuel cell onto the ship and we're 0:19:57.840 --> 0:20:01.359 looking at trifuel engines, so that will be prepared for 0:20:01.400 --> 0:20:04.000 things when whether it's methanol or hydrogen or other comes 0:20:04.000 --> 0:20:09.480 into place. Sustainability is UH is table stakes going forward. 0:20:09.680 --> 0:20:12.720 Six and ten. Consumers in the US are concerned about 0:20:12.720 --> 0:20:16.520 the travel industry's impact on climate change. And when we 0:20:16.600 --> 0:20:21.200 ask consumers who is responsible for fixing it, a plurality 0:20:21.240 --> 0:20:23.840 say it's the responsibility of companies in the industry. The 0:20:23.920 --> 0:20:26.840 cruise line has to go green. There is no a 0:20:26.880 --> 0:20:30.359 lot of options because millennials are the biggest group of 0:20:30.400 --> 0:20:34.000 consumers today already and in the future even more, and 0:20:34.040 --> 0:20:38.120 they are choosing those cruise lines that are sustainable and 0:20:38.119 --> 0:20:41.080 and there's no room for creen washing in the area. 0:20:41.119 --> 0:20:43.840 It's one of our goals right to reduce our carbon 0:20:43.920 --> 0:20:50.679 intensity by double digits and innovation around the environment is 0:20:50.680 --> 0:20:53.480 something that the company has done for many, many years. 0:20:53.520 --> 0:20:56.800 I'll give you a quick example. Um in Um the 0:20:56.920 --> 0:21:00.200 last couple of years we've we wanted to reduce used 0:21:00.200 --> 0:21:02.800 the waste of food on the ship. It's good for business, 0:21:02.800 --> 0:21:05.639 it's also good for the environment. We've used technology for that. 0:21:05.760 --> 0:21:08.399 Really understand how much is it that we have the 0:21:08.480 --> 0:21:11.440 waste of the food and we've implemented technology to help 0:21:11.520 --> 0:21:15.720 us UM reduce that that waste. We are working really 0:21:15.800 --> 0:21:19.560 closely with ports around the world because when the ship 0:21:19.600 --> 0:21:22.760 is on port, we can maybe plug into their green 0:21:22.800 --> 0:21:25.960 grid and or have or powered the ship with the 0:21:25.960 --> 0:21:27.919 fuel cell and then part of it is really the 0:21:27.920 --> 0:21:31.160 fuel of the future, which UM. You know, we continue 0:21:31.200 --> 0:21:35.440 to have a lot of partnerships in R and d UM, 0:21:35.480 --> 0:21:37.959 you know as as we as we continue that journey, 0:21:38.000 --> 0:21:41.359 so we're we're focused on it. There is so much 0:21:41.440 --> 0:21:44.320