Good morning, everyone, and welcome to our fourth quarter 2019 earnings conference call. I'm Arnold Donald, President and CEO of Carnival Corporation & plc. Today, I'm joined by our Chairman, Micky Arison; as well as David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning. Now before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release. First, I sincerely thank the 150,000 members of the Carnival family, who collectively work to offset numerous headwinds and still deliver memorable cruise experiences for our 13 million guests as well as another year of record adjusted earnings per share for our shareholders. We achieved fourth quarter adjusted earnings of $0.62 per share; that's higher than the midpoint of our guidance by $0.14 per share. We ended the year with full year adjusted earnings per share of $4.40, which is a new record for adjusted EPS, 3% better than last year's historical high and broadly in line with our capacity growth, despite a plethora of negative events and circumstances. With that said, we were disappointed not to deliver the level of earnings growth we do plan to achieve over time. We believe our business is inherently capable of and we are working hard to ensure we are, in fact, doing even better. After 5 years of very strong adjusted earnings growth for our company, 2019 brought with it more than our fair share of challenges, including the abrupt regulatory change preventing travel to Cuba, geopolitical events in Arabian Gulf, Hurricane Dorian, a costly unscheduled dry dock and multiple shipyard delays, all of which necessitated the cancellation of cruises and in many instances, resulted…

Thank you, Arnold. Before I begin, please note all of my references to revenue, ticket prices and cost metrics will be in constant currency unless otherwise stated. I'll start today with a summary of our 2019 fourth quarter and full year results, then I'll provide an update on our full year 2020 booking trends and finish up with some color on our 2020 December guidance. As Arnold indicated, our adjusted EPS for the fourth quarter was $0.62. This was $0.14 above the midpoint of our September guidance. The improvement was driven by 3 things: first, increased net ticket yields benefited from stronger pricing on close-in bookings on both sides of the Atlantic were $0.03; second, favorability in net cruise cost without fuel was worth $0.07, driven by cost improvements realized during the quarter and the timing of expenses between the quarters; and third, we benefited by $0.05 from the net impact of fuel price and currency. Lower fuel prices were worth $0.04, while favorable currency movements were worth $0.01. Now let's look at our fourth quarter operating results versus the prior year. Our capacity increased 2.4%. Our North America and Australia segment, more commonly known as our NAA brands, were essentially flat, while our Europe and Asia segment, more commonly known as our EA brands, were up almost 7%. Our total net revenue yields were down 1.8%. Now let's break apart the 2 components of net revenue yield. Net ticket yields were down 3.3% normalized for a small accounting update. Our NAA brands were down 1.4%, also normalized driven by yield declines in late season Alaska and European programs, which were partially offset by improvements in the Caribbean, which were tempered by the redemption of future cruise credits, more commonly known as FCCs, which were issued earlier in the year,…

Thank you, David. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Felicia Hendrix with Barclays.

So you guys gave us a lot of really good color on the call, which is always very helpful. And it sounds like while issues are continuing in Europe and Alaska, you're starting programs to mitigate those challenges. And Arnold, you touched on this a bit in your prepared remarks, but besides moving ships out of the region in Europe, what else can you do to stimulate demand there? So basically, what I'm trying to get to is that some investors have been concerned that you would use price discounting to stimulate demand versus tactical marketing and promotions. So I'm just hoping that you could remind us of your corporate philosophy in terms of yield management and what your typical strategic response would be if demand doesn't change after some of the structural changes you are making are set in place.

Thanks, Felicia. Yes. Definitely, we have a bias towards discipline in pricing. And in Europe, again, I can't emphasize enough what a great job our team has done in Germany, given the environment that they have and how cost is responding as well to the persistent challenges they've had. So with all the moves we made with regards to itinerary planning and capacity movement, obviously, the teams are also doing quite a bit with the trade, and with marketing and using digital marketing and other things more effectively and refining our model with YODA, which is the revenue management tool. We have AIDAs adopting YODA and particularly to that Costa as we put additional revenue management talent on that. And so from a combination of things, again, they fill the ships, it's robust given the nature of the market there in terms of actual demand, we do have record bookings at peak capacity. And so in that regard, it is strong.

And in Alaska, what's sort of strategic things could you do there to stimulate demand, given all the supply?

Yes. Yes, we said on the call, there is, what some people would probably call, a temporary overconcentration of supply in Alaska. But Alaska is premium price to Caribbean. So it is very profitable for us. And obviously, for others, which is why they're there. And we have also a little bit of a mix challenge because as we grow capacity, we can't grow the land portion as well, which naturally gives us a kind of a yield drag because, obviously, the excursion portion helps our overall yield performance in Alaska. But we've got very good initiatives in the key brands that are serving Alaska. We'll have to see how they play out. We're right before wave, but they have some tools and some great marketing techniques. We've revisit the digital aspect of our marketing and enhanced that already dramatically. We've seen some early results from that. So those are the things we're doing, but I don't want to make it sound like Alaska is a bad market, it's a great market. We make really good money there. The reason why capacity is going in is because it is a strong market with a lot of demand from guests. And we're doing everything to put us in position over time, grow yield there, along with growing the capacity.

And then for David or Beth, I was just wondering if you could help us understand the yield in NCC ex fuel cadence for the quarters? I mean, obviously, you've given us the first quarter and the full year, but maybe if you could help us understand better how those would kind of -- just the cadence. And then also, D&A and interest guidance for the first quarter and the full year.

Sure. So on costs, we did say that net cruise cost would be flat for the full year and the first quarter is down 2% to 3%. So obviously, the remaining 3 quarters have to average up each quarter, something close to 1%, just to get back to flat. I'm reluctant to give guidance by quarter because of all the seasonalization and it's very difficult. But I will say that in terms of dry dock days, which does, to some extent, drive some of the net cruise costs, I had mentioned dry dock days were down in the first quarter, and that's why it was driving the cost down. You will see higher dry dock days in the second and lower dry dock days in the fall, which will, to some extent, impact that average 1%. But that's not guidance, I'm just giving you the math to get to the flat. And, Beth, do you have...

Okay. On the -- just on the yield side. So in the first quarter, if you're down 1% to 2% and the full year, you're down 1.5%, I mean, just cadence, what I'm not asking for guidance, but just -- would it kind of be even through the year? Do you think the first half will be worse than the second half? That kind of color.

It's very early. Wave hasn't started. There's a lot left to go. We're doing a lot of marketing and advertising activities that Arnold mentioned to shape the number in the end. And so I'd be reluctant to give you quarterly guidance. But obviously, the full year is similar to the first quarter. So on average, included in that is something similar for all 3 quarters.

Okay. Great. And then the D&A and interest?

Let me get back to you on that. I just -- I don't have the...

D&A for the quarter is $580 million to $590 million and interest for the quarter is $55 million to $60 million.

And then for the year?

$2.4 billion -- $2.41 billion for the year and $220 million for the -- for interest. $2.41 billion for D&A and $220 million for interest.

Thank you, Felicia. Happy holidays to you.

The next question comes from the line of Greg Badishkanian with Citigroup.

Great. In first quarter of '20 and full year 2020, net yield guidance is roughly the same. It's around 1.5 points, if you look at the midterm -- that midpoint of the guidance. What's the cumulative booked position in pricing for Q1? You had talked about slightly higher bookings, with slightly higher pricing for the full year. Is it pretty similar for Q1?

So we just gave the booked position, but we always talk about the fact that our booked position for the first quarter is typically 80% to 90% booked, and we're at the higher end of the range. We've been at the higher end of the range all year, for the last couple of quarters. And that -- at this point in time, that's about as -- for competitive reasons, that's about as much information as we want to disclose.

Okay, okay. Fair enough. And just looking at -- if you look at U.K., you mentioned that you're seeing an increasing overhang from Brexit. Can you talk about what's just driving that? I would think that with greater certainty around Brexit happening, maybe that you'd see an improvement in trends over the coming months, maybe nothing is concluded, but it does look like it's more likely to happen with the regional elections there.

Anything we would say now would be pure speculation and it just happened, and we'll just have to monitor consumer attitudes. What we do know historically is uncertainty definitely creates cautiousness. The greater the certainty, the less cautious they'll be. But having said that, it would be too early for us to make any additional comments.

The next question comes from the line of Jared Shojaian with Wolfe Research.

Going back to your yield guidance for 2020, the minus 1.5%. Have you tried to account for any negative effect from the election or maybe even any positive contribution from some of the additional marketing spend that you have for this year going into next year? And then you called out some booking improvement in the last 8 weeks. Can you just talk about what's changed in the environment over that time period? Is that comment of improved bookings more specific to the Caribbean and Bahamas, post Dorian or more broad-based?

You bet. And concerning [ yield ], it is pre wave. We have a number of initiatives in our guidance. We have not factored in dramatic shifts in consumer attitude, positive or negative. And that relates also to election time. We do know historically, elections can create uncertainty. And so in our guidance right now, we've just taken an approach that things will trend the way they are. But hopefully, with the investments we've made, perhaps, we've obviously made them intending to drive some change, but it's too early. Concerning, yes, bookings...

And -- yes, concerning bookings, just keep in mind, we pointed out the last 8 weeks because we also mentioned that the beginning of the quarter, booking trends were impacted by the hurricane. And so as a result of that, I think we've said many times, we do see a little bit of a blip when something like that happens and then it bounces right back. And that's basically what happened during the fourth quarter.

Okay. So is that primarily Caribbean Bahamas that's driving that improved bookings? Or would you view that as more broad-based?

In terms of volumes, we did see volumes during that 8-week period up in a number of areas, but the big driver was the Caribbean.

Great. And then just as I look at your guidance for next year, you're implying minimal earnings growth into next year with a fairly sizable amount of CapEx. I think the implication would be that ROIC is going to contract in 2020. That would seem to be driven by the older hardware. I think obviously, the newer hardware is getting better returns that's coming online, presumably. So my question is, are all the ships in your fleet, particularly the older ones, are they earning your cost of capital right now? And what do you view your cost of capital to be?

I would say, of all the ships that we have in the fleet are earning and those that are not are either about to be exited of their plans. And so the bulk of the fleet earns well. And -- go ahead, David.

So generally speaking, if you do a mathematical calculation, our weighted average cost of capital is probably about 8.5%. But we look at it very differently because our expectation is for double-digit return on invested capital over time and elevated ROIC. So when we look at investments, we're looking at hurdle rates significantly higher than our weighted average cost of capital.

I think with regard to return on invested capital, the primary driver is the source market, so the brand itself in the source market. Secondarily, would probably be itinerary and the third might be age, if I had to weight them.

Yes, age is a big driver.

Okay. Great. Just one quick housekeeping. What date did you mark your fuel guidance?

Yes. As we indicated in the press release, it was December 6.

The next question comes from the line of Robin Farley with UBS.

Great. You guys have been very clear about the challenge really coming from Continental Europe. And I know that you historically don't give guidance for yields by brand or by region. But I wonder if -- just to -- for -- to make it easier for investors to compare sort of across the industry, can you give us a little bit more insight into what your North American yield expectations are? Just because I think we probably see some positive underlying yield performance there that maybe we can't see with the Continental European drag, and it just might be helpful if you can put some color around that.

Robin, nice try. But as you know, we don't give guidance going forward at this time. And we're pre wave, et cetera, and we just don't do it.

Yes. I mean it's fair to say that we do expect the NAA brands to do better than the EA brands.

Right.

For 2019, the actuals, as you could see, it was 0.8% increase for NAA and EA was down 1.7%.

Okay. And I guess maybe just -- I mean, mathematically, we missed the color that you gave on the last 8 weeks with volume being higher and price flat. Unless there's some change in the environment from the last 8 weeks that would suggest that things are trending positively in terms of how bookings are coming in now, last 8 weeks and sort of where we are now that directionally if your volume is up and your prices in line, it seems like there would be positive yield following that, tempered by the fact that you obviously had bookings on there from before the last 8 weeks and the future cruise credits that you talked about and the continental issues that were in what's on the books already. But I mean, directionally, last 8 weeks and forward, it sounds like what's coming in is in positive territory. Is that mathematically fair to conclude?

That's mathematically fair, but I will say, it's 52 weeks in a year, that's 8 weeks, and there's a lot left to go and wave season hasn't even started. So I just caution you, we'll take every positive, but I just caution you, we got a lot left to go, and we're working very hard with all the initiatives that Arnold mentioned to impact the results. Positive.

The next question comes from line of Harry Curtis with Instinet.

Two quick questions. So for the year, your -- in 2019, your SG&A was up 1.2%. How do you see that trending for next year? It sounds like that focus on marketing is going to lift that percentage increase somewhat, and I'm trying to get a sense of -- a better sense of what that might look like.

I'll have David give you the actual percentage.

Yes.

While they look it up real quickly, what we've done is that we have the sourcing savings that we generate, and we choose to either pass something to bottom line and invest others. And we just, as I mentioned in my call notes, we've been very rigorous and getting more efficient, whether it's media spend, whether it's the digital buys, et cetera. So we've actually been able to increase our share of voice and without a direct correlated increase in costs. But yes, we are spending more.

Yes. And I know you're probably looking at the as-reported P&L when you give that percentages. Remember, those are in current dollars, not constant currency. But to answer your question on advertising from '18 to '19, advertising was up double digits in constant currency.

All right. And you would expect that as well in 2020?

We're not giving detailed guidance on advertising alone, just that the net cruise cost per ALBD is flat.

And then moving on to your CapEx. I just wanted to check, are you still for 2020 and '21 looking at about $5.5 billion each year?

Yes. Well, there was a shift in the timing of the delivery schedule.

So as a result of that, we had originally talked about CapEx in 2019 being over $6 billion, but that came down to 5.4% because of the late delivery of the Costa Smeralda. So now what we're looking at for 2020 is $7 billion, and for 2021, $5.7 billion and 2022, $5.2 billion.

Okay. And can you give us a sense of how much of that is renovation CapEx and maintenance CapEx?

So it's -- all of the non-new-build CapEx is roughly $2 billion, give or take. That includes renovation, shore side, ports, destination development and everything.

Okay. And that'll be fairly constant looking ahead to '20 and '21?

Yes.

The next question comes from the line of Steve Wieczynski with Stifel.

So if I -- if we strip out the 0.5% impacts that you guys are talking about for hardware mix and then delays with some of your ships as well, obviously, that's kind of on a like-for-like basis, you're kind of guiding down about 0.5%. Am I thinking about -- and maybe I'm going crazy here, but I think you guys have talked about that you've embedded typically at the start of each year something in your guidance for other things to go wrong. Is that fair for this year as well? Meaning, that like-for-like down 5% yield guidance, do you have some cushion there for other potential events?

I wouldn't call it cushion, but yes, we do include in our guidance for things that go wrong. And as you can see already this year, we're like barely a month into it, and a number of things have. So we always included in our guidance an expectation for unusual events. In '19, we had it included as well. And as you can see from all the results in '19 with the extraordinary number of unusual events and the heavy hit from Europe, which was unexpected, we missed original guidance net of currency by only $0.10, and so we do factor in because things happen.

Okay. Got you. And then I want to ask about your fuel guidance for this year. And it looks like there's around a $300 million delta in your fuel guidance today versus when you gave kind of soft guidance back in September. I just want to understand what changed so much there over the last 3 months?

So back in September, we used the current prices for HFO and -- as well as MGO and everything else. But as we talked back in September, a lot of people were pointing out that the forward curve for HFO was a lot lower than the current price. And we did not, at that time, speculate that, that would happen, but it has, in fact, happened. HFO has come down considerably, and that is now reflected in our current fuel guidance. And that represents 50% to 55% of our consumption.

Okay. Got you. And then one other thing we get a lot of questions about or gotten a lot of questions about recently is just as we kind of go into 2020 with the scrubber technology and stuff like that. And I just want to make sure you guys feel like you're in a pretty good spot at this point as we head into next year. And I think one of the concerns out there is obviously around kind of this open versus closed-loop type of technology. I just want to make sure you guys feel pretty comfortable that your open-loop technology at some point won't be a headwind moving forward.

Yes. First of all, just with open loop to put things in context, that's in port, you're talking 10% of what we use. And even with that, only a few ports have taken a hard position against open loop. So at this point, those positions are immaterial in terms of our earnings results. But more importantly than that, we feel strongly open loop is a real plus from an environmental standpoint as an advanced air quality system technology. And so we're doing the work to ensure that we educate ports around the world. So open loop is available for use. Even if it wasn't, which is not going to happen, but even if it wasn't, you're talking about 10% of the fuel use. And there are many ports that already have bought into the fact that open loop is excellent advance air quality approach.

The next question comes from the line of James Hardiman with Wedbush Securities.

So wanted to circle back to this idea that you had about 100 basis points of headwinds between the brand mix and some of the ship delays. So if I think about that underlying 50 basis points, can you maybe walk me through how to think about that over the course of the year? I would assume that the Mardi Gras impact is a late year sort of an impact to yield. I'm guessing that, that would also be the case with respect to brand. I guess what I'm trying to get at is, if I think about that underlying growth number with respect to yields, is that actually accelerating over the course of the year based on the way you're guiding?

So it varies by quarter. So for the first quarter, which I happen to have the numbers in detail because we gave guidance, the impact of the unusual events is probably a little bit less than half, but the mix impact, the brand mix impact is a little bit greater than 1/2 and it still turns out to be, in total, about 1% for the first quarter as it is 1% for the full year. I don't happen to have the 2 through 4Q numbers handy. But if you get back to Beth, she can give you more detail.

Okay. That's helpful. And then the commentary on working shipyards to moderate some of the ships you have planned. Maybe -- I was hoping you could get into a little bit more depth there. What can realistically be done? And how quickly can it be done?

So we're obviously in conversations with the yard, but when you have prototypes like we have with Smeralda, the situation is that historically, we've had occasional delays with prototypes. But we're with the yard, working with the yard and are in the process of negotiating what we need to do to ensure their future deliveries on time.

No, I guess I was speaking more towards the slowing of ships being built. Is that not sort of what you're aiming to do just given the environment? Or did I read that wrong?

Not so much the slowing of ships being built. We do have capacity plans over time, that are going to be less capacity.

But we are a -- we're currently in a lot of discussions with the shipyards. So let us continue those discussions and let us get back to you when we have more announcements.

We should get this done by the end.

We hopefully -- yes, we'll get it done by the end of January.

Okay. And then just lastly for me. I think, as we think about the European consumer being the primary headwind here, can you quantify your exposure to that consumer? I think you talked about a 30% number-ish for 2019. Obviously, there are a lot of moving parts for 2020. That number is still about 30%? Or is the movement of costs, does that bring that down a little bit?

Yes. It's -- I don't actually, for '19, have the numbers handy.

I think sourcing-wise, in terms of sourcing guests across all of our brands, I think it's about 50% source from...

Outside the U.S.

Outside the U.S., right.

Yes.

Europe is about low 30s. Yes.

And that hasn't changed, 2020 versus 2019?

Correct. But I'm actually talking, when I say 30%, it's more revenue-wise and guests.

Yes. That's revenue. That's not -- yes. I was...

Okay. But the revenue is -- what the exposure is the revenue rise.

Right.

The next question comes from the line of Assia Georgieva with Infinity Research.

I wondered whether if we look towards Q3 and Q4, having the seasonal markets, and hopefully, Europe -- Continental Europe coming better than it has in 2019, should we see, again, the cadence of yield slightly increase relative to what we're looking at in Q1?

So I guess, your big assumption there is that Continental Europe coming back and doing better. We are not necessarily assuming. We're just assuming a continuation of the current trends in Continental Europe. And Arnold talked about the overconcentration of supply in Alaska and the capacity increase in the third quarter and -- for us in the industry. And as a result of that, we...

And David, that is why I didn't mention Alaska.

Yes. We guess, as you could see, as I said before, yield guidance for the rest of the year is similar to the first quarter and the full year, in total for the 3 quarters. Now with that said, we're working hard. We have a lot of programs in place. And remember that fourth quarter is also hurricane season.

I do know that, given that we experience it every 2 years. In terms of Q4, this was a perfect segue. Mardi Gras being delayed and now being 2021 new build the capacity addition, and Arnold, I kind of suspect Q4 having something to do with the name of the ship. Wouldn't the shipyards provide compensation both for Smeralda and the Mardi Gras delay where they can offset some of the lost revenue and additional costs that you have incurred?

Generally speaking, there is settlements with the yard. Unfortunately, those go into our balance sheet, whatever they are, and so they don't show up in the income statement. So from a shareholder's standpoint, we're often able to balance the operating income hit through the overall value of the firm, but it doesn't show up in the income statement.

The next question comes from the line of Stephen Grambling with Goldman Sachs.

One quick follow-up. What are the expected proceeds from the 2 asset sales? Do you expect a gain on these? And were they cash flow positive?

When you say -- you talk about the 2 ships we just announced, the sale in 2020?

Yes.

Yes. I mean, those will be announced over time, but you're talking -- I mean you're not talking about -- with a company that's got $5.5 billion to $6 billion of cash flow, that's not going to significantly move the needle if we sell 2 ships.

It's a small gain.

It's a small gain. Yes.

And will those effectively go into noncompeting markets? Are they going out of service?

No. They're not going out of service. We sold them to another cruise company. But generally speaking, when we sell ships, they go to tour operators and other operators that don't have our brands and are selling to different source markets and different types of product. So our belief is, hopefully, they continue to expand and grow the market with their capacity as we do with our new builds.

The next question comes from the line of Tim Conder with Wells Fargo.

Wanted to circle back, Arnold. I know, again, the capacity -- the rate of capacity growth that you all had in Germany and then the rate of capacity growth that some other competitors are doing predominantly in the Med, that has been a challenge, but you can still grow earnings yet the pricing headwinds. Any -- I know this is a difficult question to answer, but when do you see the ability to maybe stabilize pricing in Europe? Then, I guess, kind of taking a little derivative of that in Alaska. It appeared that you all ceded price, your competitors largely gained price. And yet you have, as you mentioned, and David's mentioned before also, you have a very great asset on the land side. What kind of -- should we anticipate over the next couple of years the ability to grow that as that would help your yield mix? And that's kind of, I guess, been a little bit of a headwind both in '18 and '19.

Yes. I'll give you an answer directly to your question, and then I think we want to just talk you through the capacity plans going forward for the next few years. I'll let David do that. But in general, we focus on earnings growth and return on invested capital. And so generally speaking, for us collectively as the corporation to get that, ultimately, we'll need a little yield growth given the capital we're employing to build these new ships. And so we don't necessarily need a lot of yield growth, but we do need yield growth to get to the level of earnings growth we'd like to have and to get the elevated return on invested capital that we know is inherently capable in our business model. So with that in mind, if you look at Europe, again, what we've done in the guidance is simply projected the trends to continue. Now we're doing everything we can from a marketing standpoint, from a management standpoint, to try to deliver against that kind of an environment. If that environment changes, then clearly, it's a tailwind. If the environment worsens, obviously, would be a headwind to state the obvious. But I think over time, it's going to be a combination because there are cycles, as you know, that's going to be a combination of the macro environment and our continued ability, and for example, in the case of Costa, to replace the less-efficient capacity, which is what we're in the process of doing, and we have now accelerated that with much more efficient capacity, which in the case of Costa Smeralda, for example. And so that's the plan. We're accelerating that process for Costa, and we believe that's going to give us elevated over time return on invested capital and earnings growth. In the case of AIDA, which is in a very strong market, it's already one of the highest return brands we have and have been able to absorb a substantial amount of capacity in what otherwise would be a down overall travel market, we feel very confident about AIDA's ability to perform in terms of growing earnings and ultimately growing return on invested capital, although they have a very high return on invested capital now. David, you might want to give the forward capacity comments?

Sure. Yes, so just looking at our total capacity increase next year is 6.6%. If you break that out by segment, the EA segment is up 8.4% and the NAA segment is up 5.5%. If you look at it by program, the Caribbean is kind of flattish. It's only up by like 1%. Europe is up double digits. Alaska is up almost 9% and all the other markets are up double digits. So -- and that gets back to the 6.6%.

Yes. And then with Alaska, also I just want to point out that over time, we've had periods in other markets where we've had a very overconcentration of supply. Banged against the wall, we'll settle out there. And as I said, we're growing profitably there. And we expect that to continue. And eventually, you'll probably see a little yield lift over time.

On the Alaska side, should we also anticipate -- again, you may be bulking up a little on the land tour side, given your dominance there, and how that should help the mix?

We continue to invest in our properties there. We're limited in total expansion just because of the nature of Alaska. But we are very happy. We have our joint venture with -- in Skagway, for example, with the railroad. So we look for ways to expand our offerings that would overall help drive yield and additional profits. But it won't be able to grow at the rate that we've grown overall capacity there.

Okay. And then on fuel, 2 last questions here on fuel. The -- in the third quarter call, you mentioned that, that mix of MGO would gravitate up from the anticipated 33%, 35% area to 40% in 2020, given IMO. And then today, you're saying 40% to 45%. What's driving those changes? Is it maybe some delays in getting scrubbers on, the timing of delivery of some of the LNG ships? Is it the -- those 10% of ports that are focused only on the closed-loop? Just a little more color on that.

Yes. It's itinerary plan. It's definitely not the 10% of ports or whatever, it's definitely not that. It's simply refining that itinerary plan.

Okay. And then lastly, David, on leverage, just maybe any changes or just remind us of your targeted comfort leverage range?

So we finished the year at 2.11% in the debt-to-EBITDA ratio, but that's a bit lower than I probably quoted on an earlier conference call, but that had a lot to do with the delayed delivery of the Costa Smeralda. And so with the ship delay, you also had the debt fall into the -- being drawn in the first quarter. And at the end of -- and given the midpoint of our guidance, we would be at 2.34% debt-to-EBITDA leverage in the range of what our target is, is 2x to 2.5x.

The next question comes from the line of Brandt Montour with JPMorgan.

So just one more on Europe, and I just want to sort of dig into how we should kind of think about or how you guys kind of think about the demand side of the local European economies. And a lot of people are looking for reasons. I've seen some reasons to be more positive on those economies into 2020 and later in 2020. And I guess, from your experience and just looking back at history, when we see sort of a troughing and a rebound in those particular economies, how long do you think it usually takes to start seeing some of that impact in your bookings?

I wouldn't speculate -- every situation is different. But what I would tell you is that over time, obviously, we're in the travel business. And we expect travel over time to continue to grow. At any point in time, there could be pockets of consumer confidence, crisis or decline in travel, et cetera, and that happens periodically. And as I said on the notes, we plan ahead. In this particular case, we planned ahead, and we walked right into a sudden turn in the market that have been robust for many, many years. And it's still a robust travel market. It's just that a decline versus continuing to grow as an overall travel market. It will pass through at some point. Meanwhile, we have to adapt. And again, I just can't say enough about our people in terms of their ability to continue to produce results in that environment. And so we wouldn't speculate on when it will turn in, in our guidance. We just assume the trends will continue.

And I just want to point out the obvious. When it does start turning in the booking trends because of the -- we're booked well ahead, there is that delayed impact in the actual revenue in the P&L.

On the other hand, when it does turn, we're well positioned to take advantage of it.

Got it. That's helpful. And then just -- we haven't talked about China at all. I was curious, your game plan for 2020, if it's going to change at all next year? And maybe just an update on your -- on the charter model and your sort of -- and sort of your mix from your -- from a distribution standpoint there would be helpful.

Once again, for us, China is a very small percent of our capacity today. We're really focused on our joint venture. We're very pleased with our partners there and the progress with that and are looking forward to the first new build in China in 2023. But in terms of the market itself, we had a good year in China this year. The team's done a great job. The Costa Venezia is performing very well with all the other ships there. And so we're looking for a good year in China next year. In terms of the charter model and all that, we continue to get more and more so-called kind of direct business and -- but we are very pleased also with our charter partners in China. Thank you, everyone. Happy holidays. Very much appreciate your continued interest in the company. And be assured that we're looking forward to working hard to continuously elevate our performance. Thank you.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.