Norwegian Cruise Line Holdings Ltd. (NCLH) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Norwegian Cruise Line Holdings Third Quarter Earnings Conference Call. My name is Donna, and I will be your operator. [Operator Instructions] As a reminder to all participants, this conference is being recorded. I would now like to turn the conference over to your host, Sarah Inmon. Ms. Inmon, please proceed.

Thank you, and good morning, everyone. Thanks for joining our third quarter 2026 earnings call. I'm joined today by John Chidsey, CEO of Norwegian Cruise Line Holdings; and Mark Kempa, Executive Vice President and Chief Financial Officer. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website. We will be referring to a slide presentation during this call, which can also be found on our website. Both the conference call and presentation will be available for replay for 30 days following today's call. Before we begin, I would like to cover a few items. Our press release with third quarter 2026 results was issued this morning and is also available on our Investor Relations site. This call includes forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements. These statements should be considered in conjunction with the cautionary statement contained in our earnings release. Our comments may also reference non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation. Unless otherwise noted, all references to 2026 net yields and adjusted net cruise cost excluding fuel per capacity day are on a constant currency basis and comparisons are to the same period in the prior year. With that, I'd like to turn the call over to John.

Thanks, Sarah, and thanks, everyone, for joining the call. I'm joined today by Mark as we discuss our third quarter results. Mark will be stepping down as Chief Financial Officer after more than 25 years with the company. He will continue serving as CFO through the end of this year with Meghan Montana, our current Chief Strategy Officer, succeeding him effective January 1, 2027. Mark has been with the company since 1999 and his career spans defining chapters in our history from our years as a privately held company, through our IPO in 2013 and the acquisition of Prestige Cruises Holdings in 2014, which brought Oceania Cruises and Regent Seven Seas Cruises into our portfolio. His experience across our finance organization has given him a deep understanding of our business. I also want to recognize Mark's leadership through the pandemic. At a time when our industry faced an unprecedented shutdown, his steady leadership was instrumental in ensuring the company's survival. On behalf of the Board and our entire team, I thank Mark for his years of service and dedication. We have been attracting and adding great talent to our leadership team and are pleased to announce that Meghan will be our next CFO. She brings a strong combination of financial expertise, strategic perspective and experience in a complex, capital-intensive industry. Her background includes investment banking and senior leadership roles at American Airlines across treasury, financial planning and corporate development. Since joining NCLH in January 2026 as Chief Strategy Officer, Meghan has overseen our transformation office, turnaround strategy and global outsourcing initiatives. Through that work, she has developed a detailed understanding of our priorities and the actions needed to improve our performance. As CFO, Meghan will draw on that understanding of our turnaround and our financial experience to strengthen financial discipline, improve execution and support our capital allocation and balance sheet priorities. I have great confidence in her ability to lead our finance organization as we work to improve performance and deliver long-term shareholder value. Meghan and Mark will work closely together to ensure a smooth transition. Now getting into the quarter. We delivered better-than-expected third quarter results across the board. Net yield declined 6.7% approximately 220 basis points better than guidance, driven by stronger-than-expected close-in demand across our deployment and strong onboard spending. We also maintained discipline on cost with unit costs declining 2.3% year-over-year, 140 basis points better than guidance. Together, these results drove adjusted EBITDA of $937 million, exceeding guidance by $63 million and adjusted EPS of $1.12, $0.22 above guidance. The strong beat, which was driven by the top line was due to extraordinary close-in demand by consumers who deferred summer vacations and ultimately booked closer to departure, reinforcing our confidence in the appeal of our products and the opportunity across our brands. These strengths are central to our turnaround initiatives. And while we have more work ahead, our focus remains on translating these advantages into more consistent financial performance which we expect to improve in 2027, as I will discuss later. Turning to Slide 4. I want to touch on the progress of our turnaround strategy, which is built around three priorities: strengthening revenue performance, improving operating efficiency and enhancing the guest experience. I'll spend a few minutes on the actions underway and the progress we are making in each area. While these efforts will take time to fully implement, we're highly confident that their full benefit will drive results well into the future. We look forward to sharing more detail on our plan its expected financial benefits and our outlook for the business at our Investor Day in the first half of 2027. We have implemented a new revenue management system, rolled out a new baseloading strategy across the majority of NCL's second half 2027 sailings and all 2028 sailings and strengthened the team. We are also changing how we reach our target guests and communicate the value of our offering. Significant work is underway to drive the top line but we are also focused on many other areas, including increasing pre-cruise purchases and growing onboard revenue per passenger day. Improving operating efficiency is another important part of the turnaround. We continue to streamline processes and improve productivity across the business. Over the prior two quarters, we identified approximately $225 million of annualized savings and cash benefits. This quarter, we are announcing an additional $100 million in expected run rate benefits which will phase in over the next couple of years from guests and crew air optimization and refinements to our promotional offerings. These initiatives will support the top line while helping avoid cost with benefits phasing in as we fulfill existing bookings under the prior offerings and a smaller proportion of guest sale with airfare included. Our work here is not done, and we continue to evaluate further significant opportunities to operate more efficiently, including efforts related to outsourcing and leveraging AI. Finally, an exceptional guest experience remains at the heart of our business. We are enhancing our reservation system to make the booking experience easier and give us greater flexibility to offer guest upgrades and other personalized options, creating additional revenue opportunities over time. Across all three brands, we are improving our websites and apps to make the digital experience more intuitive and convert more of that interest into bookings. Turning to Slide 5, I want to give you more detail on the progress we are making in rebuilding NCL's demand generation engine. We have a strong product, and our opportunity is to connect more effectively with the guests who will value it most. The work follows a clear sequence, understand the target customer and what is most important to them, define what the brand stands for and how it meets their needs, sharpen our messaging and improve the overall effectiveness of our marketing investments. Starting with our target customer, we have focused on premium families and seasoned travelers. Our research sizes these audiences at approximately 30 million vacationers from households earning more than $100,000 annually. We have quantified the opportunity these groups represent and refined our understanding of what they want from a vacation. That gives us a stronger foundation for deciding what we communicate and where we invest. And the great news is that they are a largely untapped audience as the significant majority, although avid vacationers, still do not cruise. Fundamentally, we have more of an opportunity to enhance our brand communication as opposed to the product itself, which we believe is an advantage in our turnaround efforts. We will continue improving our product and service and refining our promotional offerings, but our research points to a significant opportunity to communicate the strength of our product more effectively. Our opportunity is to show the consumer what makes NCL distinctive and clearly communicate how NCL is differentiated in the market. Our tagline, "It's different out here," which was first launched in the '90s, has embodied that ethos. But we did not articulate what it meant. Our job now is to bring to life through clear, consistent messaging targeted to untapped audiences. So when our new NCL CMO started a few months ago, he and his team said about honing in on what makes us different. Focusing on those products, services and brand attributes that resonate with the core consumer and are perceived to be a gap in today's competitive offering. Our new positioning centers around the idea of cruise without compromise, built on NCL strengths in freedom, choice and hospitality. Different members of a family or group often want different things from their vacation. Someone activities and adventure, while others want time to relax. NCL offers the breadth of experiences and flexibility for guests to enjoy their vacation in their own way while still spending meaningful time together. On vacation, no one should be forced to compromise or worse yet, return from a trip feeling they need a vacation from the vacation. Our opportunity is to communicate that distinction more clearly and consistently. We believe this positioning is differentiated and ownable and perhaps most importantly, addresses the perceived experiential gaps in cruising that have resulted in such a low historical penetration with these consumers. This positioning will guide a new creative platform that we expect to launch in January alongside the 2027 wave season. The platform combines creative development with consumer research and data to ensure the message connects with our core audiences. It will provide a consistent foundation for how we present the brand across our own channels, paid advertising and earned media with room for the creative to evolve over time. We are also becoming more disciplined in how we allocate marketing investment. Through media mix modeling, we are evaluating how our channels contribute to demand and where our spending can be most effective. We identified an imbalance in our prior approach with too much emphasis on consumers already considering a cruise and insufficient investment in introducing NCL to potential guests earlier in their decision-making process. We are adjusting that balance to build awareness and consideration while continuing to support near-term bookings. This includes greater visibility through social media and creator content, brand activations and high-profile media placements, similar to what we recently did at the U.S. Open and the New York Food & Wine Festival. We plan to support the January launch with a focused media push during the first quarter, an important period for generating demand. We also have a focused effort on optimizing AI-driven search as consumers' travel planning behavior is rapidly evolving. Taken together, this work gives us a clear and more consistent approach to reaching our target guests as we build demand our revenue management capabilities and baseloading strategy will help us manage the booking curve more effectively and optimize yields over time. As you can see on Slide 6, 2027 is a tale of two halves. For the first half, our book position remains behind the same point last year, although at higher pricing. We do not expect our marketing and revenue management initiatives to meaningfully benefit first half performance due to natural shape of the booking curve. For the second half, our book position is in line with the same time last year, also at higher pricing, and we expect to begin seeing early benefits from those initiatives. The second half book position, together with the initial expected benefits of our turnaround initiatives supports our expectations that full year net yield growth will be 1% to 2% with a meaningful acceleration in the second half of the year. Turning to Slide 7, I want to highlight an exciting milestone for NCL and a major step forward in the experience we offer our guests. On September 4, we celebrated the official opening of Great Tides Waterpark and our new two-berth pier at Great Stirrup Cay. I attended the opening and can tell you firsthand that Great Tides is an incredible addition to the NCL vacation experience. With 19 water slides and a high-energy river, the waterpark offers everything from thrilling drops for adventure seekers to splash areas where younger children can join in the fun. What stood out to me was how much there is for families to experience together with options for different ages and comfort levels. It brings our promise of cruise without compromise to life. The new pier is an important part of that experience, making access easier and more reliable and allowing guests to spend more of their day enjoying everything the island offers. Most encouraging is the response from our guests. 90% of guests surveyed visiting Great Tides say they would recommend Great Tides Waterpark. And the waterpark is receiving the highest ratings of any experience on the island. That is a strong early endorsement of what our teams have created. We are also introducing that experience to a much wider audience. Approximately 100 social media creators joined us for the grand opening, and their content has generated more than 275 million views to date. That content continues to reach potential guests well beyond the opening itself, giving us a powerful way to showcase the island and the broader NCL vacation experience. Financially, the early results are in line with our expectations, including waterpark participation and onboard spending. We expect the opportunity to build as awareness grows and more guests experiencing the island. In the near term, that opportunity is primarily in onboard revenue with the potential to strengthen demand and support higher ticket pricing on itineraries visiting Great Stirrup Cay over the longer term. We believe Great Stirrup Cay gives guests another compelling reason to choose NCL in the Caribbean and will be a cornerstone of the brand's growth strategy. At Regent, we are also elevating the guest experience. Turning to Slide 8. We are preparing to welcome Seven Seas Prestige to Regent this December, which will mark the brand's first new ship class in a decade and is an important next chapter in its growth. Prestige takes the space, service and all-inclusive experience that Regent guests love to another level with more space per guest than our previous ships. That translates into more room to relax, beautifully designed suites and expansive public spaces while preserving the personalized service that defines the Regent experience. New suite categories and dining experiences including our Mediterranean restaurant, Azure, give guests even more to look forward to. The response has been truly exceptional. When reservations opened, launch day bookings exceeded Regent's previous new ship record set by Seven Seas Splendor by 26%. Importantly, that demand is translating into strong pricing for Regent, with Prestige commanding meaningful premiums to the rest of the fleet. The Skyview Regent Suite is a great illustration of that pricing power, spanning nearly 9,000 square feet across two decks, it offers an extraordinary private retreat at sea. With fares starting at $25,000 per night, the suite is already booked on over 70% of Prestige's 2027 sailings, a powerful indication of the demand for this level of experience. Across the ship, the combination of strong demand and premium pricing reinforces our confidence in the opportunity to grow Regent through an exceptional guest experience. We are excited to welcome guests to board and build on that foundation as we continue growing Regent. With that, I will hand the call over to Mark to go through the financials.

Thank you, John, and good morning, everyone. Before turning to our results, I want to say what a privilege it has been to serve this company for more than 25 years. We have accomplished so much together and navigated extraordinary challenges. What I am most proud of is the dedication and resilience of our people, particularly the various teams that I have had the honor of leading. As I prepare to step down as CFO, I do so with confidence in our brands, our strategy and the opportunity ahead. Meghan brings extensive financial experience and a deep understanding of the priorities driving our turnaround and she has my full support. I look forward to working closely with her and remaining in an advisory capacity through June 2027 to support a smooth transition. I am grateful to our teams, our Board and the investors and partners who have supported us throughout my time here. I'll begin our third quarter results on Slide 9, which exceeded our guidance across all key metrics. Better-than-expected revenue performance, combined with continued cost discipline, drove adjusted EBITDA of $937 million exceeding guidance by $63 million. Starting with the top line. Net yield declined 6.7% on a constant currency basis, approximately 220 basis points better than guidance, driven by stronger-than-expected close-in demand and onboard spend. That demand also lifted occupancy to 106.5%, approximately 250 basis points above our expectation of 104%. While this performance is encouraging, we believe the stronger close-in demand primarily reflected pent-up travel demand from consumers who deferred vacations earlier in the summer and ultimately booked closer to departure, as John mentioned earlier. Turning to costs. Adjusted net cruise cost ex fuel per capacity day declined approximately 2.3% year-over-year and 140 basis points better than guidance. This performance reflected better-than-expected savings across the business as well as favorable timing of certain expenses that shifted to the fourth quarter. Together, stronger top line performance and lower costs drove an adjusted operational EBITDA margin of 43.3%, approximately 210 basis points above our guidance. Adjusted EPS was $1.12, exceeding guidance by $0.22. These results reinforce our confidence in the appeal of our products and the opportunity to translate stronger revenue performance and disciplined cost management into improved profitability. Turning to our fourth quarter outlook on Slide 10. We expect net yield to decline approximately 6.5% on a constant currency basis, in line with our prior implied guidance. This outlook reflects stronger underlying net yield growth offset by unfavorable mix impacts due to the delayed delivery of Seven Seas Prestige to late December and the cancellation of select Seven Seas Voyager sailings transiting the Suez Canal. When looking at our fourth quarter guidance, we are taking into account the onboard benefits from the opening of all the amenities at Great Stirrup Cay, which has been tracking to our expectations. Over time, we expect the enhanced island experience to support higher ticket pricing on sailings that involve the island as awareness grows and demand builds throughout the booking curve. For the full year, we are carrying through the stronger-than-expected third quarter net yield performance and raising our full year net yield guidance to a decline of approximately 4.4% on a constant currency basis. Turning to costs. We expect adjusted net cruise cost ex fuel per capacity day to increase approximately 1.7% year-over-year primarily reflecting expenses associated with certain initiatives shifting from the third quarter into the fourth quarter. Despite this timing impact, most of the third quarter cost outperformance carries through to the full year. We now expect full year adjusted net cruise cost, excluding fuel per capacity day to decline approximately 0.4%, an improvement of approximately 15 basis points from our prior guidance. Moving to adjusted EBITDA. We expect fourth quarter to come in at approximately $414 million and are raising our full year outlook by approximately $50 million to $2.55 billion. We expect fourth quarter adjusted EPS of negative $0.12 and are increasing our full year outlook by $0.20 to $1.70. Turning to Slide 11. Improving operating efficiency remains a key pillar of our turnaround strategy. Building on the savings announced in the past 2 quarters, we identified an additional $100 million of savings related to guests and crew air optimization and other tactical changes in commercial offerings. Modifications to our promotions were made earlier this year and benefits will phase in beginning this year throughout -- through to 2028 and will benefit both the top line as well as crew related transportation and logistics costs. Combined with the approximately $225 million identified over the prior 2 quarters, these actions bring our total annualized savings and cash benefits identified this year to approximately $325 million and our total identified to date to over $600 million. As we have said before, our work here is not done. We continue to identify opportunities across the business, including outsourcing select shoreside support activities where specialized partners can help us simplify processes, improve service and lower costs. We expect to announce further savings as these initiatives advance. Our focus remains on improving our cost structure and strengthening cash generation to support margin expansion and deleveraging over time. As you can see on Slide 12, we have maintained a consistent focus on cost discipline for several years. We began 2026 expecting adjusted net cruise cost ex fuel per capacity day to increase approximately 1%. During the year, we have continued our disciplined focus on cost, and as a result, we have improved our NCC ex fuel outlook by almost 150 basis points and we now expect a decline of approximately 0.4%, reflecting savings from both shoreside and shipboard and the efforts of the teams across the company. Sustaining this progress requires continued focus and execution. We have delivered three straight years of sub-1% unit growth, including an expected decline of 0.4% in 2026 and expect to continue that strong discipline in 2027. Together with the expected full year net yield growth of 1% to 2% on a constant currency basis, accelerating meaningfully in the second half, this positions us well to improve profitability and strengthen our financial position into the future. Turning to Slide 13. Reducing leverage remains a top financial priority. As we have discussed, this will take time, supported by stronger top line performance, disciplined cost management and a lower level of capital spending over the next few years. Our new build and growth capital expenditures remain elevated through 2027 as we are completing an important growth cycle for the company. Moving into 2028 and 2029. Our gross new build capital expenditures declined by about $1 billion each year, which frees up important cash needed to improve the balance sheet. This reduction in CapEx, combined with a stronger business supported by the turnaround further enhances our deleveraging profile. Finally, turning to Slide 14. We completed several transactions that strengthen our liquidity and supported our fleet optimization strategy since the last earnings call. We completed the sale of Oceania Sirena and entered into a charter agreement to continue operating the vessel through spring 2028, and we entered into a memorandum of agreement to sell Oceania Insignia, with delivery to the buyer expected in September 2027. These decisions support our strategy to deliver a more consistent guest experience across Oceania's fleet aligned with the elevated standards of its newest ships, while also generating cash to strengthen our financial position. More importantly, subsequent to the quarter end, we completed the issuance of $950 million of senior notes due 2031 and upsized our revolving loan facility to $2.8 billion, further enhancing our liquidity profile. This transaction was leverage neutral. With no significant debt maturities until 2029, we believe our existing financial resources and ongoing cash generation provide a clear path to fund our turnaround strategy and strengthen our balance sheet over time. I'll hand the call back over to John for closing comments.

Thanks, Mark. Before we open the call for questions, I want to leave you with a clear sense of where we are today and why we are confident in the opportunity ahead. We have exceptional products across our three brands, dedicated teams and compelling new experiences that give guests more reasons to choose us. From Great Tides Waterpark to Seven Seas Prestige, we are building on those strengths while moving quickly to improve how we market price and operate the business. The changes we have discussed today are concrete. We have strengthened our commercial leadership, implemented a more disciplined approach to revenue management and identified additional opportunities to improve efficiency. We are now focused on turning those actions into consistent results. Looking ahead, our stronger second half 2027 booking position and higher pricing, together with the expected benefits of these initiatives, give us confidence in a return to positive net yield growth in the second half and for full year 2027. We see 2027 as an important step forward in restoring the performance this business is capable of delivering. We have more work to do, but we are moving with urgency and clear accountability to affect our turnaround, capture opportunity and deliver value. I want to thank our team shoreside and onboard for their commitment to our guests and the progress we are making. We're excited about what lies ahead and look forward to sharing more in the quarters to come and at our Investor Day in the first half of next year. With that, operator, please open the line for questions.

[Operator Instructions] Today's first question is coming from Steve Wieczynski of Stifel. Please go ahead.

Congrats, Mark, on a great career at Norwegian. We'll clearly miss working with you. So look, as we think about next year, you gave us a lot of color around your yield outlook and actually your cost outlook as well. But wondering what gives you comfort today to think about yields at this point going up 1% to 2%. And look, I understand your book position for the second half of next year has at this point, better pricing against the same book position. But I guess what I'm trying to understand is maybe a little more color about what you're embedding into that outlook, thinking about things like you still have a war going on. What is close-in demand? What does onboard spend look like? I guess the bottom line is I'm trying to understand if this 1% to 2% yield outlook, is it super aggressive? Is it conservative? And then maybe some color around how you're thinking about like-for-like pricing next year given you will have the benefit of some new hardware and GSE as well. So sorry, there was a couple of questions there within one.

Yes, Steve, it's John. I'll go first, and we'll forgive you for multiple questions. No, I'm kidding. I think it's a lot of things actually that give me a lot of confidence or give us a lot of confidence about '27. First, if I look at the performance in Q3 where we outperformed, when you look at the fact, even with the headwinds of the delay in Prestige and Voyager not going through the Suez that we're able to maintain our outlook for Q4, which tells you the underlying business was doing better. So the fact that 3 and 4 are better and we can sort of absorb that hit, if you will, I think those are good signs right there. And then when I look at the fact that we're ahead on pricing in every single quarter next year, and to your point, while we are behind the booking curve in the first half of the year, which we've been very clear about, but when you look at the second half where we're on the curve and with our new baseloading strategy, presumably, we can get better from there, for sure, I'm not saying we're at the optimal spot at all. But definitely, the fact that were where we were last year is a great thing. And then when you think about the fact that marketing we'll be launching with the wave season in January, which hasn't begun at all, when you think about the revenue management systems that we put in place and all the changes we made to that team I think when you put all those factors together, that's why I'm highly confident, or we're highly confident we will get to the net yield that we're giving you guys for 2027.

Our next question is coming from Brandt Montour of Barclays. Please go ahead.

I also want to extend my congratulations to Mark. It was great working with you, Mark. I wish you the best of luck in whatever is next. I have also a sort of a two-parter on bookings. Based on the commentary in the release. And the first one is for the first half, you're booked below with pricing above. How can you fill that in while also protecting pricing integrity? And on the second half, you just mentioned, John, that you're only booked in line despite a handful of months into the baseloading strategy which you -- I think we would have expected you to be a little bit of a head maybe at pricing in line or below. And so I guess, is that strategy working? And what is sort of holding you back there?

Yes. So well, actually, for the second part, yes, I mean we just put that strategy in place. We have some -- I think we talked about this on the last call. We have some marketing ideas on how to drive that point home much more clearly with both the consumer as well as the travel agent community, which we'll be talking about that on the next call, you'll be seeing that. So I do think it's working. It's early days. But again, given that we're ahead on pricing and where we were last year, again, that's a great sign. Can it improve from there? Yes, absolutely. I think the other unknown that you bring up is this close-in booking that we saw in this -- in the third quarter, which is one of the reasons that we outperformed. Does that continue? So as an example, in the fourth quarter, we've assumed that it doesn't, but we're still confident we can overcome those headwinds. And the reason we don't know, I don't think one quarter doesn't a trend make, and then you've got the holidays in the fourth quarter. So I think we're going to learn a lot more in the coming months. So if that close-in booking continues, there could be some upside potentially in the first half as it goes through the second half of the year, same thing. So I just think we have to be a little patient and see how this all plays out. But again, I feel really good about how we're set up for '27.

The next question is coming from Ben Chaiken of Mizuho.

And Mark, best of luck. It seems like underlying is improving, but still a long road ahead. My question would be on the balance sheet. I think leverage next year is still pretty high on our estimates. So more than the 6.5x to 7x range depending on where EBITDA shakes out. Is there -- I don't know if there's a view internally on how you think about reducing that leverage? Is this just organic deleveraging? Or would you consider an equity raise in it that's organic? Can you maybe give us some broad strokes on how this occurs over the next couple of years?

Yes. A couple of things there, Ben. One thing, I think the 6.5 to 7x is a little high. I think it's a little lower than that, but I take your point. No, I would say from where we sit, we believe we have sufficient liquidity and financial resources after both the recent bond issuance and the revolver upsizing, so we don't foresee the need for equity issuance at all. And I think we've got plenty of liquidity to get us through this turnaround. In terms of deleveraging, I mean, ideally, it would occur organically. That's what should happen. Having said that, don't forget, we take only one ship a piece in the year 2028 and '29 and that's about $1 billion per year in reduction in terms of our CapEx there. So that is also available to delever. So depending on how the situation goes, you've got both of those things in your favor. So we are very focused on delevering the business over the coming years.

Yes. And I think, Ben, as you think about 2027 as well, we are taking two ships, one about midyear and the other in the third quarter, I believe. So when you think about leverage, we're not going to get the annualization of that -- of those earnings, yet we still do have the full debt load. So again, that will be another natural decelerator as you think about entering the first half of 2028.

The next question is coming from Conor Cunningham of Melius Research.

Mark, echoing everyone else, congratulations. Looking forward to what you're up to next. Just on the -- well, maybe to Mark, you've identified $25 million of incremental cost savings on top of your initial plan of $300 million. You talked a little bit about further opportunities onshore and through AI and so on. So if you could just maybe talk a little bit about that. The reason why I ask is that sort of like a high level, you look at your current net yields of up 1% to 2% in 2027. I think you've consistently proven sub-1% unit costs. You do have higher interest expense. Oil will be what it is. Just trying to directionally understand how earnings will flow next year a little bit. Right now, it seems like there's potentially flat to down. But just any high-level thoughts on cost because that seems like a big swing factor next year in general.

So just to clarify, through our last call, we had announced $225 million. This quarter, we're announcing another incremental $100 million bringing it to $325 million in the course of 2026. Equally as important, I think when you think about our prepared remarks, we have clearly said we're not done here. We do believe and we do have line of sight of further incremental cost savings for next year. Some of that we talked about strategic sourcing in offshore and related. So I think there is more to come on that. And look, I think when you're thinking about 2027 in addition to that, if you look at historical, over the last three years, we've been able to deliver sub-1% unit costs, including this year going from, I believe we were up 1.25%, 1.5% to going down almost 0.5%. So we clearly are very, very focused on this. Our work is not done, and you will continue to see us make significant efforts on that front over time.

Our next question is coming from Lizzie Dove of Goldman Sachs.

I'll echo my congratulations to Mark. It's been really great working with you and definitely best of luck for the next chapter. So on '27, I know it's always been a first half, second half story. Has anything about the cadence of that changed? And could you give us a sense of the relative contribution of what you expect from the Norwegian brand versus Oceania and Regent and whether the expectation is for the NCL brand to return to positive growth for next year?

Yes. No, nothing, Lizzie, has changed about the cadence in terms of the first half versus the second half other than as we just said, it's gotten better over the last few quarters on a relative basis, but still second half is really where you're going to see the major impact. And yes, Oceania and Regent continue to perform very well. And you can see no reason why that would change. So yes, obviously, Norwegian has to be, by definition, given the size of the business relative to the overall portfolio. Yes, the most of the improvement is obviously coming from the Norwegian brand, which is, again, what is driving the shift to the positive yield. And again, what we've seen both in Q3, what we see in Q4 and looking out, again, if you're looking specifically at Norwegian, not just across NCLH, again, high confidence on what we can deliver next year.

The next question is coming from Robin Farley of UBS. Please go ahead. [Operator Instructions] We'll move on. The next question is coming from Stephen Grambling of Morgan Stanley.

I realize it's a little bit early, but and maybe I missed this if you did provide it, but are there any details you could give in terms of the percentage of passengers that are touching down on Great Stirrup Cay that are actually buying a waterpark ticket.

Yes, I'm not sure. Maybe Mark can help me out or somebody on the percent. I know it's 1.4 million, I think, initially, we had said 1.2 million. And given a lot of the itinerary work we've been doing because that's one of the other areas we've been focused on about improving our itinerary planning for '27, '28. But -- so through some changes today, we were able to actually get another 200,000 people in the island next year. I don't know what the percentage off the top of my head.

Yes. I think, Stephen, we haven't given exact percentages, which we would expect that are participating. What I can tell you very clearly is that it is meeting our expectations, both in terms of the take rate on the ship as well as the pricing. So as we continue to get more and more exposure, especially into Q4 with more and more families sailing on those itineraries, we would expect that to continue to improve. And then, of course, over time, as that awareness builds, I think, over time, then we would start to leverage the pricing on the itineraries that we'll be calling on the island. But that will take time to build awareness. But certainly, the on-island amenities as we have expected so far are performing to expectations.

The next question is coming from Vince Ciepiel of Cleveland Research Company.

Congrats, Mark. It's been a lot of fun working together. My question is just kind of big picture on luxury. I know when you consider Regent and Oceania as well as kind of your exposure to The Haven. I imagine it's a good chunk of your revenue, which is kind of exposed to that luxury travel. And it sounds like a core part of the strategy is the focus on premium families. Just kind of curious, as you think about crafting your marketing message in the next 6 to 12 months into the wave season as well. Just how well you think the consumer understands kind of that premium Haven product? And if there's an opportunity to maybe emphasize that more in your new marketing and go-to-market strategy?

Absolutely. We hear that loud and clear from travel agents when we're out talking to travel agents, from doing consumer research I think that we did a good job when we first launched The Haven, how many over 10 years ago, we talked about it a fair amount. And then for whatever reason, we sort of walked away from reminding people that, to your point, we really have a luxury ship within a ship. And so when you see the new marketing campaigns that will roll out with wave season in January, you will see a reemphasis on The Haven. So it is absolutely something we need to remind consumers about not only just to get more people there, but obviously, I think that's going to help us raise yields on that particular product within the ship as well. So stay tuned.

The next question is coming from Xian Siew of BNP Paribas.

Maybe could you help us a little bit on how to think about the composition of net yields into '27 in terms of occupancy and pricing? Because to your point, seems like pricing is up for the first half, even though you're behind on the booking curve. Maybe can you help like should we interpret more pressure on occupancy you can hold the pricing? Or any color would be helpful.

Look, I think, Xian, when you think about the first half, yes, we said we're behind in load, but we are ahead of pricing. I think the ideal situation is that we're going to claw that back. And of course, as you think about the second half, we would expect both acceleration and overall yield, which is going to be a combination of pricing and load factor. But generally speaking, I think when you look -- you step back and you look at it from a 30,000-foot view, I would expect that we are going to see overall load factor increases next year again, as we're annualizing over some of the underperformance that we've seen in 2026.

And our ad campaign.

As well as -- yes, good point, as well as our increased ad and marketing campaigns and really focusing on families as well as more of the destinations, having the full tool chest of having our full island operations open. That should be complementary in terms of load factor.

Thank you. Our next question is coming from Richard Clarke of Bernstein. Please go ahead.

I just want to follow up on the comments around baseloading. I guess we probably all would have expected with baseloading, you would have got more bookings in earlier but at lower prices. Maybe just reiterate why are you not seeing that? Is that because baseloading has not been fully enacted yet and where it is fully enacted for 2028, would you expect to start the year off at lower prices but more demand? And I guess secondly, when you're enacting that strategy, how easy is it to distinguish whether this is truly incremental demand or just someone who's booking a bit earlier because of the baseloading pricing strategy?

Yes. So Richard, the reason that you don't see it as much in '27, because obviously, there was a lot more inventory at booked in the first quarter of '27. So when we came in and decided to do this more in line with the rest of the industry, it's really -- you couldn't impact it that much in the first half of '27. So that's why I differentiate between the two. And it's not across the board. I mean, you do this by itinerary. So there are certain markets where I think it's more imperative to help you. There are other markets where it's very solid either because of our position in that market. So you kind of have to go sailing by sailing, but it's -- yes, it's fully implemented in the back half of '27. You will clearly see it for all of '28. And then I think on the incremental demand piece, again, I think some of the marketing things we can do is we either through some of our programs that we're going to roll out are just conditioning the consumer and the travel agent over time. You should have more people booking earlier instead of waiting because traditionally, again, if you wait with Norwegian, you've gotten a better deal over time. So is it incremental? I'd like to think we will get some because of the programs we're going to roll out, so people have confidence the deal they're getting is what they're going to get, no matter what happens with the price. But I also think it will just get people to book sooner. So I think we're going to benefit on both. Some of it will be incremental, and some of it will just be pulling it in because people have confidence in what we're doing from a pricing standpoint.

And Richard, another important point to that is that by doing that, we would expect that we're going to have a much more stickier customer over the course of the booking curve. So ultimately, that theoretically should reduce in more churn as you get toward the final payment, which also, in turn, reduces your overall acquisition costs and promotional value that you would have to go back to retrace those customers or refine those customers or new customers.

The next question is coming from Trey Bowers of Wells Fargo. Please go ahead.

Just as a point of clarity on the occupancy side of things. For the yield thoughts for next year, 1 to 2 points, so there's a little bit of occupancy and a little bit of price in that. And then on a bigger picture question, especially given more of a focus on bringing more families on board as we think out over the next several years, where would you guys like to see that occupancy go over time? And then just a quick follow-up, Mark, if you could just talk to some of the kind of air dynamics that you guys referenced in the press release as you guys find more efficiencies there, how that shows up between kind of the growth from that bridge?

Well, on the occupancy side, and Mark and I can both chime in on this one. I think if you look back over five, six years when we were much more family focused in terms of our advertising and going after our premium families, we would have quarters where we were 111, 112, might have even hit 113 for one quarter. So I would expect us to clearly get back to 110 and above. Again, to your point, probably won't happen overnight because it will take a while to keep hammering that message about premium families, remind people about the island, all those things. But I certainly think reclaiming lost ground is not unreasonable in the least and something we should absolutely be striving for.

Yes. Going after occupancy over the next few years is another key pillar around the strategy. That is an area where we've declined over the last few years, and it's clearly an area where we think there's significant opportunity. Trey, on the air dynamics, obviously, we mentioned that we've made some improvements in our overall operational and commercial capabilities around that as well as the promotional activities. That's going to phase in over the course of the latter part of '26, '27 and '28, the benefits, primarily as a result of you did have a lot of passengers who had already booked under that existing program. So from a -- from that standpoint, you have to let that bleed out. But as well as on the crew side, that you would expect to see a bit more of a benefit of that in 2027. So again, that is an identified savings. That one just has a little bit more of a bleed in period over time.

The next question is coming from Robin Farley of UBS.

Great. Hopefully, my line is open this time. Hopefully, you can hear me.

We can hear you.

Great. So I wanted to ask and since I had to hop off and dial back in, I hope that you didn't, I think -- addressed a little bit of this in your earlier commentary, but just to get a finer point on the baseloading and your expectation that both load and price would move up from here. I guess how do you get confidence that you don't have to have price move down to move your load up just given that baseloading hasn't led to that higher load yet. But -- and are there any data points on like Q3 in particular, where you can see that dynamic? Like, in other words, does Q3 look better than Q4 in terms of that, what's on the books? And then I just have a little clarification on something else.

So I think in terms of the baseloading strategy, I want to clarify that we've really just implemented this over the last, let's call it, 60 to 90 days. And again, mostly for back half 2027 sailings and all of 2028 sailings. So again, that will take time. That's not going to turn into instant mashed potatoes. But of course, obviously, us doing that, we would expect that over time, that is going to generate an overall improvement in yield across the board as well as lower acquisition cost over time. And then I think your second part of the question was bifurcating Q3 and Q4 of next year. Look, at this stage, it's a bit early. As we've said, the second half is at similar load factors but at much better pricing. And I think as we think going -- as we think about going forward in February, we'll definitely be able to give you much more color at that point in time.

And then just my clarification point is on the $100 million in cost saves, you referred to some savings in air. Is this $100 million in cost saves, this like incremental $100 million cost saves going to be something that helps the net cruise cost line? Or is this -- or is some of this going to show up between the gross and the net yield line, just to clarify, the $100 million will be showing up.

It's both. And obviously, the net cruise in the yield line is more -- I look at this airfare program that we were doing as basically a marketing subsidy. And so when that goes away, that obviously will affect your revenue line. But if you look at the crew cost, that piece, that obviously is in your cost. So it's a little bit of both.

Okay. And any -- is it kind of 50-50 would you say or hard to quantify at this point?

We're not going to give that level of detail, Robin.

Our next question is coming from Alex Brignall of Rothschild.

Mark, good luck in the next role. The question I wanted to ask is just on pricing. Obviously, you've talked about this acceleration in the back half, but all of us looking at pricing, we'll see that the trajectory relative to previous years has not been the same as some peers. So I wonder what the best compare point is for pricing that you would consider to be sort of either appropriate start point or something you're going to judge yourself against as we look back in time. So for next quarter, Q3, not relative to a minus 7% quarter, but what quarter might be a good one to compare it to.

I'm not sure I understand the question, Al. You mean what year would we compare it to? Like I'm not understanding what you're asking.

So if I think about your pricing in Q3, clearly, there were lots of changes. So you wouldn't think about that as a great quarter to compare ourselves to. So where -- when you're running your yield systems, what year do you look back to and go, okay, well, that's that we did things okay then, that's where we can build from because it's just our understanding of how to model it relative to this year, which has obviously been a very messy one.

Yes. Got it, Alex. I don't think it's a particular year that we're looking at in terms of setting our benchmark pricing for Q3 and Q4 revenue management is an art as much as it is a science. So I think it's about, number one, looking at obviously, historical data from both internally, but more importantly, historical data in the broader competitive environment. And again, the whole idea is to ensure that we're getting a proper getting a proper baseloading strategy upfront, which will then really leverage -- allow us to leverage that pricing dynamic on the remaining itinerary. So it's a combination of all that versus just taking a prior historical point in time and building off of that.

Thanks, Alex. Operator, I think that was -- we're up against our time limit. So I don't think we have time for any other questions. But I just want to thank everybody for being on the call. Thank you, and we look forward to following up with you. Appreciate it. Bye.

Ladies and gentlemen, this concludes today's event. Thank you for your interest and participation in Norwegian Cruise Line Holdings. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.