Good morning. My name is Kaila and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Cruises Limited 2015 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now hand today's call over to Mr. Jason Liberty. Please go ahead, sir.

Good morning, and thank you for joining us today for our second quarter earnings call. Joining me here in Miami are Richard Fain, our Chairman and Chief Executive Officer; Adam Goldstein, President and Chief Operating Officer; Michael Bayley, President and CEO of Royal Caribbean International; and Laura Hodges, our Vice President of Investor Relations. During this call, we will be referring to a few slides which have been posted on our investor website, www.rclinvestor.com. Before we get started, I would like to refer you to our notice about forward-looking statements, which is on our first slide. During this call, we will be making comments that are forward-looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Additionally, we will be discussing certain non-GAAP financial measures which are adjusted as defined, and a reconciliation of these items can be found on our website. Richard will begin by providing an overview of the business. I will follow with the recap of our second quarter results, provide an update on the business environment, and then provide an update on our full year and third quarter guidance for 2015. We will then open the call for your questions. Richard?

Thank you, Jason, and thanks to all of you in the investment community for joining us this morning. There's a lot of good stuff to talk about. Overall the year continues to turn out as of expected. Revenues are a little better, costs are up slightly and our earnings are back to within a nickel of our January guidance. To put this in perspective, foreign exchange and fuel have bounced around during the year and today have cost us a net of a negative $0.21 versus our original guidance. It was on this call a year ago that we first publicly announced our Double-Double program. And that anniversary seems like a great time to update you on our progress. The program is solidly on track to meet our twin goals of doubling our 2014 profit and reaching double-digit ROIC by 2017. The three pillars of the program were main, modest capacity growth, strong cost controls and rising revenue yields. These three pillars have not changed and they remain at the core of everything that we do. Today I would like to focus on the last two of these pillars as moderate capacity growth is firmly enhanced. Beginning on the cost side, we remain steadfast in our commitment to maintaining a cost-conscious culture. While our cost guidance is up slightly from April, it's still lower than our initial guidance of up 1% or better. This is due to the diligence of our teams and finding efficiencies and building synergies throughout our business. Most recently, we merged our single branded marine department into one world-class marine organization. The intent of this consolidation was to facilitate the sharing of best practices and to drive further efficiencies throughout our fleet. I look forward to updating you as this develops. We do believe that our…

Think you, Richard. I will begin by taking you through our results for the second quarter. Unless I state differently, all metrics will be on a constant currency basis. We have summarized our second quarter results on slide two. For the quarter, we generated adjusted net income of $0.84 per share which was approximately $0.14 above our guidance. Foreign exchange and fuel rates benefited earnings by $0.07 per share. The balance of the beat was driven by the timing of cost and better than expected close-in pricing in the Caribbean and China. Revenue yields were up 4.2% for the quarter, approximately 70 basis points better than guidance. Strength in the Caribbean and China drove the majority of the upside. Shipboard revenue came in as expected for the second quarter and was up 3.3% year-over-year, driven by improvement in beverage, short excursion and internet. As we discussed in our April earnings call, the volatility in the currency market led to a modest pullback in onboard spending for our non-U.S. guests in the first quarter. To help mitigate further deterioration in spending, we took additional commercial actions that included bundling onboard amenities in the ticket price, as well as encouraging pre-cruise sales of average, short excursion, and specialty restaurant packages in local currency. While still early, these tactics are being received favorably and are helping us reduced further risk. Net cruise costs excluding fuel were up 3.4% for the quarter, which was 110 basis points better than guidance. This was mainly due to the timing of shipboard project that will be carried out in the second half of the year. Now I would like to update you on what we are seeing in booking environment. Overall, while there are always puts and takes at the product level, the back half of the…

[Operator Instructions] And your first question comes from Steve Wieczynski from Stifel.

So the Caribbean clearly is firming up. And I don't think you can quantify this but maybe more from a quantitative perspective. I was wondering how much of that closing pricing the strength in closing pricing you can tie to your better frontloading practices which has started to implement last year? And then I guess also how do you plan to attack the frontloading again this year in the upfront discounting as we move into the back part of this year for 2016? Thanks

Hi, Steve thanks for the questions. In terms of the Caribbean itself, clearly us having a better book position going into the quarter helped us improve pricing because you went through the quarter. I just think that overall by worsening better demand especially on the short product. For the Caribbean which is leading us to those better results.

Yeah and Steve, I think your question on the philosophy, I think in general we think that it's helpful to have more enhance. It takes pressure off of the last-minute bookings, if it's in with our objective of trying to be more consistent on our pricing. And I think that there's probably one thing that frustrates the travel agents that we work with as much as anything else is those late last-minute discounts. And we can't afford to frustrate them. And so, by getting more on the books early, we're in a better position to adjust our pricing on the later bookings and get a more level kind of pricing policy. So I think philosophically, you've seen it this year, you'll see it again next year, where we are trying to get more in hands earlier on.

Okay, great. And then second question around 2016, you gave some pretty good early color there. And I know this is a year - there were clearly some moving items that folks didn't properly account for when they were modeling out their respective quarters. And as we look into 2016, are there any big picture items that you would point out today that you want folks to be thinking of as a start to get more focused on next year?

Well, Steve, I think the cadence of the quarters will generally be the same. I think that the things that I would point out specifically is that we do take delivery in the second quarter next year for Harmony and for Ovation. Ovation will take a similar journey that Quantum took over to Tianjin. So that will have a similar impact, but I think there's also the need to account for Harmony who will come in the second quarter and then will be sailing out of the Mediterranean.

And, Steve, just - this is Michael. Just to add that Harmony will be operating out of Barcelona in the Mediterranean, but also Allure will be returning to the Caribbean. So we'll have some fantastic product in the Caribbean.

Okay, great. Thanks a lot, guys. Appreciate it.

Thanks, Steve.

Your next question comes from Ian Rennardson from Jefferies.

Yeah. Good afternoon, everyone. Just on this extra marketing, could you quantify the amount and what specifically you are aiming to do with that please?

Hi, Ian. It's really a modest incremental amount on marketing. And, again, we are in a good book position for the future. And I think we're just looking for opportunity to expand that base and we think we can do that through spending a little bit additional money on marketing. But it's not in any specific market, it's more general, and again, it's modest.

Okay. Thank you.

Your next question comes from Felicia Hendrix from Barclays.

Hi, good morning. Richard and Jason, you either can choose who want to take this. But I'm just having a tough time reconciling the comments that the back half is expected with the comments that the Caribbean looks like it's coming in a bit better than expected . And because of what you're seeing you are expanding your discounting policy now out 40 days. It just seems to me that with your business improving - with the business that might've improved incrementally, you might have been talking about the second half in a little bit of a different way. So while I'm always in favor of conservatism I was just hoping if you could help me reconcile that.

Well, it's always good to know that your favor of conservatism, Felicia. I think the way I would put it into perspective and I try to address it in my commentary that we're definitely seeing strong demand coming from the Caribbean and as I commented, we would actually - the back half of the year is better for the Caribbean in our current thinking. But that is helping really offset some weakening in the Eastern Mediterranean and Pullmantur which is been struggling in Latin America mainly in Mexico and somewhat also in Brazil. So again, we always see these puts and takes within our environment which is why we kind of manage this portfolio of products and brands and that in itself balances out the back half of the year.

Okay. That's helpful, thank you. And then just maybe I'm splitting here but if you look at your occupancy in the quarter it was about 20 basis points lower year-over-year, so I was just wondering if that was a function of some of the new policies that you have implemented and you're on board continue to grow nicely with perhaps lower people onboard, less people on board perhaps so if you could just talk about how you drove your on-boards as well? Thanks.

Yeah, actually it really is very much on the margins. The price integrity piece is a small piece of it. Also in the quarter we feel we had one cancelled sailing which was higher occupancy sailing that also affected a little bit but it really is on the margins in terms of what affected the load factor for the period.

Okay. And but just getting through the bookings, I mean, can you just elaborate a little bit more about the programs that you've implemented or perhaps stimulate some demand despite the FX headwinds?

Hi, Felicia its Michael. Yes, I think we kind of caught on to this quite quickly in the first quarter so we implemented some commercial actions fairly quickly that included the bundling of value adds, not only in the ticket price in terms of the promotional activity that we put into the marketplace such as beverage included et cetera, as well as encouraging the pre-purchase of various onboard products and services, specifically beverage, short excursion specialty restaurant in local currency and we put more energy behind the promotion and the marketing of that into the international markets, because that was our area of more concern. And, obviously, while it's still early, our tactics have been received well and helping us mitigate any further risk, so we feel quite good about the actions that we've taken. It's important to note that we still anticipate yield increases in onboard revenue this year and it will be the fourth year in a row where we see those increases. And we've also seen some stars such as Voom, the fastest internet at sea that we have with Royal Caribbean International. We put a lot of energy behind the promotion of Voom, the fastest internet at sea, and we've seen a considerable uptake in how many people are participating and purchasing Voom.

Great. That was helpful.

Felicia, its Richard here. And it's just might worth - might be worth adding, Michael referred into the bundling. And I think, again, philosophically speaking, that is a growing trend. We're seeing more - we're doing more of that and that does sometimes tend to cause a little confusion on the numbers, because things can shift between ticket revenue and onboard revenue. But we're releasing a desire on the part of our guests and very much on the parts of the travel agents who find it is a much better way to present something, much better way to sell it if it's all included in the package. And we started that last year. You saw the 123 go at Celebrity. This year a big shift probably one of the more dramatic shifts on Celebrity with our Go Big Better Best program. And these are in fact moving us to an even more inclusive packaging and we think that gets us more net revenue and happier guests, happier travel agents. So I think we will probably see more of that as we go forward.

Thank you.

Your next question comes from Patrick Scholes from SunTrust.

Hi, good morning. Have you seen any of your competitors following suit on the holding the line on last minute discounting?

Hi. Patrick, it's Michael. We are really focused on what we're doing and we're paying a lot of attention to the feedback that we get from travel partners, distribution and of course, our customers. So we feel really positive about the actions that we took back in March and we are feeling good about the direction that it is heading for us.

Okay. I'll leave it at that. Thank you.

Your next question comes from James Hardiman from Wedbush Securities.

Hi. Good morning. Couple of clarifications here, Richard, as you talk about the bundling of certain traditionally onboard items into the ticket price, can you help us figure out how exactly you guys are accounting for those? Is the entirety of that still going to be counted in onboard? It seems like there from the consumer's perspective there might be some blurring of the lines but how should we think about what has traditionally been on board being put in the ticket prices and how we should expect that the show up in your numbers?

Hi, James its Jason. In terms of the bundling it really kind of depends on the program itself. And as we've commented in the past which is why we really guide on a net revenue yield side depending on the offer, it could be recorded into onboard revenue or ticket revenue. So it's - all I would say is that there's probably we'll create more variability between those two lines but again I think that's why you're consistently see us guide on the overall revenue picture.

Got it. And then just another clarification here, you talked about the price integrity policy being a negative in the short-term. Just to clarify, is that a comment on the occupancy being negative by itself or is that the net impact of pricing in occupancy that's currently negative and if so, when do you think that goes from being a negative to hopefully being a positive? Thanks.

Yes, the main impact is on occupancy because what happens is if you can do these last-minute discounts, these big last-minute discounts you end up with a few empty cabins and so you offer these extraordinary discounts that allows you to fill up at the end. And if you take away that tool, which is essentially what we've done, then you will lose some of those people, obviously. The reason we believe there is an offset, which is that we get a more consistent than higher-priced during the period. At this stage, those numbers are really quite small. So we're not suggesting that's a major driver of this. But it is there and it is hurting us in the short-term. And I think that we will feel that for some time well into 2016. And - but we think the long-term benefit, and I really do want to emphasize, the benefit isn't just that we will illuminate these people who say let's wait to book at the low price. It's really very important to the branding. It's hard to set yourself out as we are a brand that is high-quality and high respect in the industry. And you can have us for half-price. So the ability to maintain your image as a higher quality product, which really has to permeate everything you do, is probably a big driver, as big a driver of our thinking is anything else.

That's really helpful. And maybe just a quick follow-up on that last point. I don't know if you've been able to do any consumer research on - for the psychology of this pricing program. Is there any evidence that tells you that the customer that hasn't bought because prices didn't come down at the last minute, that they are just waiting for those prices to come down and when they don't will ultimately buy a cruise or is there a chance that you've lost that customer longer term?

Well, there's no question that some people do wait to the end. Again, I really want to emphasize, in terms of quantitative analysis, we're just starting on this policy we have three or four months under our belt. And I think it's something we will continue to look at closely, but we're pretty confident, we have been in the business for a long time, our revenue people understand the dynamics of that, and I think we feel pretty confident that the direction we are going will be well received and will help both in the long run on the revenue side but also on the branding side.

Got it. Very helpful. Thanks, guys.

Your next question comes from Tim Conder from Wells Fargo Securities.

Thank you. First of all, just taking the approach of during the period of strength to implement this policy is key, so kudos on that part. A couple clarifications, one, the marketing, how much of that is skewed towards building earlier your North American source passenger base? And then, secondly, in Asia, if you can maybe - I don't know if you can just put it into those two buckets. Second question comes from Celebrity versus the Royal Caribbean International brand performance, how that's looking year-to-date and for the year especially in Europe. And then Pullmantur, you call that out specifically, how much of the drag there has been demand versus euro being the functional currency and then Jason just remind us of the pending accounting change later on this year with Pullmantur?

On the marketing side, Tim, I think first, again, just to point out, it's a very small amount of money and we said we are really trying to apply it to further expand a very good book of business we have today for the future and specifically for 2016. So the spread of it is not necessarily key western Asia. It's more to further accelerate our position and get at the very small amount of money. I will just take a real quick on in terms of the pending accounting change as we said it's something that is and will continue to be under consideration in terms of the timing of when we make that change. For us we need to make sure the processes and the systems are in place before we close at two-month lag with Pullmantur. But we will certainly advise the timing when we implement that.

Okay.

I just answered the - in the Pullmantur your question on the demand versus the impact of the euro. It's both. The demand has been a real problem, but so has the currency. And in this case, the currency that's hurting us isn't so much the euro it's more the Latin American currencies. So the euro has deteriorated versus the dollar but in Latin America, in Brazil, in Argentina, in Ecuador and Colombia etcetera we are looking at closer to 25% kind of drops. So it is both the economy and the currency which is not what we were hoping to see at this point. And then Tim just to comment on Celebrity versus Royals performance in Europe. I mean, I think as you know, we basically kind of comment on the market and product as a whole but they are both doing well in Europe. The strength of having a lower there and having Anthem is definitely a nice tailwind for Royal and the European season for us.

Okay. And then finally gentlemen, on the bundling for the international market that you've been doing and appears to be helping out there, is that bundle fully commissionable to travel agents or is it only the ticket component of that bundle?

Hi, Tim, it's Michael. There's really two types of bundling, there's the bundling that goes through in a promotion through the distribution channel which becomes commissionable unless it's obviously a direct booking. And then, there's the bundling that we've been doing in - and the selling of pre-cruise direct to our customers, which of course is - in that case is not commissionable.

Okay. Thanks for the clarification there.

You're welcome.

Your next question comes from Robin Farley from UBS.

Great. Thanks. To questions. One is, one of the nice things here in the release was that China drove some of the close-in and bookings and I guess you really kind of think of that as being sold through charters so far in advance that may be you wouldn't benefit from close out strength. It would just be the agent that had chartered it. So I wonder if you could kind of just give a little color around how you're getting the benefit of that close in.

Hi, Robin, it's Michael. It's - that's correct. A lot of our distribution and sales goes through the larger retailers, but we've also started to move a little bit further into FIT and individual sales and bookings as a brand, so we're seeing some benefit because those changes that we implemented about a year or so ago.

Great. And then, just a housekeeping thing, looking at your capacity guidance. It looks like it's just that - you actually go out a couple of years, it looks like your capacity growth in 2017 is a little bit lower and in 2018 is a little higher, is that just - and you don't have anything getting delivered that would be late so is it a dock or something that you didn't expect in 2017 that's shifting out a little bit?

Well, 2017, there are no new ships being delivered in that year so the capacity increase is really related to fall over of Harmony and Ovation which comes in 2016. That's really what drives the lower capacity amount, and in 2018, we do have always Oasis 4 coming in.

And just to clarify, I understand you don't have delivery in 2017 and I know the increase is from the carryover but it's actually versus your guidance a quarter ago, it's not a full percentage point but it's a lower rate of increase not just lower versus 2015 but lower versus your previous for 2017, so I'm just wondering what had changed?

Well, I think one thing that I can think of that has changed, which is Splendour of the Seas was sold to Thomson Cruises and that ship leaves our fleet in 2016.

Okay. Great. That's probably it. And then just the last thing is, especially given Richard's opening comments about variances and guidance and things shifting, I'm just curious why take the 10 basis points off the top of your full year range given that it's a range and that's not a huge difference at the top end of the range. I'm just wondering if there's something in particular that made you want to just take those 10 basis points off the top?

Yes, it's more, Robin, that typically at this point of the year obviously we have, as we talked about in the call, we have over 94% of our revenue on the books. We typically have 100 basis point range around the midpoint of our guidance and so that's really what set the 2.9% to 3.9%.

This really is - it's more that you just have at this point. Okay, great. Thank you very much.

You got it.

Your next question comes from Steven Kent from Goldman Sachs.

Good morning. This is Laura stepping in for Steve this morning. So I was just wondering it seems that the pricing integrity program negatively impact your 2Q 2015 earnings are looking consumers getting retrained. But the closing demand was still very strong in the Caribbean. Could you just parse out that dynamic for us so with the closing demand would have been stronger if you didn't have that pricing integrity program? And then my second question was just on China as we try to understand that mix shift what sort of pricing premium does that market get and are you seeing any kind of cannibalization there? Thank you.

On the price integrity side, first off as we the price integrity program really addresses certain products that are 10, 20, 30 days out and where we saw strength in the second quarter was really the short Caribbean product which typically the late booking product anyways and that's kind of what drove the strength in the second quarter. So it's not necessarily, as we talked about the price integrity program in itself with the balance for the year was a very small negative impact to our revenue that we had communicated on our last call. And so if we do see strong closing demand especially in the short product that will drive it and then obviously we get guests who will pay the price out there that will also benefit our revenue relative to our expectations.

Hi. On the question with regards to China premiums, I think we don't really go into details on premiums but we're obviously very happy with the performance of our China products this year in 2015 in the market and I think bringing Quantum into Shanghai has proven to be very successful. It's been exceptionally well-received and I guests are having a phenomenal time and our trade partners are really happy with the quality of that product in the market. So we're seeing the kind of premiums that you would expect to get when you put a brand-new asset of that quality into the marketplace

Your next question comes from Greg Badishkanian from Citigroup.

Great. Thanks. Just pointing to your opening earmarks where you mentioned you expect nice yield growth next year. And that does seem to be the general consensus from other cruise lines based on public comments that are out there. What do you think is that really the key driver for those short bookings and even pricing for 2016? And then, as we progress throughout 2015 into early 2016 is there any dynamic that you would - that you can see that would reverse that? Has everyone pulled forward demand? It doesn't seem like that's the case, but is there anything that we should think about as we get into 2016?

Hi, Greg. First off, it's very early in the bookings cycle for 2016 and I think what you're seeing is us just continuing to build on a quality book of business. Clearly, the strength in the Caribbean which has a further out booking window is quite helpful. But, again, it is very early and what we know is the patterns that we are seeing is, it's good on the load factor basis and good on a rate basis and that's encouraging for next year. There is a lot of things that could happen that could reverse that position, right, because this is a global business but at this point in time those are the trends that we are seeing and that basically kind of what supports the commentary that we provided.

Okay. Very helpful. Thank you.

Thanks Greg.

Your next question comes from Harry Curtis from Nomura.

Good morning, everyone. My first question is on your outlook for capacity growth in the traditional markets, Europe and the Caribbean for next year?

Is it just more of what we are expecting or?

I'm sorry, what kind of supply growth do you expect in each of those two markets next year versus this year?

Well, I think in terms of the Caribbean and Europe you will see very small increases in our capacity for next year. You will see most of the capacity going into the Asia Pacific market with Ovation and the full year of Quantum of the Seas. But you will see marginal growth for the Caribbean in Europe in 2016 based off of our current deployment that has been published.

And then overall what are your expectations industry-wide?

I think on the industry side I would - I expect it to be higher than we're putting in there, there are some competitors that are having some additional capacity in there. Europe I think will be up slightly and Asia will certainly be up with the entry of some of our competitor ships in there going into 2016.

And have you got any additional thoughts on the Caribbean?

I'm sorry, sir one more time?

Have you gotten any original - do you have any incremental thoughts on the Caribbean for next year?

I'm sorry. I do expect the Caribbean to be up probably low to mid-single digits next year which is quite a bit higher than what we're going to have in the Caribbean for next year.

Okay. My second question is, if you could discuss the visibility that you have from your travel partners in China next year particularly as you bring the Ovation and are you feeling optimistic that you will have similar kind of demand trends and occupancies?

Hi, Harry its Michael. Yes, we are optimistic. And I think Quantum has really done a great job for Royal Caribbean in terms of how people have perceived that product and Royal Caribbean in general. So the reception that we have from Quantum has really added impetus for Ovation. And we're seeing that in terms of the kind of bookings that we are already seeing in 2016 for Ovation. So we feel quite optimistic about performance in China in 2016.

Can you give us how well booked you are for 2016 thus far?

No.

Thank you.

Thanks for trying, Gary.

Your next question comes from Joel Simkins from Credit Suisse.

Yeah. Hey, good morning, guys. I wanted to start with Cuba here. I just wanted to get your sense on how you think this is ultimately going to shape out over the next couple of years. Some of your peers are starting to make some early efforts in that market and I guess - as it fully opens up how quickly could you be down there and could you see direct meaningful capacity in, let's say, 2017 to that opportunity?

Hi, it's Adam. Well, clearly we're excited about the potential opportunity that Cuba presents. Anything that we do and hopefully anything that anyone else does has to be within the confines of the law. As you can imagine, we're actively planning and preparing to incorporate Cuba into our cruise program to the extent that were permitted. We think we have a lot of things going for us as a company at RCL in terms of our track record of delivering quality destination experiences, the way we've demonstrated the ability to create win-win relationships all around the world, our history of operating above and beyond compliance, all of that we think will bode well for us there. We have many brands and a large fleet, and therefore quite a number of different operate opportunities to participate in the Cuba opportunity when it opens up. As you can imagine, our normal course of action would be to announce any plans when they're firmed out before. But we are very enthusiastic about the prospects we've all been waiting a long time and we feel like things are beginning to develop in an exciting manner.

And one quick follow up in China. I know, obviously, we're still very much early days there, but as you continue to develop these relationships with consumers in that market, and get them signed up in your databases et cetera. Are you starting to see any signs of, let's say, outbound enquiry or demand as these consumers looks to perhaps maybe stay with you in Europe for instance?

Hi. Joe, it's Michael. Yes, I mean, we are seeing that. We think that's one of the opportunities. It's not of particular focus at the moment but we certainly recognize it's a significant opportunity over time. That outbound market is significant and we do see an increase in our plan to products certainly into Europe and to the West Coast. So, yes, we think that's a good opportunity.

Thank you.

Our next question comes from Assia Georgieva from Infinity Capital.

Good morning. This is Assia. Congratulations on great Q2 results.

Thank you.

And just one quick question, close-in your pricing seems to be doing quite a bit better despite [indiscernible] and all the other concerns that we've had over the macro economy. I don't know Richard, Michael, anyone would you like to comment on what you're seeing?

Hi, it's Michael. You know we've seen this in the past. Europe can be a fickle market at times and there is all of these different variables that come into play in the different European market depending upon what's occurring at the time. We think that Greek situation we did see a slight dip during the whole Greek events and I think that caused the slowdown a little bit. Generally, in terms of the Europeans, and then it all started to come back again. So I think it's just ebb in the flow of the psychology of the marketplace.

Just to add to that, Assia, also we've commented in the past, we entered the - the European seasons are very strong book of business. And that really has left less inventory on the table for the European consumer which we also believe is also a nice tailwind to the closing pricing that we are seeing within that environment.

Thank you, Jason and thank you Michael. It seems that things have actually turning out pretty well as opposed to what expectations would have been.

Thank you.

Your next question comes from Dan McKenzie from Buckingham Research.

Hi, good morning, thanks guys. I believe Royal has been trailing a premium cabin space on the Core Royal brands on enhanced cruise experience and enhanced service levels for a price. I'm wondering if you can share any of the early findings? And then secondly how would you characterize the revenue opportunities looking ahead, is this a smaller in size or could it perhaps be material?

Hi, Dan its Michael. I think you may be referring to the Royal suite class program that we have - we are about to introduce. We haven't introduced it yet. We're going to roll that out literally in the coming six to seven weeks and its focus very much on inventory in 2016 from spring forward. And that's really part of our focus on segmenting the market segmenting our distribution and making sure that we can provide the kind of product that we think people are willing and able to pay a premium for. So we do have plans on generating an increase in yield in our premium accommodations through the introduction of Royal suite class. That's the program that we are introducing. Celebrity has had the suite-class in place now I guess for about a year and a quarter, a year and an half. And I think they found out to be quite successful in terms of offering the kind of premium space with a premium on it. The people are certainly willing and able to pay for it. As long as you can bundle the right products and services into that category. We are looking at other categories within the Royal fleet and we think there are further opportunities there.

Okay. Thank you that's helpful. And then, I appreciate oil has collapsed relative to a year ago, but looking further into the future, has Royal make any investments in the biofuel area and from an engineering standpoint is that just simply too complicated or expensive? And I guess, I am beginning to see the airline industry go that direction. But then, related to that how has hedge book changed looking ahead through 2018?

Hi. It's Adam. I'll answer the first part. You may not remember, but once upon a time about 8 to 10 years ago we believe the Royal Caribbean was his angle largest user of biodiesel in the world at that time in any industry. We really were robust and our thinking about the potential than, but as it happened over time for a whole series of different reasons, the attractiveness of using the products and services trended away. One of which was that the tax benefit that went to the producer of biodiesel was not passed on at all to the end user such as ourselves and we couldn't sustain any economic benefit of the use there. Also we're - it was a little bit rough on the ships at that time, because it was such an immature industry and I could go on, but I won't. So we don't see at the moment the opportunity to resume that kind of usage. We have been tremendously successful with finding ways of consuming less fuel to get from point A to point B with a whole host of programs. We've got more successful at purchasing fuel and of course our hedging program over time, it's been a great benefit to the company as well. And there's still a lot of opportunities in those areas before we would consider a significant use of bio-fuel on our ship. And just a comment on our hedge portfolio, which is also outlined in our release. We have increased our position going out. Next year we are 65% hedged and 60% hedged and then 40% and then 10% over the coming years. So we're looking to try to take advantage of this low fuel price environment to help walk in the future.

Thanks for the times, guys.

Thank you.

And our final question comes from Laura Starr from Nuveen Asset Management.

Hi, guys. How are you? So as more and more people pay upfront for all these packages whether it's beverages or the dining, are you thinking about what you sell them when they come onboard when they a lot more money, are you thinking about changing what you sell in the stores, adding spa options or classes or different entertainment? I mean I know this is something that would work out over the next couple of years, but are you thinking about that now?

Yes, hi, Laura. It's Michael. It's a good point and yes, it's absolutely what we see. So once they pre-purchase the package or whatever the service are that they pre-purchase everybody seems to forget the pre-purchased and then when they come onboard, they bring more dollars or euros or what have you to spend and it does provide more opportunity. I mean in many cases they simply consume and purchase many of the products that we have onboard. But if you think about really all of our brands particularly Royal and celebrity over the past few years, we've been through quite an extensive process of revitalization. We have added multiple retail units, we've enhanced many of the different services, and we've transformed a lot of the products that we sell on board and in many cases to higher-margin products. So that evolution I think is in place and we're quite cognizant of it.

Okay. But there's nothing else new on the horizon that you can talk about now that would be maybe bigger incremental giving them to spend?

Well, one of the things that we're immensely proud of in which only Royal Caribbean has of course is Boom which is the fastest Internet of Sea and that is something that we think we have a significant advantage over and certainly for families with kids. If you've got kids and they come on board and they want to connect and they want to do streaming, they want to play video games we're the only cruise line that they can do that with because of the significant advantage of Boom and that's something that we're seeing certainly in the revenues is generating today as a further opportunity.

And can you prepay for that Internet right now too?

Yes, you can.

Okay, thanks. Thank you.

Thank you.

Thank you for your assistance, Kaila, with the call today. And we thank you all for your participation and interest in the company. Laura will be available for any follow-up questions you might have and I wish you all a very great day.

This is the end of today's call. You may now disconnect your line.