管理層發言
Good morning. Welcome to the Norwegian Cruise Line Holdings First Quarter 2026 Earnings Conference Call. My name is Robert, and I'll be your operator. As a reminder to all participants, this conference call is being recorded. I'll now turn the conference over to your host, Sarah Inmon. Ms. Inmon, please proceed.
Thank you, and good morning, everyone. Thanks for joining us for our first quarter 2026 earnings call. I'm joined today by John Chidsey, Chairperson and 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 first 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 '25 and '26 net yield 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, everyone, for joining the call. It's my pleasure to be joined by Mark today as we discuss our first quarter results. I've now been in the seat for roughly three months. I'm going to start the call by spending a few minutes covering what I'm seeing so far across the business, and then we'll update you on the actions we are taking to position the business for long-term success. It has been a very active start. I've spent a meaningful amount of time meeting with various stakeholders, including shareholders, travel partners, guests, and team members listening carefully to their perspectives on the business. Our proactive work this quarter is setting the tone for the remainder of 2026. My key focus is on driving sustainable improvement at NCLH, and that starts with disciplined execution, operational rigor, and a clear focus on the fundamentals. I continue to believe that NCLH is a special company with strong brands, world-class assets, and dedicated guests.
This was especially evident at the christening of Norwegian Luna that was held about a month ago. The excitement on board from travel partners and guests was palpable. At Great Stirrup Cay, we witnessed the significant progress being made on the island, particularly at the Great Tides Waterpark, which remains on track to open later this summer. This water park will be a demand driver moving into 2027. It will elevate the island's offerings and enhance the guest experience. Experiencing our newest ship and upgraded private island amenities firsthand brought to light the strength of our brands and the size of the opportunity ahead of us. It also reinforced my view that cruising remains one of the most attractive propositions in travel. Day in and day out, we offer a differentiated vacation experience across multiple destinations, focusing on convenience and quality to deliver enhanced value for our guests.
As cruising continues to benefit from healthy industry fundamentals, including record passenger volumes and encouraging indicators of both repeat and first-time cruise demand, I am confident in the industry's long-term trajectory. We are focused now more than ever on where we need to enhance operations so that NCLH can capitalize on these broader industry trends from a position of strength. To that end, I now have a good sense of the core areas where we will be dedicating the most focus to drive the most meaningful impact in the near term. Since stepping into the CEO role in February, one of my top priorities has been strengthening our internal culture across the organization. This includes building a greater sense of urgency, sharpening accountability, and fostering a one-team mindset across our operational segments. Of course, strategy matters, but my turnaround experience has reinforced that culture is essential to improving how we operate, how we make decisions, how we deliver results and the speed at which we do it.
We are already taking steps to build and enhance a cohesive culture, including our recently completed search for a new Chief People Officer, whom we expect to officially welcome to the team soon. On the cost side, we are working efficiently and effectively to optimize our SG&A structure, streamline the organization and better align resources with the areas that matter most to drive performance and long-term value creation. While shipboard operating costs have remained relatively consistent over the past several years, we see a meaningful opportunity to reduce shoreside cost. As part of that effort, we are streamlining the shoreside organization and making targeted role and position adjustments to improve efficiency and better align resources. As a result, we expect our salary and benefits costs to decrease by approximately 15% on an annualized basis. Actions like these are never easy, but are intended to better align resources, improve productivity and strengthen execution across the business.
As part of these efforts, we are also exploring additional opportunities to improve efficiency in our operating model and drive incremental savings over time. For example, we have started to pilot select offshoring initiatives across different areas of the company. These efforts are in their early stages, and we are testing and learning as we go. We plan to utilize this lever as we move ahead, expanding upon and scaling our efforts where and when appropriate and most beneficial to the business. We are also taking a hard look at other spend across the business, including marketing and advertising, and we see an opportunity to not only improve effectiveness, but also efficiency. From a marketing perspective, our focus is on correcting missteps we have made in recent years as we enhance our ability to target the right consumer with the right message through the right channels while ensuring that our spend is translating into demand and returns.
In line with this focus, we are planning to reduce our marketing spend in 2026 while sharpening the effectiveness of that spend. As a result of the marketing spend reductions as well as organizational optimizations, we expect to reduce our SG&A by $125 million on an annualized basis. These are long-term structural actions that we believe will help offset near-term pressures and position the business for stronger performance over time. Beyond this, we have been evaluating our bundled air program through the same lens of discipline and return on investment, and we have continued to make targeted changes to improve economics. In many cases, this program has effectively served as a promotional tool, but hasn't always delivered returns commensurate with its cost. We will continue to assess these offerings to ensure they remain commercially sound while offering convenience to our guests. I am confident in the efforts underway to capitalize on opportunities we are identifying on the cost side.
And while the revenue side of the equation is more complex, I recognize that it undoubtedly represents our greatest opportunity. From a revenue management perspective, as you know, this is not a function that changes overnight, but we are actively taking steps to strengthen it. To that end, we recently implemented Phase 1 of a new revenue management system. And while its capabilities are meaningfully stronger than our prior tools, its effectiveness will depend on correctly calibrating the underlying data, refining and turning it to better align with our deployment. A system like this is also only as strong as the people using it, and we are continuing to build out the team and capabilities needed to fully leverage it. We are also continuing to refine and tune the system to better align with our deployment. Additionally, for revenue management to be effective, we need to generate stronger demand at the top of the funnel.
As clearly evidenced by our shortfall in occupancy for this year, our marketing function has not been operating as effectively as it needs to, and we have to get those fundamentals right in order to drive demand more consistently and put ourselves in a better position to optimize pricing. As I mentioned earlier, we have had missteps over the last few years where we were not consistently and effectively speaking to our core customer. We were not always putting the right commercial support behind the itineraries we were trying to fill, and our marketing was not as demand generative as it needed to be. To address that, we are looking to bring in new leadership and marketing at NCL and better align that function with revenue management, deployment and sales. This work is critical and will strengthen the business over time, but it may result in some near-term variability in top line performance as we work through these initiatives.
While we have identified key internal priorities and are making progress addressing areas of underperformance, the external operating environment has turned more challenging. We entered the year behind our ideal booking curve in certain areas and recent geopolitical developments have added pressure to an already challenged backdrop, particularly in our European market this summer and demand for close-in bookings. Rest assured, we are monitoring this closely and making adjustments to our business model when and where needed. I want to be clear, while the macro environment continues to rapidly shift and evolve beyond our control, many of the issues we are addressing are internal and fixable. They come back to execution, alignment, and discipline, as I noted at the outset of this call. Mark will go into our guidance for the year, but we recognize that our 2026 outlook is below expectations.
We are not satisfied with that, and I know our shareholders aren't either. I stepped into this role to address these issues, and we are here to do just that with the support of our talented team. We have the assets, we have the brands, and now we have the focus. Our job is to execute better, operate with more discipline, and build a stronger, more cohesive organization. While progress will take time, I am confident we are moving in the right direction to deliver stronger, more sustainable performance over time. With that, let me turn it over to Mark.
Thank you, John, and good morning, everyone. I'll begin with our first quarter results on Slide 6, which were in line with our expectations. Net yield in the first quarter was down 1%, which is above our guidance. Adjusted net cruise cost ex fuel of $168 was slightly better than guidance, declining 1%, driven by strong cost controls, which ultimately drove adjusted EBITDA of $533 million, exceeding our guidance. Lastly, adjusted net income for the quarter benefited from below-the-line foreign currency exchange and was $108 million or an adjusted EPS of $0.23. Turning to Slide 8. You can see our second quarter and full year guidance. Our outlook reflects an extremely challenging backdrop for the balance of the year. Keep in mind, our prior guidance did not include any impacts from the disruptions in the Middle East, which is creating incremental headwinds, including pressure on the top line and higher fuel expense.
These external pressures are occurring as we continue to calibrate our revenue management system, improve commercial execution, including marketing and demand generation, and work through the impact of entering the year behind our targeted booking curve. As a result, we are reducing our full year guidance for net yield, adjusted EBITDA and adjusted earnings per share. Starting with net yield in the second quarter, we expect a decline of 3.6%. This reflects pressure mainly on our European sailings, which represent approximately 26% of our deployment in the quarter as well as weaker-than-anticipated domestic demand as consumers reevaluate travel plans in the current macroeconomic environment. Looking to the full year, we expect net yields to decline 3% to 5%. This updated guidance reflects both the impact of the macroeconomic environment and the extent to which those pressures have compounded the execution and commercial challenges already facing our business.
In terms of pacing through the quarters, we currently expect the third quarter to be significantly weaker than the second quarter, reflecting our greater exposure to Europe, which represents approximately 38% of our deployment in the quarter as well as continued softness in markets such as Alaska, which we discussed last quarter. Looking to the fourth quarter, we are assuming the consumer environment remains pressured, although net yields should improve from Q3, supported in part by the opening of Great Tides Waterpark at Great Stirrup Cay by the end of the third quarter. Moving to cost. John discussed earlier in the prepared remarks, we have made great strides to take quick and decisive action on the cost management side of the equation. I will go into this in a bit more detail, but we now expect our adjusted NCC ex fuel to be approximately flat for the full year and up 1% in the second quarter due to the timing of certain costs.
Moving to fuel. We now expect fuel expense to be approximately $800 million based on the current spot prices. However, fuel expense would be approximately 6% lower if rates were based on the forward curve. As a result of softer-than-expected top line performance and higher fuel costs, partially offset by better cost performance, we are reducing our full year adjusted EBITDA guidance to between $2.48 billion and $2.64 billion and our adjusted EPS guidance to between $1.45 and $1.79. We recognize these results are significantly below expectations. That said, we have moved quickly to focus on what we can control, particularly on the cost side, which I will detail on Slide 9. We have taken swift action within SG&A to drive efficiencies and identify savings. To start, we are taking steps to optimize our organization and reduce our marketing spend, which combined are expected to generate annualized run rate savings of $125 million.
In 2026, these efforts will result in an expected approximately 2 percentage point reduction in adjusted net cruise cost ex fuel. Unfortunately, a meaningful portion of these savings is being offset by incremental direct costs related to the conflict in the Middle East, including higher crew airfare and increased logistics costs. Together, these impacts represent an approximate 1% increase in adjusted net cruise cost ex fuel. As a result, we now expect full year adjusted net cruise cost ex fuel to be approximately flat for the year. The important point to keep in mind is that while these savings are being partially offset by war-related impacts in 2026, the actions we have taken are structural in nature. On a run rate basis, we expect to carry these savings forward and see a benefit in adjusted net cruise cost ex fuel as we move into 2027. As shown on Slide 10, these actions position us to keep adjusted net cruise cost ex fuel subinflationary and in fact, 1% or lower in 2026 for a third straight year despite the current macroeconomic headwinds, while also meaningfully exceeding our cumulative 3-year savings target of $300 million.
We are now approaching $400 million in savings between our shipboard efforts over the last three years, combined with our recent shoreside cost savings. We expect these actions to continue to benefit the business over time, supporting margin expansion as top line performance begins to recover in 2027. It's also important to note that our work here is not done. We continue to see additional savings opportunities across the business, both within SG&A and on the shipboard side, and we expect to build on these efforts going forward. The reduction in our 2026 adjusted EBITDA outlook has also impacted our expected year-end net leverage. Reducing net leverage remains our top financial priority, and we remain confident that leverage will improve over the coming years as earnings grow, capital spending moderates and cash flow strengthens as we turn around the business. Turning to Slide 11. Our gross newbuild and growth CapEx detail highlights that we are beginning to move beyond a period of elevated capital spending.
Over the last several years, we have invested heavily in our fleet, adding two to three ships annually and driving strong capacity growth with capacity days expected to increase 7% in 2026. We will continue to take delivery of new ships over the next two years with two ships in 2026 and another two in 2027. Beginning in 2028 and 2029, however, that pace moderates meaningfully with only one ship scheduled for delivery in each of those years. As a result, we expect gross newbuild and growth CapEx to decline by nearly $1 billion per year, which should materially improve free cash flow generation. We view this as an important inflection point for the business and a meaningful opportunity to accelerate deleveraging. Also important to note, as shown on Slide 12, our debt maturity profile remains manageable with no significant debt maturities until 2030. That gives us added financial flexibility and supports our ability to focus on deleveraging over the next several years. With that, I'll turn it back to John for closing remarks.
Thanks, Mark. Before we open the line for questions, let me leave you with a few closing thoughts. First, as Mark noted, the operating environment has become more challenging since our last call, and that is clearly weighing on the business. But I also want to be very clear, many of the issues we are actively addressing are internal, operational, and fixable. This is a company with strong brands, attractive assets, and a product that continues to resonate with guests. Our focus today is on executing better, operating with greater urgency and aligning the organization more effectively around revenue, cost discipline, and returns. Second, we are swiftly taking action to address any issues that were within our control. We have already moved decisively to streamline the organization, reduce cost and strengthen accountability, but we know our work does not stop there. The actions we have taken to date and those we are continuing to pursue will support a healthier cost profile this year.
More importantly, they are beginning to build a stronger operating foundation for the future. On the revenue side, improvement will take more time given booking lead times and the work currently underway in revenue management and marketing, but we are focused on making the right changes now so that the business is better positioned as we head into 2027 and beyond. Third, reducing leverage remains a top priority. While leverage is not improving during 2026, we do have a path to improving free cash flow and strengthening the balance sheet as capital spending moderates and earnings recover over time as we turn around the business. As I said on our last call, we have the assets, we have the brands, and we now have the focus. Our job is to execute with greater discipline, restore credibility through consistent delivery and unlock the earnings potential of this business over time. That work is underway, and while progress will take some time, I am confident we are moving in the right direction. With that, operator, please open the line for questions.
分析師問答
I appreciate all the color. So John, could you elaborate on the roughly 400 basis point revision to your full year net yield outlook now calls for a 3% to 5% decline? Just how much of this you see as macro versus company specific? And any breakdown of the impact across regions would be helpful.
Sure, Matthew. I'm not going to break it out exactly because I think that's very difficult to parse all that out. But clearly, as Mark noted, we didn't have any impact whatsoever from the Iran conflict on our last earnings call. So this was our first attempt at trying to assess what's going on, particularly given the amount of capacity that we have in Europe coming up in the second and third quarter. And particularly, as we noted in our earlier call that we were already behind the booking curve. So I think it has an outsized impact on us compared to our competitors, given how we came into the year. But I think most of it really is the situation in revenue management and marketing. Now that I've had a chance to dig in a lot deeper, I think our opportunities are greater than I thought. On the flip side, I think what we need to fix in those areas is also greater in terms of building out the team and getting the team to work better. That takes time. So part of that reduction is a reflection that while I have confidence in the people that are building it, it's going to take some time, and I wanted to make sure that we adequately addressed the complexity of what we have to accomplish in the coming quarters as we build out those two functions. I still feel really good about the industry. That explains the change in the guidance around yield.
Great. And then, Mark, could you walk through on the bottom line, just the puts and takes embedded in this year's EBITDA margin forecast, maybe specifically flow-through of the $125 million identified cost savings versus costs you see as transitory this year? And then if we just take a step back, is there any structural change in your view to the roughly 39% margin target for the business that you had quoted prior?
Matt, to address your latter part of the question, no, I don't think there's anything structural that would preclude us from getting back to 39-plus percent. When you step back and look at the EBITDA reduction, primarily that's coming as a result of revenue, our revised revenue guidance. That said, we have made significant and quick actions on the cost side. We noted in our prepared remarks that we've reduced costs by about $125 million on a run rate basis and probably about two-thirds of that or so are coming to fruition in 2026. We are seeing some elevated costs directly as a result of the war. It's really around transportation, both logistics and crew movement. We think those are transitory, assuming the conflict resolves itself in the near future. So between the additional run rate savings from our initial first 60 to 90 days with John in the seat plus some of the transitory costs, we certainly think that should be a tailwind for us going into 2027.
So Mark, another yield question here. As we think about the revised yield guidance, I think a lot of us were expecting a significant yield cut given the headwinds from Europe this summer. But I'm not sure a lot of folks were expecting negative 5% on the low end. If we think about the midpoint now, call it down 400 basis points, can you help us think what would get you to down 5% versus down 3%? I'm trying to figure out what the delta would be between getting from negative 3% to negative 5%.
Steve, in our revised guidance, as John said in his prior answer, we do have some more structural issues in our marketing and demand structures which are resulting in issues in our revenue management system. You have to have the right marketing at the top of the funnel to generate demand, and we're seeing that's not functioning as it should. When I think about the 3% to 5% range, roughly about 1.5 points of that is a result of the load reduction from our prior guidance. It is a wide range, but it's based on what we're seeing today. It takes time for teams to gel and get that engine going. This is a new team. We've recently announced a change in our marketing leadership at the Norwegian brand. That will take time to turn around. As we get that going, we'll continue to see green shoots going forward.
Okay. Got you. And then second question, your booking commentary or demand commentary is different from what we're hearing from some of your peers, especially around North American deployments. Am I thinking about it the right way that maybe the Norwegian brand itself is getting lost with agents and consumers, meaning the brand needs to show what it is? Does that make sense?
Yes, Steve. We're not comparable to our peers at the moment. This is a turnaround, and that's why the change was made. When you're making comments about why we look different from our peers, I would say, yes, we do. But I have confidence in the industry and in growth trends. These are self-inflicted wounds that we need to fix. I wouldn't say we've completely lost our way with agents and consumers, but we are not hitting on all cylinders. Getting the right team in place and getting them to work well together is how you're going to optimize those areas. We're not firing on all cylinders, but structurally nothing is wrong; we need to execute with better discipline.
Maybe one on 2027. To the extent there are bookings taking place today for 2027 in Europe, what color can you give us? The concern being these types of disruptions can have a tail to them because of your booking curve and customer exposure. What are you doing today to make sure this isn't something that sticks with you for the next six to twelve months?
Ben, when you look at the luxury brands, they are in pretty good shape as they have been this year and are performing to expectations. That is another proof point that the industry is fine and growing. To make sure it doesn't happen going forward on NCL, we need to build a great marketing team, a great revenue management team, and ensure they work as a cohesive group with sales, deployment, and itineraries. That will take a couple of quarters at least to build out, and it's what's going to ensure 2027 and 2028 look differently for the NCL side. On the luxury side, things are pretty good.
Got it. Just to be clear, I was coming from a Europe perspective given the disruption and the fact you booked North American guests there. Maybe that's the same answer.
Ben, it goes back to fundamentals. It's making sure we're getting back on the right booking curve well in advance. That's where we entered 2026 suboptimally, and with the exacerbation of the war, that's hurt us more. We're very focused on 2027 across all itineraries to ensure we have the right booking curve and base loading of business on the books, which we think will help in 2027, but that will take time to turn around.
I think Q4 yields are negative. In the prepared comments, you mentioned they'll continue to be pressured. Is that correct? Can you deconstruct some of the high-level assumptions for Q4? Europe is 13% of mix; I imagine that's probably negative year-over-year.
When you look at both ends of the guidance range, there could be a scenario where Q4 is negative. We still have a ways out and a lot of booking momentum to go. We're excited that we've started marketing our island in earnest over the last week or two, which we expect will help demand generation. If you're looking at the high end of guidance, there is a scenario where Q4 could be negative. On the other end, you could be in positive territory. We're focused on turning the demand and marketing engines around, which will take time, and we'll look for green shoots going forward.
Maybe to clarify what you just said. You have a second half implied net yield guide of negative 3.4% to negative 7.2%. You talked about potential for positive yields in Q4, which implies Q3 is well below the low end of the 7.2% range. I'm trying to understand the puts and takes for Q3. I know you're not specifically guiding to it, but more granularity on Q3 would be helpful.
Conor, yes, the implied second half is a wider range. For Q3, given our significant Europe deployment being behind the booking curve and the war exacerbation, there is a scenario where you could see high single-digit negative yields in Q3. That helps you back into where Q4 could be, and that's on the low end of the guidance at negative 5% for the year.
Conor, you're trying to nail this down. We are not comparable to our peers at the moment. The wider range is because these teams are gelling and are not even completely hired. We're hiring people and building out revenue teams, so it would be irresponsible to have a super tight range. Think of this as a turnaround story for the Norwegian brand. The luxury brands are operating as expected; that's what accounts for the variability. It's more about letting the teams gel.
This is a gradual turnaround, and I understand it takes a while to build. As we think about 2027 for the whole company, will we start to see fruits of your labor in the first half of 2027, or is it later? How do you see the commercial strategy turning?
Yes. The cost side will come quicker. Over the next two to four quarters, you'll see continued cost actions as we turn over rocks. On the revenue side, getting the marketing message out, targeting premium families with kids and seasoned travelers, and returning to those fundamentals will take time. You can't flip a switch and expect immediate consumer reaction. I think you'll see green shoots in 2027 and more roll-through into 2028 when we hope to be hitting on all cylinders. Cost and revenue are on different tracks: cost will come quicker and revenue later; the revenue opportunity outstrips the cost opportunity.
A near-term question on Q3: Have you seen any signs of stabilization over the last couple of weeks? How much is left to book for that quarter? Is the third-quarter number fully derisked based on what you're seeing real time?
Brandt, consider where we entered the season: we were behind the booking curve and had more business to go after. That was exacerbated by the war. We had a higher hill to climb than some competitors. We've seen elevated cancellations in Europe across the board. Here and there in certain areas of Europe, you start to see green shoots, but given it's May, it's going to be very hard to dig out of that hole we created by being behind in the booking curve.
On the luxury brands, in the last three to four weeks we've seen encouraging signs for Regent and Oceania.
Noncommissionable fares went into effect this week. What's your internal modeling for NCF on the business for the second half of 2026 and 2027? Is it net dilutive or accretive to yields, and when might it flip positive?
Brandt, this was about getting attention around the Norwegian brand with the travel agent community as we go to shorter and more domestic cruising. It's very early to quantify what that will be in 2027. The thesis is to get the travel agent community back engaged; it only applies to the travel agent distribution channel, not our direct channel. Over time, we think volume will outpace any potential impact from that minor cost.
I'm going to ask the 2027 question differently. Given the booking curve issue that hurt 2026, anything you can tell us about where you sit on the booking curve for 2027? As we think about possibilities for 2027, should we expect a normal opportunity, greater opportunity because of one-timers in 2026, or should we not anticipate meaningful yield growth in 2027?
It's difficult to be precise. We know where we made mistakes in getting behind the booking curve and the team is working to correct that. The system is being refined and calibrated. I'm optimistic that 2027 will be better, but I cannot promise it will be fully back to where we want. Meaningful improvements are being made. On the luxury brands, expectations for 2027 are in line. The primary issue is Norwegian.
James, on the cost side, we're taking quick and decisive action. You've seen some of the numbers we discussed today. That will continue. You'll see quicker change on the cost side. Getting revenue management and the demand engine fixed via marketing will take more time.
Can you assure us that some of the outperformance on the cost side isn't contributing to the underperformance on the top line, i.e., cutting muscle not fat? And John, how much brand damage has been done and how much needs repair?
No, we're investing more in revenue management and in people horsepower. We've been careful where we took cost out to avoid impacting revenue-producing opportunities. We will be spending more on the quality of people. Marketing dollars have not been as efficient or effective as possible, so that's an area for improvement. Regarding brand damage, guest satisfaction scores do not indicate brand damage. I don't see brand damage. I see an opportunity to maximize what we can get out of the Norwegian brand because we haven't been doing things as effectively or as coordinated as we should. There are operational missteps over the past four or five years, including itineraries and air spend, but I don't see brand damage.
I fully agree with John. This is not a brand damage issue. It's about putting our dollars to work in the right places and focusing teams on the right priorities to get more productivity and intellectual horsepower. We're investing in the right places and focusing on the right priorities.
You've touched on Europe and Alaska. Could you touch on what's going on in the Caribbean right now? You had a lot of capacity to absorb this year. What is the latest in the Caribbean and the broader competitive environment there?
Lizzie, we've been transparent. We had a large Caribbean deployment shift this year. On our last call, we said we did not have the right tools in place: marketing, systems, and the island. We've now launched the marketing of our island in the last week or two, and we're hopeful that will improve demand generation. We believe in the Caribbean as a market, but we have to have the right tools in place, and we're working on that.
Long-term deployment: pre-conflict, Europe was tracking a bit down. Are you happy with your current mix of deployment, or could you make shifts over time out of Europe?
We're happy with the current mix long term. A large portion of our European bookings are sourced from the U.S., so the Iran war has a bigger impact on us compared to some competitors. When we get everything aligned, fixes will flow across all regions. We feel good about Europe long term.
Can you unpack Great Stirrup Cay more? What are review scores and guest impressions? I know the water park remains to open. What feedback have you had on amenities like the Lagoon and Silver Cove? And when you think about quantifying it, what potential yield benefit could the island generate?
Vince, with the Phase 1 opening of Great Stirrup Cay, we've seen guest satisfaction scores improve dramatically. Feedback from guests has been very positive. We have not opened some primary monetizing events on the island, which are scheduled for late summer. When those open, together with a solid marketing campaign, we believe the island will generate incremental yields from both on-island monetization and premiums for itineraries calling on it. We're very happy with the results to date and look forward to late summer monetization activities sparking incremental demand.
Longer term, how are you thinking about occupancy opportunity over the next few years as you address missteps, gel teams, and refine the marketing message? Could occupancy return above prior levels?
Vince, occupancy is front and center where we think there's opportunity. We want to get back to historical levels and exceed them. We're not just maximizing new ships for occupancy but ensuring we maximize space across the existing fleet to add more families. We have to get the Norwegian brand front and center and the marketing and demand engine fixed. Over time, that will help drive both price and occupancy.
Do you believe the situation in the Middle East is negatively impacting bookings for Caribbean and Alaska? The wording in the release sounded like the Middle East may be impacting things outside of Europe as well. Also, your Q4 guidance changed from a couple hundred basis points positive to flat or negative. Since Europe is not as big a factor in Q4, how much of the Q4 impact is from the Middle East versus self-inflicted issues?
Yes, it is having some impact in the U.S. — on gas prices and overall consumer behavior. It's across the board; airlines and travel are affected. For mass markets, there is an impact. For the fourth quarter, we can't parse exactly how much is the Middle East versus self-inflicted. We're assuming the environment stays where it is today — not improving or getting worse. Given the issues we've discussed, our turnaround is driving the spread. It's not specific to the war, though the environment has softened overall.
Robin, these are downstream ancillary effects we're seeing. Luxury brands are performing well. Once guests are on vessels, onboard spend is healthy. It's a matter of getting in front of the consumer and getting guests on board. If we can do that, it will help turn things around.
With the change in guidance, where do you see year-end net leverage getting to?
Based on the range of outcomes, you're probably looking at somewhere in the high 5s for year-end net leverage. We're not happy with that, but we're moving quickly on costs. We expect leverage to improve over the coming years as earnings grow and capital spending moderates.
You said a couple of times that the luxury brands are fine. Is that a signal about yield dynamics? Could you give a sense for the order of magnitude differential between what you're seeing at Norwegian versus the luxury brands? Also, on the $125 million SG&A savings, how does that reconcile with improving marketing and people? Where exactly was inefficiency in marketing so that cuts and investments make sense together?
We don't break out that differential. I'm saying we like what we see in the luxury brands. There are cost opportunities in those brands, which we'll pursue. Regarding the $125 million SG&A savings, look at our marketing spend over the last three to four years versus competitors: our spend increased dramatically and we were not nearly as efficient. This is mostly about where we're spending and how we're spending, not about headcount alone. We're investing in higher-quality people, and there's room to cut inefficient spend.
It's about putting dollars to work in the right places versus volume. When you look at our year-end filings versus competitors, we've been spending more on a per-bed basis. It's about effectiveness, and that's our focus.
Okay. Well, thank you, everybody, for joining us this morning. Appreciate all the questions, and talk to you later. Thanks.
Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.