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Operator
Good morning, and welcome to the Norwegian Cruise Line Holdings First Quarter 2018 Earnings Conference Call. My name is Andrew, and I will be your operator. (Operator Instructions) As a reminder to all participants, this conference call is being recorded.
I would now like to turn the conference over to your host, Ms. Andrea DeMarco, Vice President of Investor Relations and Corporate Communications. Ms. DeMarco, please proceed.
Andrea DeMarco - VP of IR & Corporate Communications
Thank you, Andrew. Good morning, everyone, and thank you for joining us for our first quarter 2018 conference call. I am joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings; Mark Kempa, Senior Vice President and Interim Chief Financial Officer; and Andy Stuart, President and Chief Executive Officer of Norwegian Cruise Line.
Frank will begin the call with opening commentary. After which, Mark will follow to discuss results for the quarter as well as provide guidance for 2018 before turning the call back to Frank for some closing words. We will then open the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at www.nclhltdinvestor.com and will be available for replay for 30 days following today's call.
Before we discuss our results, I'd like to cover just a few items. Our press release, with first quarter 2018 results, was issued this morning and is available on our Investor Relations website. 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 statements contained in our earnings release. Our comments may also reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in our earnings release.
With that, I'd like to turn the call over to Frank Del Rio. Frank?
Frank J. Del Rio - President, CEO & Director
Thank you, Andrea, and good morning, everyone. Today, we are hosting our call from the New York Stock Exchange in New York City, where in about 24 hours, the fabulous new Norwegian Bliss will make her maiden call in the United States. Her delivery 2 weeks ago marked not just the introduction of the latest flagship of the Norwegian Cruise Line fleet, but also the culmination of the best pre-booking period for a newbuild in the Line's history. And we expect that her inaugural activities in Southampton, England; New York City this weekend; and in Miami, Los Angeles and Seattle, which incidentally make up the Line's most comprehensive inaugural event in our history, will further stoke demand for her sailings in Alaska, the West Coast and the Eastern Caribbean from Miami starting this fall. The buildup and successful launch of Norwegian Bliss embodies all that our team, not just the Norwegian Cruise Line, but also those at Oceania Cruises and Regent Seven Seas cruises, have been working fervently to instill in our brand and message to the marketplace, that of choice, quality, value and innovative onboard and shoreside activities resulting in the ultimate cruise vacation experience.
Our 3 brands focus on offering our target market sailings to the destinations they want to visit most on state-of-the-art vessels that are consistently refreshed to prevailing tastes and to the highest standards. As part of our unique go-to-market strategy, our brands offer the absolute best value at the time voyage is first opened for sale, in other word, at the inception of each sailing's booking curve. This can mean offering the best price in the case of the all-inclusive Regent brand or including the most valuable choices from the menu of Free at Sea offerings on the Norwegian brand, because our ultimate goal is to deliver exciting, fun and memorable vacation experiences that will make guests loyal repeat customers while delivering best-in-class financial results for our shareholders.
Norwegian Bliss has wildly succeeded in these first 3 pillars. All that is left to do, which is what Norwegian does best, is to deliver its unique onboard experiences centered around freedom and flexibility that no other cruise line can come close to replicating. In the case of Bliss, we achieved this goal with the most attractive offering of onboard activities, amenities and venues ever seen on a Norwegian ship. But most importantly, we accomplished this with a passionate and dedicated crew that is anxiously waiting to welcome and graciously serve each and every guest. From Bliss' stylish observation lounge, perfect for viewing Alaska's stunning natural scenery; to world-class entertainment, which includes Broadway favorite Jersey Boys; and from a North American debut of the top of the ship 1,000-foot long go-kart race track to our first upscale smokehouse restaurant, Q, Bliss will certainly make lasting impressions on the most discerning of guests.
As I stated earlier, Norwegian Bliss enters the fleet as the best-booked newbuild in Norwegian's history. Her success exemplifies the strong worldwide demand for cruising that is being experienced across our brand. After entering this year's wave season with the highest load factor and highest pricing in the company's history, the sustained strength in global demand that we've come to expect across our 3 brands has continued, which together with our bundling strategy and the precise execution of our market-to-build strategy has resulted in pricing and occupancy for the balance of 2018 and through 2019 sailings continuing to meet -- to be meaningfully ahead of same time last year level. This is true across all major deployments and particularly in our premium price deployment of Scandinavia, the Mediterranean, Alaska, Hawaii and Cuba. Even our Caribbean and Bahamas sailings through this year's second through fourth quarters and continuing through the first half of 2019 are showing, with very few isolated exceptions, year-over-year improvements in pricing and load.
Of particular interest is our Eastern Caribbean sailings, which resume operations again in the fourth quarter after a hiatus in the second and third quarters. Bookings and pricing for fourth quarter 2018 and first half 2019 sailings are better booked when compared to similar cruises during the same time last year.
Looking further ahead, I'd like to discuss 2 points that demonstrate the strong continuation of the booking environment that first began in late 2016, continued throughout 2017 and is alive and well year-to-date. First, while still early in the booking cycle, I'd like to reiterate that 2019 is shaping up very well, with full year occupancy and pricing at each of our 3 brands above the record levels we experienced during the same time last year. Second, in mid-April, Regent Seven Seas Cruises set an all-time single-day booking record when the brand released for sale the first set of voyages of its first quarter 2020 introduction of Seven Seas Splendor. Booking volume exceeded the previous record, which was set 3 years ago when Splendor's sister ship, Seven Seas Explorer, opened for sale by over 30%. But most importantly, it is worth noting that Splendor's first sailing is not until January 2020, close to 2 years from now. And this boost in first-day booking increases our confidence that we have yet another stellar ship in our hand with Splendor.
The strength in demand for sailings further and further in the future underscores the strength of our booking curve and reinforces my view on a macroeconomic trends that I have held for many years. Today, there is a heightened level of chatter among some investors about the possible impact from the rising risk of a near-term recession, coupled with known increases in supply growth. I've always believed that market analysts and government watchdogs should consider the cruise industry's booking curve as a leading economic indicator because of the extended time frame and future visibility of consumer confidence that crew sales represent. Today, we want to confidently tell you that we do not see any evidence of recessionary pressures on demand or on pricing as a result of global or domestic macroeconomic conditions or that the increase in supply growth coming online over the next few years is causing any disruptions in the marketplace.
During each of the past 2 years, business has improved each year. And at this juncture, it looks like 2019 will improve as well. Our strong operating results reflect that, that we are an active participant in the stronger for longer secular trend. But perhaps the best news is that there is still room for improvement to continue building upon this strong demand environment. Several catalysts can drive consumer cruise demand even higher. Some of these factors we control while others are purely external. One of the main external factors is full access to some old favorite and desirable destinations that have been off-limits for a while. For example, some areas of the Eastern Mediterranean are, for the most part, still effectively closed to cruising, and we are eager to see Turkey and its historic cities of Istanbul and Kusadasi and sailings to certain Black Sea destinations along with Egypt and the Holy Land return to our Mediterranean itinerary in a meaningful way.
There are also infrastructure issues that affect capacity deployment, which when improved will fuel additional demand. Havana, for example, is severely limited in its ability to serve its current demand. We began sailing to Cuba a little over a year ago, and in that short time, Havana has skyrocketed to become the most popular port of call among our high-volume destinations while becoming the latest addition to our portfolio of premium price destination. Fortunately, we have worked extremely hard to gain additional calls for this extremely popular and high-yielding port of call. We remain both committed and hopeful that infrastructure improvements will occur soon, allowing us to bring additional and larger ships to this most sought-after destination. And lastly, there's Alaska, where several important ports, such as Ketchikan and Skagway, are looking to increase cruise capacity, hopefully resulting in additional and larger ships being able to bring more and more guests to Alaska's pristine waters.
Internally, the go-to-market initiatives we recently launched for our China source business could result, if successful, in meaningful pricing and onboard revenue improvement. With a relatively small and nimble fleet, Norwegian Cruise Line Holdings is uniquely positioned to benefit from these underserved high-potential destinations as ports and regions either reopen or increase their capacity to further enhance our already outsized offering of premium price deployment.
Premium price deployments command commensurate premium hardware in order to optimize pricings. 2018 marks the winding down of 2 significant fleet enhancement programs that have transformed the fleets of Norwegian Cruise Line and Regent Seven Seas Cruises. The Norwegian Edge program elevated the experience across the Norwegian brand fleet, with enhancements to public areas, dining venues, staterooms and more. The heavy lifting for this program will essentially be completed in 2018, with only 1 major dry dock left in 2019 and 1 in 2020. After which, every ship in the Norwegian fleet will be in like new condition. And the completion of the $125 million refurbishment program for Regent Seven Seas Navigator, Voyager, and just last month for Mariner, has elevated the experience on these vessels to the level of the brand's current flagship, Seven Seas Explorer. We firmly believe that these programs have greatly contributed to the record pricing and record repeat guest rate, the metric by which I truly measure guest satisfaction of these 2 brands.
In the quarter just ended, it was the stellar performance of all 3 of our brands that drove our record results. To go over these results in more detail, I'll turn the call over now to Mark Kempa. After which, I will return with some closing comments. Mark?
Mark A. Kempa - Interim CFO & Senior VP of Finance
Thank you, Frank. Unless otherwise noted, my commentary compares 2018 and 2017 net yield and adjusted net cruise cost, excluding fuel per capacity day metrics, on a constant currency basis. I'll begin with commentary on our first quarter results, followed by color on booking trends, and then we'll close with our outlook and guidance for the second quarter and full year 2018.
I'm pleased to report yet another record quarter, with both first quarter revenue and earnings the highest in our history. Results for the quarter exceeded expectations by $0.08 with adjusted earnings per share of $0.60, surpassing guidance of approximately $0.52. Better-than-expected performance in the top line contributed $0.03 of the beat and $0.02 was due to timing of certain expenses, partially offset by an increase in fuel expense, with the remainder coming from other -- our other income expense line as a result of the strengthening of the U.S. dollar.
Net yield increased 1% or 2% on an as-reported basis versus prior year, outperforming guidance expectations above 0.5%. The beat was driven by strong and well-priced close-in demand, coupled with continued strength in all onboard revenue streams. Excluding the impact from our new Norwegian brand capacity, which is dilutive to the NCLH corporate average yield, our first quarter net yield growth would have been over 4%.
Looking at costs. Adjusted net cruise cost, excluding fuel, decreased 2.7% versus prior year and 2.1% on an as-reported basis as a result of fewer dry docks and better cost control in the period.
Turning to fuel. Our fuel expense per metric ton, net of hedges, decreased to $448 from $453 in the prior year.
Taking a look at below the line. Interest expense net was $59.7 million in 2018 compared to $53 million in 2017. The increase in interest expense reflects additional debt in connection with the delivery of Norwegian Joy in April 2017, Project Leonardo financing as well as higher interest rates due to an increase in LIBOR, partially offset by the benefit from the full redemption in October of 2017 of our 4.625% senior notes due 2020.
Now shifting focus to the second quarter. Our capacity is expected to increase approximately 9%, primarily due to the annualization of Norwegian Joy and the introduction of Norwegian Bliss in the quarter, with her first regularly scheduled revenue sailing commencing in early June. As for deployment for the second quarter, approximately 24% is allocated to the Caribbean, which includes the Bahamas and Cuba, and is down slightly from the prior year. We do not have sailings to the Eastern Caribbean during the second or third quarter as we redesigned those itineraries during Q4 of last year to Western Caribbean sailings as a result of the impacts from last year's hurricanes. These new itineraries also allowed us to take advantage of our newly developed private destination, Harvest Caye, which is one of our highest-rated ports in terms of guest satisfaction.
Before moving on to the balance of Q2 deployment, I'll touch on our third quarter Caribbean capacity. Approximately 18% of our capacity is allocated to the Caribbean, which includes the Bahamas and Cuba during the shoulder season. And while our third quarter capacity to the region is up double digits during the quarter, this is primarily driven by the addition of Norwegian Sun, our second Norwegian branded ship sailing to Havana from Port Canaveral beginning this month.
Turning back to Q2 deployment. Europe represents approximately 25%, down from the prior year due to several dry docks early in the quarter associated with the Norwegian Edge program. The Asia, Africa, Pacific region accounts for approximately 11%, up from 3% in the prior year as a result of the addition of Norwegian Joy to the fleet. As for other key markets, Alaska accounts for approximately 9%, Bermuda approximately 11% and Hawaii approximately 4% of our total deployment.
Turning to expectations for the second quarter. Despite rolling over impressive year-over-year net yield growth of 8.1% as well as the expected impact of the lower-yielding shoulder season for Norwegian Joy in China, net yield is expected to increase approximately 2% or 2.75% on an as-reported basis. Excluding the effect of new tonnage introduced for the Norwegian brand, which is dilutive to the NCLH corporate average yield, net yield is expected to be up approximately 4.25% during the second quarter, further demonstrating the core pricing strength of all our brands.
Turning to costs. Adjusted net cruise cost, excluding fuel, is expected to be up 7.5% to 8% or approximately 9% on an as-reported basis, primarily due to a large year-over-year increase in dry dock days in the quarter as a result of extended dry docks for the Norwegian Edge fleet enhancement program and inaugural and launch expenses associated with the introduction of Norwegian Bliss, which are higher than previous shipping production -- introductions as the first ship we've launched in North America since 2015. We are very excited to showcase her in 4 major cities around the country: New York, Miami, Los Angeles and Seattle.
Looking at fuel expense. We anticipate our fuel price per metric ton, net of hedges, to be $470 with expected consumption of approximately 205,000 metric tons. Taking all of this into account, adjusted EPS for the second quarter is expected to be approximately $1.02, flat to the prior year, primarily as a result of the higher dry dock days associated with our Norwegian Edge fleet enhancement program.
As for the full year, strong booking trends across all core markets for all 3 brands have resulted in the raising of our outlook for net yield growth by 50 basis points, and is now expected to be up approximately 2.5% or 3% on an as-reported basis. Excluding new tonnage introduced for the Norwegian brand, net yield is expected to be up approximately 3.5% or 100 basis points higher, which further illustrates the pricing strength of our core fleet.
Turning to costs. Adjusted net cruise cost, excluding fuel, is expected to be up 1% -- flat to 1% or up 0.5% to 1.5% on an as-reported basis, consistent with our prior guidance.
Looking at fuel expense. Our fuel price per metric ton, net of hedges, is now expected to be at $470 with expected consumption of approximately 840,000 metric tons.
Strong and well-priced close-in demand in the first quarter, coupled with higher expectations for the remainder of the year, has resulted in an increase to top line expectations. In addition, rising fuel prices negatively impacted earnings guidance. Despite this headwind, we have raised our EPS outlook by $0.08 at the midpoint, expanding the high end and moving up the floor of our guidance range. As a result, full year adjusted earnings per share is now expected to be in the range of $4.55 to $4.70.
There are a few key -- few items to keep in mind for the balance of 2018. The back half of the year will have higher yield growth versus the first half as a result of easier comparisons with the third quarter having the highest growth. As for costs, the back half of 2018 is expected to be down as we lap onetime expenses from the prior year related to the hurricanes and costs associated with the launch of our China operations.
During the quarter, we executed on a few initiatives to reduce interest expense and further strengthen the balance sheet. First, we redeemed $135 million of our 4.75% senior notes due 2021. Following the partial redemption, $565 million remains outstanding. In addition, we recently entered into forward interest rate swaps for $1 billion of our variable rate debt for the remainder of 2018 and through the end of 2019 to lock in favorable rates, which increases our fixed rate debt to approximately 71% in 2018 and 75% in 2019. Thereafter, our fixed rate debt percentage will be approximately 70% as we take delivery of our newbuilds, which have very efficient fixed-rate financing in place.
As for leverage, we remain on track to delever to the low 3x by year-end. We remain focused on our capital allocation strategy. And as our balance sheet continues to strengthen in combination with strong financial performance, we will pivot to providing meaningful capital returns to our shareholders. As part of that strategy, we recently announced a $1 billion 3-year share repurchase program that will enable us to opportunistically buy back shares. We will discuss this topic more at our Investor Day later this week.
With that, I'll turn the call back over to Frank for closing remarks.
Frank J. Del Rio - President, CEO & Director
Thank you, Mark. The delivery of a new flagship vessel is always an exciting time, and just as exciting is the addition of a new flagship terminal. We recently announced plans to construct a new dedicated terminal at PortMiami, the cruising capital of the world. Lastly, our executives and members of Miami-Dade County Government and PortMiami joined together to break ground on what will be an iconic structure in the city that has been home to Norwegian Cruise Line for over 50 years. With the capacity to handle over 5,000 guests, the terminal will serve to welcome over 1 million passengers that board our ships in Miami annually. Construction of the terminal is slated for completion in time to welcome the next ship in Norwegian's fleet, Norwegian Encore, in November of 2019. It will be fitting welcome to have a brand-new terminal to inaugurate the final ship in the wildly successful Breakaway Plus Class. These ships were revolutionary when introduced and continue to be extremely popular with new and repeat guests alike. We have set the bar high with Norwegian Bliss, but we are confident the Norwegian Encore will be the ultimate Breakaway Class ship.
With new terminals and ship additions that are indeed exciting, perhaps what excites me most is taking note of where we are today in Norwegian's path to returning capital to shareholders. We are rapidly reaching an inflection point as our stellar operating results, shrewd investment in our fleet, strategic acquisitions, disciplined financial stewardship and deleveraging profile have all coalesced to position us to further solidify and accelerate our plan to return meaningful capital to shareholders. As Mark mentioned, we'll discuss our capital allocation plans along with our strategies for driving demand to maximize the benefits of our growth profile at our Investor Day this coming Friday aboard Norwegian Bliss. We look forward to welcome you to what will surely be an exciting and informative event.
And with that, I'll turn the call over to questions. Operator, please?
Operator
(Operator Instructions) Our first question comes from the line of Felicia Hendrix with Barclays.
Felicia Rae Kantor Hendrix - MD and Senior Equity Research Analyst
Mark, I just want to make sure that we're interpreting your guidance for net yields correctly. So based on the first quarter upside and your new 2Q guidance and your revised 2018 net yield guidance, it appears that you raised your second half net yields by something like 20 basis points. Is that right?
Mark A. Kempa - Interim CFO & Senior VP of Finance
Yes. Thanks, Felicia. Yes, we did raise our yield guidance for the balance of year. And that's despite FX headwinds in the top line. The beat in Q1 was really from -- we rolled over the beat in Q1 I should say. And then we raised the outlook for the year, and it was driven by strong demand across all 3 brands. We're in a better booked position and we just have a lot more visibility and confidence in the outlook.
Felicia Rae Kantor Hendrix - MD and Senior Equity Research Analyst
Okay. And then just on the fourth quarter, and maybe Frank, this is for you. I believe you said in your prepared remarks and you said this before that you're bringing ships back to the Eastern Caribbean. So does that mean that the second half net yield guidance that we just talked about doesn't just reflect your optimism about just the Western Caribbean but also about the Eastern Caribbean generally?
Frank J. Del Rio - President, CEO & Director
Yes. That's about right, Felicia. The Eastern Caribbean comes back to our fleet in fourth quarter, and it is performing better in both load and pricing as it did this time last year. And remember that this time last year, the hurricanes hadn't occurred yet. So we're very pleased with the way the Eastern Caribbean has come back in Q4.
Operator
And our next question comes from the line of Robin Farley with UBS.
Robin Margaret Farley - MD and Research Analyst
I think there is so many data points you've given us to kind of refute the farer supply case. So maybe my question would be on the sort of other -- this other part of the debate about the Caribbean pricing. I think one of the things that can sometimes be misinterpreted is that if people are looking at price now versus price at the same time last year for that fall Caribbean, that those April of 2017 prices aren't really where those fall Caribbean cruises ended up. So I wonder if you could quantify in any way when you look at what you have on the books now, even for those -- you mentioned you've some isolated parts of Caribbean and Bahamas that they are -- where some of the price may be down versus the same time last year. But is it fair to say that where those are pricing today is ahead of where those prices end up last year?
Frank J. Del Rio - President, CEO & Director
Yes. So the prices today compared to where the prices were last year is a tougher comparison because whatever erosion there was on price after the hurricane had not yet occurred. So the answer to your question is yes. Today's prices for the Eastern Caribbean in Q4 are better than they were same time last year and certainly better where they ended. And to the point about the -- your second point about the 3- and 4-day cruises, I'll turn that over to Andy, who's got a better handle on that.
Andrew C. Stuart - President & CEO of Norwegian brand
I thought it might be useful to exclude Cuba just because Cuba -- it's is a unique destination and premium pricing. So if you look at Caribbean pricing and load over the next 12 months, we are ahead on pricing and load factor. So quite frankly, we're feeling pretty good about the region.
Operator
And our next question comes from the line of Steve Wieczynski with Stifel.
Steven Moyer Wieczynski - MD of Equity Research and Gaming & Leisure Research Analyst
So if you look at -- Frank, you gave a lot of good commentary around 2019 and some pretty healthy commentary around what you're seeing there right now. I guess based on what you're seeing today in the marketplace and kind of your booking activity, is it fair to say that when we look out the next year, you would expect yields to continue to grow similar to what you would characterize as a normal year? And I know you might not want to answer that directly. But any high-level commentary would be helpful given the amount of supply growth that's going to come in next year. And I think that's a -- it's pretty big concern right now for the -- for a lot of investors.
Frank J. Del Rio - President, CEO & Director
Yes. We're going to talk a lot about this at Investor Day on Friday, Steve. But I can tell you that remember, 2019 is primarily an organic year for us, with Norwegian Encore not coming online until very late in the year, middle of November. But as I look at the core business today, how is it shaping up for 2019? Should we be optimistic? And the answer is yes. Across all segments, the business is ahead of this time last year. Remember this time last year for '17, it was fantastic, record bookings for '17. Everybody was very giddy about what was going to happen in '17. And '17 turned out to be a record year in the industry despite what happened in September with hurricane. So the fact that we are ahead today in both load and in pricing should, under normal circumstances, dispel any kind of concern that there may be in the marketplace about the industry's ability to absorb capacity, the industry's ability to bounce back after the hurricanes, sustained growth in our European business. All those myths, and that's what they are, myths, should be dispelled by not only our commentary but those of our peers in the industry.
Steven Moyer Wieczynski - MD of Equity Research and Gaming & Leisure Research Analyst
Okay. Got you. That's great color and that's helpful. And then, Frank, can you talk about maybe the bundling strategy and how that is coming together and how that's working for you guys? I think there's also a little bit of a misconception out there in the marketplace about how that's going to impact ticket-prices impact onboard in terms of your yields. And if you can give some color around that, that might be helpful as well.
Frank J. Del Rio - President, CEO & Director
I'm going to give you a rainbow of colors on that on Friday at the Investor Day. But for this purpose, I will tell you that we consider our bundling strategy to be a competitive advantage, and you will clearly see what I mean by that on Friday. We've begun rolling it out to other markets, international markets in Europe. We started rolling it out this winter in China, and the preliminary results are very promising. We see an extension of the booking curve. We see higher ticket pricing as a result of it, and we begun seeing a better onboard spend as well. So it's something that is core to our go-to-market strategy and something we'll continue to do.
Operator
And our next question comes from the line of Harry Curtis with Nomura.
Harry Croyle Curtis - MD and Senior Analyst
I wanted to just ask a quick technical question for Mark. Do you need to pay down any debt or any significant amounts of debt to get your -- to your low 3x leverage target? Or is that essentially -- is that mostly EBITDA-driven?
Mark A. Kempa - Interim CFO & Senior VP of Finance
Yes. That's primarily EBITDA-driven. Any debt repayment in a -- that we completed that debt repayment at the latter -- tail end of Q1, early part of Q2. And no, we have not contemplated any further to get to that target.
Harry Croyle Curtis - MD and Senior Analyst
Okay. Very good. And then a quick one for Frank. Just again focusing on the supply concerns because significant amount of the concerns are on not only 2019 supply but also the third quarter Caribbean supply. If you think about marketing expense, it seems to me that the industry as a whole is pivoting some of their marketing expense this far ahead of 2019. And if there were a significant amount of work yet to do to fill 2018, would the industry be doing that?
Frank J. Del Rio - President, CEO & Director
No. I think that's a good observation. So some of our brands began pivoting, if you will, focusing on '19 over '18 in early March because that's how well they're booked for '18. And others are just about to begin that pivot in the next week or so. The good news is that at least in our case, we're not spending any more marketing dollars in total. To the degree that there is more inventory to sell in '19, and we'll spend that money accordingly. But yes, I think that's another data point that should be encouraging to investors that the pivot to the following years' inventory is occurring certainly earlier than last year and perhaps earlier than ever. And that again, at least, in our case, that we're not envisioning spending more, we're just spending it in a different time period.
Operator
And our next question comes from the line of David Beckel with Bernstein Research.
David James Beckel - Research Analyst
Just piling on the list of investor concerns here. I think another one would be certain new entrants that aren't public and don't have to abide necessarily by some of the same public disclosure rules or, I guess, it's perceived discipline. As it relates to Caribbean entry from certain new competitors this year, how has their entry affected your revenue management strategy, if at all?
Frank J. Del Rio - President, CEO & Director
Not at all. I think I know which entrant you might be referring to. And what we have seen is a very responsible way in which they have introduced their new hardware into the marketplace. Again, another data point that suggests that the overall health of the market and that of the Caribbean is strong enough to absorb a relatively new entrant with new hardware. And so we're not, again, seeing any disruptions in the marketplace. Nothing that we or our peers in the public space have had to do to respond to an assault from a new entrant, if you will. It's pretty much business as usual. And we wouldn't be better booked at higher prices if that wasn't the case.
David James Beckel - Research Analyst
That's helpful. And as a quick follow-up. Just digging into your guidance a little bit for the rest of the year. Do you anticipate -- does that guidance anticipate higher onboard spend? And if you could, could you sort of bifurcate the percentage growth between luxury and Norwegian brand?
Frank J. Del Rio - President, CEO & Director
Yes. We don't segment report like those numbers. We will give you more color Friday about our industry-leading onboard revenue generation and we'll give you more color on that. But we saw a strong first quarter onboard spending trends ex China, so we're very happy with the onboard spend. It's another data point. Now one thing is the booking curve where people today feel confident enough to be booking their cruises a year or more further out. And a more current data point will be, well, what's happening today, what happened last week onboard your ships in terms of onboard revenue. And onboard revenue has been very, very strong throughout Q1, and I see it continuing so far into Q2.
Operator
And our next question comes from the line of Stephen Grambling with Goldman Sachs.
Stephen White Grambling - Equity Analyst
Maybe one for change gears a little bit. I guess with IMO 2020 kind of moving to the horizon, I guess, what do you think about the impact of the new rules and regulations there?
Frank J. Del Rio - President, CEO & Director
Yes. So that's something that's been in our minds for quite some time over the last few years. We are in the process of retrofitting our legacy fleet with scrubber technology. All of our newbuilds are going to be delivered with scrubbers in place. And right now, our best ability in 2020 is that we'll have a mix change. Today, we burn roughly 70% HFO, 30% MGO. We anticipate that will probably go to somewhere around 40% HFO, 60% MGO. And just to give you a little bit more context around that, we expect around 65% of our operational capacity in 2020 will have scrubber technology. And then, thereafter, we will -- in '20 and '21, we'll have additional capacity coming online.
Stephen White Grambling - Equity Analyst
And maybe a follow-up on that. I mean do you anticipate as you look at the broader industry fleet that some of the older ships could actually be effectively forced into retirement given the investment that will be required to become compliant?
Frank J. Del Rio - President, CEO & Director
No. I don't think so, Steve. We've spent quite a bit of money refurbishing our vessels. We have the youngest fleet in the industry, so we were not in that situation. Our -- we have a small fleet. We have many unserved -- underserved markets. A preponderance of our deployments are to premium price destination. One of the reasons why we lead the industry on a capacity-day basis in EBITDA per berth. So no, I don't see the price of fuel causing, at least us, any kind of accelerated retirement. Not at all.
Stephen White Grambling - Equity Analyst
And then maybe moving back to the forward bookings. And you provided a lot of detail there, but are you seeing any differences in that forward booking trend by customer base, whether it's luxury versus moderate, new to sales versus returning customers? And then, I guess, given some of the shift in capacity in China, are you seeing any change specifically in consumer demand there for in the market versus [fly] to sale?
Frank J. Del Rio - President, CEO & Director
Okay. I'll try to remember all of your questions. The upscale brands are performing extremely well. The forward booking curve for the upscale brands continue to expand. As I mentioned, the Splendor that doesn't start operating until 2020 had a record booking day by over 30%, and that should give you a proxy by which you can think about the rest of the fleet at the upscale brands. At the Norwegian Cruise Line, the year-over-year increase in load factor is truly impressive. And it's across the new ships, across the legacy fleet, across all destinations. And to have that combination with higher pricing, I can't say it enough, I see absolutely no effect of all the things, the big bogeyman that some investors are worried about, I just don't see it coming. In terms of China, as I've said in my most recent commentary, I continue to be encouraged about China. I feel better about China today than I certainly did 6 months ago. The reduction in capacity in China that's coming up, starting in Q3 of this year, without any new addition is certainly helping the situation in terms of the supply demand balance. We see pricing up in the last -- in the second half of the year, up solid mid-single digits from our first year introduction. And that's important because typically, in the second year of a ship being introduced, you have a dip in the yield growth, and what we're seeing the opposite in China. And then we're optimistic about our ability to meaningfully increase onboard spend in China from the introduction of our Joy At Sea promotion, which is a -- that the same concept of bundling that we've been able to introduce successfully in North America and throughout Europe. We're going to test to see whether the Chinese consumer likes free stuff just like the rest of the world does, and I'm hopeful that they do.
Operator
And our next question comes from the line of Assia Georgieva with Infinity Research.
Assia Georgieva
One quick question. I want to switch gears to Europe for the summer season. We go to sort of a few weeks basically now and then towards the end of May and early June, where I think close-in pricing from European source passengers becomes important. Will that possibly be a reason to raise guidance for Q3 further?
Frank J. Del Rio - President, CEO & Director
Can you articulate your question? I didn't quite understand the question.
Assia Georgieva
Frank, basically, I've think there some European source passenger bookings that come very close to the start of season. Could that be reason for further enthusiasm for Q2?
Frank J. Del Rio - President, CEO & Director
Yes. Thank you. Our Europe business continues to perform very, very well across all 3 brands, both in Northern Europe and the Mediterranean, all solid year-over-year pricing gains and the load factors are extremely well sold. I think you've heard me say in previous calls that our marketing -- go-to-market strategy in Europe, our bundling strategy that we've laid out throughout Europe is causing us to be agnostic as to where the consumer comes from. We're chasing what you would call the best customer. And it's proven to be strong and we're going to have a lot of discussion about this on Friday on Earnings Day (sic) [Investor Day]. But the North American consumer is returning to Europe in a very, very big way. The trend that we saw last year, where the numbers for the North American source business was very, very strong. It's continuing, and the strength is being seen in the pricing that we're able to command in the marketplace. So I think that Europe, overall, is going to be a very, very good news story in 2018.
Operator
And our next question comes from the line of Jaime Katz with Morningstar.
Jaime M. Katz - Equity Analyst
I'm curious, in China, how you feel like you maybe have to stay with the charter business for an extended period of time? Or maybe are there some lessons that you've gained from others that have entered before you that might help you shift away from filling through charters full faster than others may have?
Frank J. Del Rio - President, CEO & Director
Look, I think the whole industry wants to shift away from the charter model because, as you know, one of the most important functions of a cruise line is its ability to yield manage. And in essence, the charter business doesn't allow you to yield manage anywhere near the way that you can in the more traditional model that we have in North America. So we along the rest of the industry is moving away. Less than 20% of our overall business in 2018 will be full ship charters. And we believe that number will be below 10% in 2019. So certainly, the trend is moving away from full ship charters. But there is still a long ways to go from moving away from full ship charters to being -- to having a travel agent-dominant marketplace where hundreds of travel agents fill a particular sailing. Ultimately, that's where we need to go. That's the most efficient way of distributing our products across a broad market. And I believe that as the Chinese market matures and people from throughout China and not just the greater metropolitan Shanghai area or Tianjin area get exposed to cruising, that that's exactly what will happen.
Operator
And our next question comes from the line of Jared Shojaian with Wolfe Research.
Jared H. Shojaian - Director & Senior Analyst
Frank, you sound really confident just overall on what you're seeing right now, but your stock just really hasn't been trading well in the midst of really all the strength you've been seeing for many months now. So my question is, why is low 3x deleverage right now so important? And will you consider delaying the target to get more aggressive on the buyback in the near term, especially since you might get an opportunity especially with the secondary upcoming?
Frank J. Del Rio - President, CEO & Director
We manage the business for the long term. And while I am disappointed as many other investors are in the share price today, we think it is ridiculously low. It is what it is, and sooner or later, it will right itself. We do believe that for the long term to be -- to delever from where we are today is important. And we'll talk more about that as well at Investor Day and how we plan on delevering and returning capital to shareholders. I don't think, Jared, that we will change that strategy. It's something that the board and I feel strongly about to deleverage to those levels and to reach our target delever area that, again, we'll share with you on Friday.
Jared H. Shojaian - Director & Senior Analyst
Okay. And then just switching gears here. On the back half yield guidance raise, would you say that demand in March and April accelerated from what you were initially seeing back in February? Or were you just baking in some conservatism in case there were some unexpected surprises, which there really haven't been in the last couple months?
Frank J. Del Rio - President, CEO & Director
Yes. Business has been pretty steady throughout 2018 so far. As I said earlier, some of our brands have begun to pivot to booking more 2019 than 2018. So the overall volume has remained pretty much the same throughout the first 4 months of the year, but some of that volume has diverted to 2019 inventory.
Operator
And our next question comes from the line of Patrick Scholes with SunTrust.
Charles Patrick Scholes - Research Analyst
My first question concerns if you could perhaps help quantify what's your -- what your booking curve is right now. You certainly listed that as the booking curve is a reason giving you confidence that a recession isn't imminent. And how that length of booking curve has changed since over the past year or even since the February earnings.
Frank J. Del Rio - President, CEO & Director
Yes. So if you recall that at the end of the year, we said that our booking curve has improved some 18% from the prior year at year-end. And today, that trend has continued. We -- you never know what the optimal booking curve is. I don't have that answer. What I have said is, if you can continue to stretch that booking curve further and further into the future, while at the same time raising prices, then I think you're on to something. And that's what we do, and that's what we have been doing. And that's why you see, for example, as a data point, when we introduced Splendor, which doesn't come out until Q1 of 2020, how well booked she is. And that gives you an idea of the overall sense of the marketplace. So the booking curve is at a longer point today than it was a year ago, and that's why 2019 is booked as well as it is, not to mention those very early 2020. Can't believe we're even talking about 2020. But yes, booking curve is at a longer point today than a year ago, and that's contributing certainly to our confidence to be able to raise prices along the way.
Charles Patrick Scholes - Research Analyst
And then just a quick -- one more quick question here. I noted last quarter, you had said you intended this year to purchase $264 million of shares. Does today's announcement of the $1 billion share repurchase authorization, does that change that target?
Frank J. Del Rio - President, CEO & Director
Well, we announced the $1 billion new buyback program a couple of weeks ago, and we're going to remain opportunistic. We'll see how things transcend through the year. We're still very focused on delevering to the low 3x. But we're doing well. We're generating free cash. And we'll use it the best way we can, noting that it is our strong intent to begin to meaningfully return capital to shareholders in the coming years.
Charles Patrick Scholes - Research Analyst
Okay. So would $264 million be sort of the base case and there could possibly be more above and beyond that?
Frank J. Del Rio - President, CEO & Director
Patrick, the $264 million, we already completed in Q1. That was part of our prior share repurchase authorization. $1 billion is the new -- completely new program.
Operator
I am showing we have a question from the line of Vince Ciepiel with CRC.
Vince Charles Ciepiel - Senior Research Analyst
One of your peers alluded to better recent booking trends for Caribbean sailings in the remainder of this year. Curious if you had seen any change in the last 3 to 4 weeks and curious what might be driving that now.
Andrew C. Stuart - President & CEO of Norwegian brand
Yes, it's Andy. I'll take that. We from -- Caribbean booking trends have continued reasonably strongly. We are seeing strong close-in bookings trends for Q2 and 3, where we have relatively little capacity comparatively as we look out the 12 months, although I said to Robin earlier where we're happy with where we are. We're ahead on pricing and load. And we see a pretty positive trend in the Caribbean looking forward.
Vince Charles Ciepiel - Senior Research Analyst
Great. And then maybe a quick one for Mark. You raised the business on the strength of core yields despite what looked like fuel and FX moving against you. Just curious if you can put a number on what type of headwinds you saw from fuel and FX, maybe $0.05 or $0.10 since you last gave guidance.
Mark A. Kempa - Interim CFO & Senior VP of Finance
Yes. I would say it's in the neighborhood of $0.04 to $0.05 combined.
Operator
Our final question comes from the line of Tim Conder with Wells Fargo Securities.
Timothy Andrew Conder - MD and Senior Leisure Analyst
Just a couple, and again, not to beat the Caribbean, but let me ask this a different way maybe. If you had it to do over again, given what you've seen and granted you're basically to pull a lot of capacity out for Q2 and Q3 out of the Eastern Caribbean, would you make that same decision if you had to do it over again?
Frank J. Del Rio - President, CEO & Director
Yes.
Timothy Andrew Conder - MD and Senior Leisure Analyst
Okay, okay, okay. And then another thing, just wanted to ask Frank and maybe we'll hear it on Friday so we can wait until then. But let's get to your deleveraging target as you guys have remained very intently focused on, thankfully. After that share repurchase and dividends obviously in the mix, what about M&A? What about M&A?
Frank J. Del Rio - President, CEO & Director
Well, Tim, you know how M&A works. You can't really count on it. You always keep your options open. You talk to all the investment bankers who have something to offer. But this is a highly consolidated industry already. That's how we got here. Not sure there's much left. And I'll leave it at that. It's not something that we are out there, shaking the bushes, pursuing because we have to have an acquisition in order to make our numbers to show a healthy growth rate. We've got a very disciplined newbuild program that takes a 1 vessel per year. We have the youngest fleet in the industry. We generate the highest yields in the industry. We generate the highest EBITDA per berth in the industry. So quite frankly, we don't have to have in any way, shape or form an M&A transaction to beef up that growth profile. If one comes along that's accretive to earnings, we'll certainly take a look at it. But it's not something that we must have.
Well, thank you, everyone, for participating in this morning's call. And I look forward to seeing most of you, if not all of you, on Friday onboard our beautiful new Norwegian Bliss. Thank you, and have a great day.
Operator
This concludes today's conference call. You may now disconnect.