Good morning, and welcome to the Norwegian Cruise Line Holdings business update and second quarter 2022 earnings conference call. My name is Daryl and I will be your operator. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions for the session will follow at that time. If anyone should require operator assistance during the conference, please press star then zero on your touchtone telephone. As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host, Jessica John, Vice President of Investor Relations, ESG, and Corporate Communications. Miss John, please proceed.
Thank you, Daryl, and good morning, everyone. Thank you for joining us for our second quarter 2022 earnings and business update call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings, and Mark Kempa, Executive Vice President and Chief Financial Officer. Frank will begin the call with opening commentary, after which Mark will follow to discuss our financials before handing the call back to Frank for closing remarks. 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.nclhltd.com/investors. We will also make reference to a slide presentation during this call, which may be found on our investor relations 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 second quarter 2022 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 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. With that, I'd like to turn the call over to Frank Del Rio. Frank?
Thank you, Jessica, and good morning, everyone, and thank you for joining us today. Over the past several quarters, we have reached many pivotal milestones as we continue the steady march of our post-pandemic recovery. On our last call, we had just welcomed the last ship in our fleet back to service, becoming the first major cruise operator to be fully operational. This quarter, we are pleased to report that we have reached another key milestone with operating cash flows turning positive for the second quarter. While our focus is on a profitable future, when I take a moment to reflect on the tremendous progress we have made since launching our Great Cruise Comeback just over a year ago, I can't help but be immensely proud of the entire team at Norwegian for rising to the occasion time and again and delivering impressive results.
Working right alongside us has been the travel agent community, who more than anyone can appreciate the challenges that we as an industry have overcome, and more importantly, can also see the tremendous opportunities that lie ahead. We thank them for their unyielding support throughout this journey. We have been disciplined and methodical in our ramp up and have maintained a clear and consistent mindset focused on our go-to-market strategy of market to fill and emphasizing value over price by continuing to expand and refine our bundling strategy. Our guiding principle has been a focus on the long-term profitability of the company, particularly for 2023 and beyond, by protecting our long-term brand equity and building on our industry-leading pricing. This means making intentional tactical sacrifices in the short term in favor of long-term sustainable results.
With this ethos at the forefront of our business plan, we also continue to be opportunistic, exploring all options to accelerate our recovery. As I survey the current landscape, I see several tailwinds and catalysts for our company which are outlined on slide four. First, since we last spoke, we have seen further improvement in the public health and regulatory environment, which has allowed us to relax COVID-related protocols and align us more to the rest of the hospitality industry. Last month, the CDC discontinued its voluntary COVID-19 program for cruise ships. This was a strong signal of confidence by the CDC that the industry's COVID-19 mitigation and management plans are robust and effective. This very positive development has paved the way for us to begin removing barriers for our guests.
We're permitted by local regulations, bringing us not quite on equal footing with land-based vacation and leisure alternatives, but significantly closer. Just yesterday, we announced a number of changes to our own health and safety protocols, which are effective September 3rd, and as always, are subject to local regulations. We will no longer have a mandatory vaccination requirement on any of our ships and have relaxed testing protocols regardless of sailing length. To put it simply, vaccinated individuals, including those embarking on NCLH ships from U.S. ports, will no longer have any pre-cruise related protocols, and those who are unvaccinated or choose not to provide proof of vaccination will be required to test negative within 72 hours prior to embarkation. In addition, all guests 11 years old and younger will be exempt from vaccination and testing requirements of any kind.
There remain a few jurisdictions with stricter requirements, including Canada, Greece, and Bermuda, where we will continue to comply with local mandates. These modifications to protocols are meaningful and give us additional flexibility to reach a wider cruising population, reduce friction and travel-related hassles for our guests, and bring greater variety to our itineraries. In fact, yesterday's announcement was an instant catalyst, resulting in one of our top three best booking days of the year. Our top priority remains the health, safety, and well-being of our guests, crew, and communities we visit, and this commitment is unwavering even as we are evolving our SailSAFE protocols to adapt to the changing public health environment. Across the globe, we continue to see the easing of travel restrictions and reopening of ports to cruise, bringing us closer to a normal operating environment.
One significant example of this easing is the lifting in June of the onerous one-day testing requirement to enter the U.S. While the decision was too late to have a meaningful impact on ships sailing in the second, and to a lesser degree, third quarters of this year, the change resulted in an immediate and sustained boost in booking volumes for future periods in the weeks following the announcement. Second, and despite recession and economic slowdown fears abounding in the broad marketplace, we continue to see a strong upmarket consumer, with booking trends continuing to show steady improvement week-over-week, which I will touch on in more detail later in the call. At a high level, to evaluate the extent and willingness of consumers to spend on cruise travel, we typically monitor two key indicators.
First is the booking window, which provides a peek into the consumer psyche about the future, given that cruise is a long lead time and relatively high ticket purchase. To be clear, we have not seen any cracks emerge in the dynamics of the booking window, and it remains both within historical range and our own expectations. Second is our onboard revenue generation, which is a real-time now indicator of how our guests are feeling about their financial situation right now and while on board our ships. Onboard revenue generation has continued to be impressive, even as we continue to ramp up occupancy, carrying more guests across all ships and cabin classes. In the second quarter, onboard revenue per passenger cruise day was approximately 30% higher than during the comparable 2019 period.
We continue to focus on enhancing our market-leading bundled offerings and increasing quality touch points with our guests, starting from the time of booking to capture even more revenue pre-cruise, allowing guests to arrive on board with an ever-fresher wallet, which ultimately results in higher overall spend. In fact, our pre-cruise revenue on a per passenger day basis for Q2 2022 is up over 50% versus 2019 levels. At a high level, guests who make pre-cruise purchases tend to spend approximately double that of guests who do not pre-book onboard activities. While the broader economy has experienced a pullback in consumer spending for physical goods, we continue to see strong propensity for spending on travel and experiences, particularly from the affluent consumer. Hotel average daily rates and airline fares remain at or near record levels, with occupancies reaching pandemic peaks.
Consumers want a vacation, even during economic downturns, and we believe cruises are much better positioned than land-based alternatives to capture the strong demand given our unmatched value proposition. While consumer appetite for experiences bodes well for the entire cruise industry, we believe our company in particular is best positioned to outperform in this environment. Our three brands focus on providing upscale experiences relative to their respective industry categories and therefore skew towards the higher-end consumer, which while not immune, have proven more resilient than other cohorts in previous downturns, and all indications are that the intent to travel for this demographic has not abated. The last and arguably most exciting catalyst I want to touch on is our attractive pipeline of new builds outlined on slide five, which will greatly enhance our already world-class fleet and drive significant contributions to the top and bottom line.
I just came back from Italy last week where we took delivery of Norwegian Prima, the first of six next-generation Norwegian Cruise Line ships, bringing our total fleet to 29 vessels with approximately 62,000 berths. We are excited to celebrate her christening ceremony later this month in Reykjavík, Iceland, and I encourage all of you to experience her firsthand as she is truly incredible. In fact, our shipbuilding partners at Fincantieri have said Prima is the finest, most demanding, and most complex vessel they have ever built. The Prima Class marks an evolution for Norwegian Cruise Line as every aspect of the design and guest experience has been elevated. Last week, we also celebrated the float out of Norwegian Viva, the second vessel in this groundbreaking new class, which is expected to debut in summer of 2023 as seen on slide six.
The Prima Class will further differentiate Norwegian Cruise Line compared to our cruise peers and reinforce the positioning of our brands as the leaders in providing upscale experiences in each of the major cruise categories. In addition to the new Norwegian vessels, we are also gearing up for the delivery of Oceania's Vista in spring of 2023 and Regent's Seven Seas Grandeur later that year. These new additions will further add to our dominance in the flourishing upper premium and luxury segments. You know, I often get asked whether we are confident that we can profitably absorb the capacity growth we are expecting for the next few years, and the answer is a resounding yes. Given our relatively small base of only 29 ships, we still have many unserved and underserved markets around the world.
We are continually innovating and enhancing our product offerings through our new builds and refurbishment upgrades to our existing fleet and making enhancements to our bundle offerings to provide even more value and attract even more high-paying guests to our brands. I can't emphasize this enough, so I will show you once again on slide seven how we've proven our ability over the years to absorb capacity and deliver outsized revenue, adjusted EBITDA, and operating cash flow contributions relative to our capacity growth, and we fully expect to continue this trend. Turning now to our booking demand and pricing trends summarized on slide eight. We continue to see sequential improvement as we remain disciplined and focused on laying the foundation for a record 2023 and beyond.
In the second quarter, our load factor was approximately 65%, in line with our expectations and a significant improvement versus the prior quarter of 48%. We expect load factors to increase to the low 80% range in the third quarter, with July already coming in at 85%. This steady sequential ramp is expected to continue until we reach historical 100%+ levels beginning for the second quarter of 2023. In terms of pricing, as you can see on slide nine, our net per diem growth in the first half of 2022 over the first half of 2019 pricing was significant at 18%. These results are consistent with our strategy of holding firm on our go-to-market strategy outlined on slide 10 of market to fill versus discount to fill, and maintaining pricing integrity by emphasizing high value over low price.
We absolutely believe this is the optimal path to continually deliver high quality and sustainable true profitability once we return to a fully normalized environment post-pandemic. As expected, our second half 2022 book position remains below an extraordinarily strong 2019, driven primarily by the lasting impacts of Omicron and the Russia-Ukraine conflict. That said, pricing for the second half of 2022 continues to be higher when compared to 2019, even when taking into consideration the dilutive effects of future cruise credits and the impact to premium-priced Baltic itineraries from the Ukraine conflict, which is primarily concentrated in the third quarter. As we move beyond this transition year and focus on 2023, our full-year book position is in line with 2019's record performance, and our booking pace in recent weeks has reached the level needed to consistently sail full.
Pricing is also significantly higher for 2023, and while we typically would not provide this level of detail, our performance in this area is so extraordinary that I just had to share it with you this one time. Pricing for 2023 is currently running in excess of 20%, 20% above 2019's record pricing and is higher by double digits across all three brands. While pricing will naturally tend to level off as we continue to build our book for 2023, it is nevertheless a testament that our steadfast strategy of focusing on long-term price increases over short-term load factors is indeed working as intended. Another one-time proof point that I will provide is ticket sales already on the books for 2023 sailings.
When compared to the same time in 2018 for 2019 sailings, and taking into account capacity growth of approximately 20%, 2023 sales are a whopping 40% higher. In addition, the quality and stickiness of our ticket sales for 2023 sailings is also expected to improve as a significantly higher proportion of bookings, 4x the level seen in 2019, include air travel booked through our own air programs, which in the past has proven to be indeed stickier. Another positive indicator demonstrating strong consumer demand is our advance ticket sales build. As you can see on slide 11, our advance ticket sales balance stood at $2.5 billion as of the end of the second quarter, up over $300 million versus the prior quarter, despite approximately $1 billion of revenue recognized. This represents an all-time record high ATS balance for the company.
On a growth basis, advance ticket sales build increased by over 40% to $1.5 billion in the quarter, the highest level in three years. In addition, approximately $1.5 billion of the total ATS balance at quarter end is associated with bookings that are already within the final payment window and therefore subject to cancellation penalties. The bottom line is that our entire team is more energized now than ever before. We are striving to reach our goal of record net yields and record adjusted EBITDA in 2023, welcoming eight additional ships to our fleet through 2027 after Prima this year, and leveraging all opportunities to maximize value for our stakeholders. This will not be an easy feat, especially as we continue to navigate an uncertain macroeconomic, but an increasingly encouraging public health and regulatory environment.
We are prepared for all scenarios, and I'm confident that we are taking the right steps today to set us up for future success. I'll be back with closing comments a little later, but for now I'll turn the call over to Mark for his commentary on our financial position. Mark.
Thank you, Frank, and good morning, everyone. Before I begin my commentary on our financial results and outlook, I would be remiss if I did not take a moment to thank our team of nearly 35,000 team members across the globe for their continued dedication, passion, and commitment to excellence. Their collective efforts are propelling us forward as we continue to execute on our operational and financial recovery plan. We have made tremendous progress to date, which has led to the significant financial inflection point of generating positive operating cash flow in the quarter for the first time since the start of the pandemic. Turning to our second quarter results, during the quarter, we returned our full fleet back to service with the relaunch of Norwegian Spirit in early May.
Our load factor for the quarter was 65% in line with our prior guidance, which reflects our methodical approach to ramping up occupancy while maximizing pricing. Numerous sailings across key regions and markets achieved over 90% and 100% occupancy, with particular strength in recent months in the Caribbean and Bermuda markets. We continue to expect sequential quarterly increases in occupancies, with load factors returning to historical levels for the second quarter of 2023. Strong ticket pricing and onboard revenue generation drove total revenue per passenger cruise day in the quarter up approximately 20% versus 2019. As we look to the third quarter, we expect this metric to increase by high single digits compared to 2019 levels.
This is impressive considering the impact in 2022 of the Russia-Ukraine conflict on premium priced European, in particular Baltic itineraries, which are heavily weighted to the third quarter. As a reminder, three ships were redeployed entirely as a result of the conflict, including one for each brand, and a total of 60 sailings across our fleet were canceled or modified. In addition, crew-related capacity constraints on the high-yielding Pride of America are a further headwind to overcome. Turning to costs, like every company across the globe, we continue to experience pressures from inflation and global supply chain constraints. Fuel prices remain a headwind, but our hedge program, as seen on slide 12, provides partial protection, and more recently, we have also seen prices beginning to moderate.
We have opportunistically added to our hedge position during the quarter and are now approximately 40% hedged for the remainder of 2022 and approximately 30% for 2023. We are also experiencing pressure on food costs, although we have recently seen green shoots of prices moderating for certain commodities such as beef and pork. In addition, we are starting to see shipping and logistical costs moderating from their highs experienced in 2021 and early 2022. Our supply chain and logistics teams continue to work around the clock to find measures to minimize this impact. Lastly, in the first half of 2022, we continued to incur additional costs associated with our COVID-19 health and safety protocols, primarily related to testing. As the industry continues to align its protocols with the broader travel and leisure space, we expect these costs to ramp down in the future.
Taken together, we expect adjusted net cruise cost excluding fuel per capacity day to decrease approximately 10% in the second half of 2022 compared to the first half. Guided by our core market-to-fill strategy, we will continue to make disciplined demand-generating investments in marketing in the near term, with a focus on laying the foundation for a strong 2023. Looking ahead, while it is still too early to provide concrete guidance, we expect net cruise cost excluding fuel per capacity day in 2023 to exceed 2019 levels. Aside from the fact of three or four years of both normal and now hyperinflation, remember that we have the youngest fleet of the major operators. We have not disposed of any ships during the pandemic, and therefore will not receive the unit cost benefit from the removal of less efficient capacity.
To help with modeling, we have also provided additional guidance on key metrics like Capacity Days, revenue expectations, depreciation and amortization, interest expense, fuel consumption, and capital expenditures, all of which can be found on slide 13. Shifting to our financial performance, slide 14 lays out the key financial milestones already achieved, as well as our expectations for the upcoming quarters. As previously stated, we generated approximately $260 million of operating cash flow for the second quarter after first turning positive for the month of March. Given that just over a year ago, we were just beginning the Herculean task of returning our ships to service after 500 days on the sidelines, this is no small accomplishment. The next milestone we are aiming to achieve is slightly positive adjusted EBITDA for the second half of 2022. Leading to positive adjusted free cash flow for the fourth quarter.
All of these stepping stones are consistent with our return to service plan and position us extremely well for 2023, where a return to a more normal operating environment, along with our focus on pricing discipline, is expected to lead to record net yields and record adjusted EBITDA for the full year. Moving to liquidity and our balance sheet. Our overall liquidity position remains strong, totaling approximately $2.9 billion at quarter end, which consisted of cash of approximately $1.9 billion and an undrawn $1 billion commitment. This existing $1 billion commitment, originally entered into in November 2021, was recently extended through March 2023. We have been clear that we view this facility as a backstop, and we currently do not intend to draw on it.
However, given the volatility in the capital markets in recent months, we felt extending the facility was the prudent choice to enhance our financial flexibility. Based on our current projections and trajectory, we continue to believe we will be able to meet our liquidity needs organically. Slide 15 demonstrates the result of the proactive and deliberate measures we undertook throughout the pandemic to optimize our debt maturity profile. We resumed debt amortization payments in April, which were previously deferred during the pandemic. For the remainder of 2022 and for full year 2023, we have approximately $500 million and $900 million of debt payments coming due respectively, the vast majority of which is related to our Export Credit Agency-backed ship financing.
While on the surface, 2024 maturities appear high, approximately $2.4 billion is related to our operating credit facility consisting of our revolver and term loan A, both of which we expect to refinance well prior to maturity. This positions us well as we continue to ramp up and return to a more normal operating environment. For additional detail on the breakdown of our upcoming debt payments through 2027, we also provide a detailed schedule on our investor relations website. After taking delivery of Prima less than two weeks ago with fixed rate financing that was secured back in 2017, our debt portfolio is approximately 75% fixed rate today. This fixed ratio is expected to increase to approximately 80% by year-end 2023, with the addition of three new builds next year, positioning us well in a rising rate environment.
The weighted average cost of debt for the portfolio is approximately 5%. We took out, as a reminder, all of the high-cost double-digit debt we incurred during the pandemic at an opportune time, prior to the current dislocation we are seeing in the markets, by completing balance sheet optimization transactions in November 2021 and February 2022. Turning to slide 16. As I've said this before and will repeat it today, we believe the transformational growth we have in the pipeline over the next few years, representing 50% growth in capacity by 2027 as compared to 2019, is an underappreciated component of our company's investment thesis. Our new ships have very favorable and efficient financing structures, resulting in an expected and immediate boost to profitability. For all new builds on order, our financing is committed at fixed rates averaging approximately 2.5% over the portfolio.
To help you better understand the mechanics of the cash inflows and outflows associated with a new ship, slide 17 lays out an illustrative scenario demonstrating the typical timeline. In general, approximately 20% of the ship's cost is due in four installments tied to various milestones pre-construction, beginning at contract signing. Typically, 80% of the cost is then due upon taking delivery of the ship. However, while this looks like a large capital expenditure outlay in the financial statements, we also receive very efficient Export Credit Agency-backed financing at the same time. This ECA-backed financing covers approximately 80% of the ship cost, which as I mentioned earlier, is committed prior to contract signing and at extremely attractive rates. In certain cases, we also structure predelivery financing in order to better match the timing of cash flows.
Amortization payments on this debt begin six months after delivery of each vessel and continue over 12 years. An often overlooked but incredibly important facet in the cash flow mechanics of a new-build timeline is that well prior to a delivery of a vessel, we are already receiving significant cash inflows in the form of advance ticket sales and onboard presales. Given that final payments from our guests are typically due 120 days prior to a sailing, this is when the cash engine begins to come to life.
As a rough estimate, we typically receive in the range of $100 million-$150 million of cash inflow from future bookings prior to a vessel's first revenue sailing, resulting in a cash infusion into the business that continues to build over time as final payments for future voyages also become due. While we often hear concerns surrounding the industry's capacity growth, we welcome and are excited for new capacity we have coming online. We have a high degree of visibility into the supply chain, supply pipeline for the industry with only four major shipyards globally who can build cruise ships of scale. This, coupled with the incredibly efficient cost and financing structure of the new builds, are a unique differentiator for us and the industry at large.
In summary, I am pleased with the progress we have made so far, but more importantly, how we have positioned our company for the future. While there continue to be challenges facing our business, and we are keeping a close eye on how the macroeconomic environment evolves, we also have significant tailwinds, including a continued post-pandemic return to normalcy and the industry-leading capacity growth that I just discussed, all of which bode well for our future prospects. With that, I'll turn it back over to Frank for closing comments.
Thank you, Mark. Before we wrap up our prepared remarks, I'd like to provide an update on our global sustainability program, Sail & Sustain, which slide 18 outlines key accomplishments and milestones. Since we last spoke, we published our second annual comprehensive ESG report and SASB-aligned disclosure on World Oceans Day in June. The report highlights our progress and commitments on our top ESG priorities. As we strive to provide critical transparency to our stakeholders this year, we focused on expanding and improving the data disclosed in our report, including expanding Scope 3 greenhouse gas emissions reporting, providing climate risk and resiliency data through our TCFD assessment, and strengthening human capital disclosure, including with data related to diversity as well as training and development. We also increased the scope of our third-party assurance to include many of these new data points.
Earlier this year, we also announced that we are pursuing net zero greenhouse gas emissions by 2050. This ambition spans our entire operation and value chain as we aim to bring all of our key partners along with us on this important journey. As we have said previously, a key driver to achieve our net zero ambition is the development of alternative fuels along with the associated critical infrastructure at destinations globally to support the creation, distribution, storage, and usage of these fuels. Methanol is one of the fuels we are actively exploring, and we recently joined the Methanol Institute to collaborate, share, and adapt solutions alongside the institute's members of methanol producers, distributors, and technology providers. We will continue to evaluate a variety of alternative fuels and share learnings with other companies as we collectively try to find a viable long-term solution.
Before I turn the call over to Q&A, I'd like to leave you with some key takeaways that you can find on slide 19. First, we continue to execute on our return to service plan and are achieving key milestones as we return to normalcy. The improving public health and regulatory environment, including our recent relaxation of testing and vaccination protocols, are a tailwind, and our entire team is focused on setting the stage for long-term sustainable profitability in 2023 and beyond. Second, we are seeing a strong consumer with a healthy desire to spend on travel and experiences, particularly in the upscale demographics our brands target. This strength is demonstrated by our improving booking trends, robust pricing, and strong onboard revenue generation.
Lastly, we are excited for the transformational and highly profitable growth we have in store over the next five years as we welcome eight additional ships to our fleet after Norwegian Prima. We've covered a lot today, so I'll conclude our commentary here and open up the call for your questions. Operator?
Thank you, Frank. If you have a question at this time, please press star one on your touchtone telephone. In order to get as many people through the queue, please limit your time to one question. If your question has been answered or you wish to remove yourself from the queue, please press star two. Our first question comes from the line of Dan Politzer with Wells Fargo. Please proceed with your question.
Hey. Good morning, everyone, and thanks for taking my questions. You guys certainly had some positive commentary on 2023. I think, Frank, you gave the first time the sales are pacing 40% higher than this time historically. I'm just trying to bridge to 2023 EBITDA, which you said is gonna be a record. Does that assume pricing is gonna continue to accelerate, or is that more of a function of cruise costs moderating from that second half pace which you guys have set? Thanks.
Hi, Dan, and welcome to the cruise industry. Look, I think it's everything. I think we're going to see occupancies return to normal levels. We expect that to begin certainly by second quarter of 2023. We expect pricing to be higher in 2023 than 2019. We have more capacity, more high-priced capacity. Remember, in 2019, we took delivery of Encore literally the last few weeks of the year. We had no contribution from the Regent Splendor, which was delivered in February of 2020. Both of those vessels will have a full year in 2023. We'll have a full year of Prima. We'll have roughly seven months of Vista, six months or so of Viva, and a little bit of Grandeur towards the end.
We've got new ship deliveries that are extraordinary, high-priced. We have, as of today and trending better every day. I really think that our announcement yesterday of relaxing protocols is really gonna be a tailwind. We saw it instantly yesterday, and it accelerated throughout the day. Today is also gangbusters compared to a typical Tuesday. The last thing we have control over is overall inflation. If you believe the experts and we are seeing, as Mark mentioned in his prepared remarks, some green shoots where costs are already coming down, including fuel, including food costs, that's strong.
Today we sit here telling you that we have record load, record pricing, record Capacity Days that we're absorbing very easily, and therefore we strongly believe that we will have a record net yield in 2023, which you know results in record EBITDA.
Dan , just to highlight, you know, further to what Frank's saying. It's not only the top line growth and the profitability of the new ships we have coming online. We are focused on costs. Obviously, 2022 has been a very lumpy year. It will continue to be a bit lumpy for the second half, given where our load factors are expected to be. You have to remember that a lot of our costs are fixed in nature. So when you look at it on a unit basis, yes, they are a little bit higher in the second half, in for 2022. But again, we expect normalization of that as we go into 2023. We've stated very clearly, we are spending dollars on demand generating initiatives, i.e. marketing, building a very strong 2023 book across the board.
We're making the investment today. We're not chasing the incremental load factor for next quarter. We are focused on a very profitable, high yielding, lower cost 2023, which we believe will result in a record EBITDA year next year.
Got it. Just for my follow-up, for the third quarter, I know you guys have talked about pricing, tracking up high single digits. Any additional color or if you could unpack that, you know, just given obviously Europe, I would assume is a headwind this year. To the extent you've seen strength in other regions, you know, just kind of a lay of the land would be helpful. Thanks.
Yeah, look, Alaska is very, very strong. Our Caribbean product is also selling well. We took a large vessel out of the Baltic very last minute, repositioned her to Port Everglades, where she's doing very, very well. Bermuda's doing great. You know, Europe isn't doing all that bad considering what's going on over there with the Ukraine conflict. We are leaning more on European sourced business, which typically underperforms in terms of both ticket price and onboard revenue. Still, overall, our yields are better in Q3. I think we're going through, you know, like Mark mentioned, some lumpiness. We've had protocol situations that are improving. The elimination of the testing requirement to get back into the country was huge.
Americans simply didn't wanna take the chance to be stuck in Europe should they contract COVID. That's had an impact over the short- and medium-term. Remember, one of the wonderful things about the cruise industry is you have great visibility because of the booking curve. People book way in advance. When these things occur, it impacts the short term, which is why we simply don't want to chase short-term occupancy at the expense of long-term pricing. You know, pricing has a long tail. The occupancy, the load factor of any given sailing, once that sailing is finished, it's finished. It has no impact in the long run or no cumulative impact, but pricing does. For us, it's incredibly important, especially since we target that high-quality, high-paying consumer to maintain pricing discipline.
As you can see, across the board to be up in pricing 20% for 2023 is truly extraordinary.
Got it. Thanks so much for all the color.
Thank you. Our next question comes from the line of Brandt Montour with Barclays. Please proceed with your question.
Hey, good morning, everyone, and thanks for taking my questions. Maybe just on the back of that, and apologies for the near-term question. I feel like I'm splitting hairs a little bit here, but when I look in your deck, now versus last quarter, you know, it looks like the back half, you know, in terms of when you sort of were looking for positive adjusted EBITDA, may have downshifted a little bit. I think maybe you just covered it, Frank, talking about not giving up occupancy for price. But I wanna know if there was anything else in there that you just weren't really expecting three months ago that maybe impacted that.
No, I don't think so. It's just the cumulative sustained lasting issues related around Omicron. It's only been in the last six weeks that, number one, the Biden administration took down the requirement to test negative to get back into the U.S., number one. Number two, the CDC dropping the cruise guidelines, which occurred about three weeks ago. Just yesterday, us announcing the relaxation of our own protocols. I think those three items, each one of them had a positive impact on bookings. As we said in our prepared remarks, each one of those events triggered an improvement in booking volumes. Remember, the booking curve on average is about seven months out.
When you say that all this happened around mid-year, whether it was late June, mid-July, early August, and you look seven months into the future, guess where you get? You get to 2023. We could, like others, chase short-term occupancy and sell cruises for, you know, crazy prices. We don't wanna do that. We never have done that. That is not our strategy. I remind you what happened back in 2008 and 2009, when the Great Recession, certain cruise companies did drop their prices to ridiculous levels, and it took them, in some cases, 10+ years, and in some cases, they've not yet reached those pre-Great Recession yields. I'm not willing to mortgage the company for 10+ years in order to window dress the next quarter or so. Just won't do it.
We're here for the long term. We're managing the business on a long-term basis. COVID had a major impact. We were shut down for 18 months or so, and the recovery is not instant mashed potatoes. If you want instant mashed potatoes, you gotta go elsewhere, because we're here for the long run, and our pricing strategy, how disciplined it is proof of that. To have 40% more ticket sales on the books right now compared to 2018, despite a 20% increase in capacity, is formidable. You know, I've been doing this for 30 years. I've managed cruise companies in good times and in bad times, and I am convinced beyond a shadow of a doubt that you don't sacrifice the long-term pricing power of your brand in order to achieve short-term load factor gains.
Thanks for that, Frank. We don't like instant mashed potatoes either. Maybe just a quick modeling question on terms of gross revenue. You gave us a little bit of guidance for the 3Q. I was just curious if you could just walk us through that to sort of net revenue per PCD. The only reason I bring that up is because it looks like the commission and transportation line in the 2Q was just a little bit elevated. I don't know if that was, you know, higher flight costs that you guys are passing through or whatnot, but maybe you can unpack that for a little bit for us.
Yeah. Hi, Brandt. Good morning. It's Mark. Yeah, when you compare our gross, you know, in Q2 versus Q1, you will see gross to net. You will see a slightly elevated cost structure, and that's gonna be representative of more of the ongoing cost structure. I think Q1, given all the dynamics where we had many sailings, many cancellations, we had quite a bit of ancillary revenue coming through in the gross line, which may have bumped up the net, so to speak. As we stated in our prepared remarks, we have now embarked on our air program that we've been working on for many years. You are starting to see the cost of that come through. I think you're gonna see these more.
These are gonna be the norm, more norm levels, so to speak. It's coming through in both the gross and obviously when you look at the net, and again, considering the fact that in Q3, we were heavily weighted, particularly in Europe, and we're still having very strong pricing, I think it's a pretty impressive result.
Perfect. Thanks, guys.
Thank you. Our next question has come from the line of Steve Wieczynski with Stifel. Please proceed with your questions.
Yeah. Hey, guys. Good morning. One of the questions we've gotten a bunch this morning, Frank, you've already talked a little bit about this, but you know, it's the change in the 2023 booked position today versus kind of where you were back in May. Obviously, pricing has actually improved a good bit, but the level of bookings have potentially slowed a bit. I would assume, you know, this is all gonna stem from your, you know, your go-to-market strategy, which you've already discussed a lot. I guess the question here is, should we expect moving forward that pricing should continue to basically push north, but you know, we, us investors have to be prepared that the book position could get moved around more than what we've been accustomed to in the past?
The second part of this question also, you know, if you guys could, I don't know if you will give this or not, but give us a sense of where you think you'll turn the calendar year in terms of being booked for 2023 versus where you would be historically.
Good morning, Steve. There was a lot there in your question, so I'll try to remember it all. Remind me if I miss something. You can't be ahead significantly forever because at some point the timelines converge. We're very, very pleased where we are today for 2023 in terms of cumulative book position. As the calendar goes forward and we get closer to 2023, I would expect us to stay more or less where we are today, because if you recall back in 2018, I think it was this very call in early August, where I said we had now reached the optimal balance between advanced bookings and pricing. If you book too fast, you leave money on the table. If you book too slow, you'll pay the price later by having to discount to fill in.
We don't wanna go there. We're very happy with the pace that we're at. We don't want to accelerate it much more than we have. We're instead focusing on price. We think that the tailwinds that I described so far this morning is going to help. We don't wanna be ahead any more than we are today. Because we had reached that point in 2018 where we thought we were optimum and we wanna maintain it. It all had to do with the booking curve and different itineraries. I'm pleased where we are today, not looking to push load factors or accelerate load factors.
Although again, I do believe that the two or three tailwinds that we discussed this morning are going to have a natural tailwind to bookings. Did I miss one of your questions, Steve?
No, that pretty much covers it all, Frank. Then, the second question actually is gonna be probably for Mark here, and it's gonna be a liquidity question, which I'm sure you're tired of talking about. You know, Mark, I fully understand, you know, your comments, you know, you made in your prepared remarks. You know, at this point, we've seen some of your competitors say their liquidity profile was fine, and the next thing you know, you know, we turn around and see them raise equity or do some kind of, you know, debt deal.
I just you know I wanna be clear here that and I know we can never say never, that you know we shouldn't expect any type of dilutive raise over the near term, given I think you said your cash flows at this point should be able to take care of you know pretty much all your near-term maturities.
Hi, Steve. Yeah. Look, based on everything we see today, and I'll repeat it again, we believe we can meet all of our liquidity needs organically. What you've seen from some of the competitors and more recently was really around refinancings of more near-term maturities. Specifically what I called out in my prepared remarks is that was something we were focused on over the course of the pandemic. As you look at our maturity tower, and if you put aside our normal operating facilities, our revolver and our term loan A, which, you know, we plan to amend and extend by the end of this year, we have a very clean path during our recovery. You know, with that, we still have debt capacity should we need to go to the markets.
We have no plans on raising liquidity via equity. We've said that before. We've diluted our shareholders enough through this pandemic, so we feel good where we are. We'll continue to watch that. More importantly, we have a relatively clean path going forward, so we feel good today.
Okay. It's very clear. Thanks, Mark. Thanks, Frank.
Thank you. Our next question comes from the line of Patrick Scholes with Truist. Please proceed with your questions.
Hi. Good morning, everyone.
Good morning.
With your pricing strategy, I completely understand, you know, the rationale for that. I wonder, you know, how much does the current staffing market play into, perhaps giving up some occupancy, but holding pricing? I relate this to some news that just came out with Diamond Princess canceling some itineraries due to not enough staffing. I guess, again, you know, how much does possible issues with staffing.
Yeah.
Play into that strategy? Also, maybe just if you could give us just an update on the general staffing environment for you folks.
Yeah. Hi, Patrick. It's Frank. Look, you know, the internationally sourced crew that make up the abundance of our staffing on board, it's pretty back to normal. Quite frankly, I was surprised to see what you mentioned happen to another company. But we're not immune to it. We have challenges in that area, but it's not keeping us from filling the vessels, except for one, and that's Pride of America, which, as you know, is the only American-flagged vessel that requires us to have 75% of our crew to be American citizens. We are having issues sourcing labor and crew for that vessel.
That vessel, which unfortunately is also our highest yielding vessel at the Norwegian brand, we've purposely kept the load factor since she's returned to service at 40%. Would our overall load factors be higher in Q3 and Q4? Yes, and pricing would be higher. We're purposely keeping it at that lower level because of labor shortages. We believe we have a road which by year-end, we should see that vessel return to full occupancy. Certainly the demand is there. It's, you know, disheartening every time we have to go and cancel people who are booked and expect to go, and we have to keep that load factor in the 40% range. That's around the edges.
Like I said, we expect to be back at 100% occupancy on that vessel by year-end.
Okay. Thank you.
Thank you. Our next question comes from the line of Vince Ciepiel with Cleveland Research. Please proceed with your questions.
Great. Thanks for taking my question. I wanted to come at the cost perspective from maybe a different angle. Obviously, there are lots of puts and takes here with restart costs, maybe some pull forward to marketing, and you have elevated fuel prices to deal with as well. You go back pre-COVID, the business was pretty well dialed in with EBITDA margins in the low 30s%. As you're thinking about the business longer term and planning for years ahead.
Maybe you just assume that fuel prices at some point get back to a what I'll call more normal range. Is there any reason to think that margins don't get back to the neighborhood that they were before? I guess another way of asking it is, has something changed in the relationship between operating costs and the pricing that you're seeing out in the market today?
Good morning, Vince. The short answer to your question is no. While we are seeing some near-term headwinds, you know, with the cost pressures like every other business is seeing, longer term, we still believe that we have a very strong operating leverage. You know, the simplest example of that is, you know, it's almost a two for one relationship. Every point of yield, you know, is generally, you know, 2x the point of cost in terms of monetary value. We still believe that to be intact as we look out into 2023. Obviously, it's very early to give any sort of concrete guidance around that. You know, apart from taking.
You know, when we look at 2022, internally we try to normalize what the cost structure is. You have to remember that we have the full burden of cost today, yet we don't have the full complement of passengers on board. We're doing that purposely, so when you look at the metrics, it like I said earlier, it's lumpy. As you look into 2023 and then beyond, that operating leverage is fully intact. You know, setting aside fuel, which we think we've mitigated reasonably with our hedge program. We think there's a very very real near-term path to getting back to historical margins. We just have to be able to operate consistently, operate our vessels at historical load factors, which we said we expect to be doing for second quarter of 2023.
I think you're gonna start to see the normalcy appear very quickly.
That's really helpful. Maybe separately on the bookings commentary, it sounded really encouraging with you know sequential improvement, a record day yesterday, a strong morning. Just thinking about the occupancy guide for the third quarter. I guess less short-term focused, but maybe more of an update on where the booking curve is at. Can you help us understand where close-in bookings are versus where they are historically and where the booking curve is at from a length perspective?
There's a lot there as well, Vince. Look, historically, the booking curve at the H level, knowing that each brand has a slightly, you know, different nuances, is about seven months. Today is slightly more elongated than that. I would say closer to nine months, primarily because of our focus on 2023 bookings versus 2022. If you gave me a choice of selling a cabin or a booking for a 2022 departure versus a 2023 departure, I'll take a 2023 departure. Our marketing is all geared towards 2023. We'll take 2022 bookings, of course, but we're not pushing it. Certainly we're not discounting to attract that kind of business. We believe investors are focused on 2023 and beyond, and not necessarily 2022. For us, 2022 is a transition year.
We're very pleased that we got the entire fleet operating. We're very pleased we took delivery of Prima. We're very pleased that we've now turned cash positive. In terms of, you know, pedal to the metal focus, getting back to normal on margin, on yields, on EBITDA, on profitability, it's all about 2023 and beyond.
Thank you.
Thank you. Our next question comes from the line of Robin Farley with UBS. Please proceed with your questions.
Great. Thank you. Most of my questions have been addressed already. Just one on, you know, so much of your maturities in the next 18 months look like they're ECA related and I wonder if you could talk about, you know, the potential there for those to be extended or pushed back in some way without you having to go to the capital markets and borrow for that. Thanks.
Hi. Good morning, Robin. Look, you know, our ECA and all of our lenders have been phenomenal over the pandemic and really have been really flexible. They too are commercial organizations, right? While we're gonna continue to work closely with them, first and foremost, as I've said, we believe that we can meet all of our liquidity needs organically. We have 20% more capacity coming online next year, which is driving significant growth. As we look forward, if there are any near-term significant headwinds, we're gonna look at all the options that are available out there. I would not wanna point specifically to the ECAs or any other lender, but we're gonna look at all options.
As we've seen in the past, I think, there's a strong tailwind, so to speak, to make sure that the industry is thriving. But more importantly, we don't think we need to do that. We don't think the industry needs to do that. The industry is recovering. You know, let's keep in mind where we were this time last year. We were just starting to operate, and a year later.
Over the course of time, we are now turning positive cash flow. We're generating positive EBITDA. The machine has started and the flywheel is going. We just have to let it keep percolating, so to speak. We feel good, but look, we're gonna look at all options should the need ever arise.
Okay. No, great. That's helpful. Thank you. Then just one clarification as a follow-up. You talked about onboard revenue being 30% higher, I think it was, compared to Q2 2019, which is a remarkable increase. Can you talk about how that's bundling? Do you have a higher percent of bundling in than you did in Q2? Or kind of what adjustment is in there, for the fact that, you know, some of that, I guess, is like in ticket price that you kind of allocate to onboard revenue for accounting purposes versus, you know, or is that 30% increase just purely what is spent once people get on board? Thanks.
It's certainly generating from what we're seeing on today's consumer, what they're spending on board. I will remind everybody on the call that we have been bundling now probably since late 2016, 2017. We started that in the industry. Our numbers on a comparable basis are relatively clean. There's always some nuances between the two buckets, but we are not having any sort of apples and oranges comparison in our 2022 versus 2019 results. As we've said, we've raised prices in terms of all of our offerings on board. Consumers are spending. We've gotten smarter in the pre-marketing of our products, creating that sense of urgency before the consumer steps on board.
We talked about those consumers who have a stronger propensity for pre-sales. They also spend more, about 30% or 40% more once they're on board. It's a combination of all those. The numbers are strong. We're seeing a strong consumer today spending today's dollars, and we feel that bodes well for ourselves and the industry.
Great. Okay, great. Thanks very much.
Operator, we have time for one last question.
Thank you. Our next question comes from the line of Jaime Katz with Morningstar. Please proceed with your question.
Hi. Thanks for squeezing me in. I guess, my question primarily is around sourcing strategy and maybe how you guys have altered that, given the weakness that we've been hearing in, you know, European consumers and how you're using that as a competitive advantage. Just any details you have on marketing plans ahead of the Wave season, given the strong demand that you're seeing. Thanks.
Yeah, we're not gonna share with you our marketing plans for Wave. I do believe that this coming Q1 will be the first true Wave since 2020, which was, you know, cut short by the beginning of the pandemic. In terms of sourcing, look, we prefer an American consumer on board all our vessels, regardless of where the itinerary is operating. Americans book earlier, book a higher cabin category, and as Mark mentioned, spend more money on board. That is still our basic go-to-market strategy. For European sailings, partly because of the hesitancy by many Americans to travel to Europe until the mandate to test negative to come back to the U.S. was lifted, we leaned a little heavier on our European sourcing.
Our European sales and marketing team did a fantastic job of accelerating demand from European marketplaces. Pricing suffered a bit. In spite of that overall pricing suffering a bit, we still posted you know higher pricing in Q2, expect higher pricing in Q3 going forward. I think overall the European consumer has improved a bit, or we've done a better job of sourcing those high-quality consumers out of Europe like we do in the States. Make no mistake, we rely on the American consumer perhaps more so than others because at the end of the day, we think they're the most resilient, certainly the wealthiest, understand our product best, and we'll continue to do that.
Thank you. That's helpful.
Okay. Well, as always, thank you so much for your time to this morning and for your support. The entire team here at Norwegian Cruise Line Holdings will be available today to answer any of your questions. Have a great day and stay safe, everyone.
Thank you. That does conclude today's conference call. We appreciate your participation. You can now disconnect your lines. Enjoy the rest of your day.