Posted on 08/10/2022 5:03:32 PM PDT by Capt. Tom
Norwegian Cruise Line Won’t Be Dropping Prices to Fill Ships Norwegian Cruise Line Holdings remains committed to not dropping the cruise price to increase occupancy levels.
Norwegian Cruise Line Holdings CEO and President Frank De Rio has made it clear he is not interested in filling up ships if that will devalue his three brands.
The comment from the CEO of the third-largest cruise company in the United States is a significant step away from what the competition has been doing recently.
Focussing on creating a long-term strategy of offering steady pricing and a competitive onboard environment is the way forward, Del Rio said in his second-quarter earnings call.
This is why guests sailing onboard NCLH’s ships will likely not be seeing discounted cruises while paying up to 20% more for a voyage compared to 2019.
Past Experiences Forming Future Strategy In the second-quarter earnings call held yesterday, Norwegian Cruise Line Holdings made it clear it will not be sacrificing profitability in the long term for a short-term effect.
Norwegian Cruise Line Holdings has been sailing at around 65% occupancy levels, but filling up the ships at all costs is not something the CEO will be considering.
Frank Del Rio, CEO and President of Norwegian Cruise Line Holdings: “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.”
“I’m not willing to mortgage the company for 10-plus years in order to window dress the next quarter’s results, I just won’t do it. We’re here for the long term. We’re managing the business on a long-term basis.”
That long-term plan means NCLH and its three brands, Norwegian Cruise Line, Regent Seven Seas, and Oceania Cruises, will not be offering guests any discounted cruises to be able to bring occupancy levels to 100%.
That strategy could just be the right call to make, looking back at events in the past. During the financial crisis of 2009, cruise companies went all-out to get people to sail. The effects of those strategies took some companies more than ten years to recover from.
Del Rio: “I remind you what happened back in ’08 and ’09, when the Great Recession, certain cruise companies did drop their prices to ridiculous levels. And it took them, in some cases, 10-plus years, and in some cases, they’ve not yet reached those pre-Great Recession yields.”
Long-Term Bookings Looking Stronger Than Ever For NCLH Looking at the long term, the strategy that NCLH is looking at seems to be the right call, as long as the company can survive with lower occupancy rates in the near term.
Del Rio: “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.”
Bookings for 2023 are looking stronger than ever; even with 20% more capacity across the fleet, Norwegian Cruise Line Holdings is looking at a 40% increase in bookings for the coming year built up by the relaxing of COVID-19 measures and the upcoming maiden voyage of Norwegian Prima.
With ships currently sailing at 65%, increasing to 85% lately, the 40% increase will mean that ships will be sailing full next year. And NCLH is making those bookings with prices that are 20% higher than they were in 2018 and 2019.
De Rio continued: “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%-plus levels beginning for the second quarter of 2023.”
What Does It Mean For Those Looking To Book? Pricing strategies aside, the fact of the matter remains that the financial markets are showing record inflation numbers, a volatile currency exchange market, and a fuel market that is reaching record highs.
Put all that together; no matter what, cruises will be more expensive. The only thing that Frank Del Rio is saying is that his company will not be lowering prices to get more guests onboard.
Companies that lower pricing forfeit profitability. While this may seem a good idea short-term, guests will inevitably pay the price somewhere, whether through onboard purchases, tour pricing, or other additional costs. At a minimum, while sailing onboard the NCLH ships, guests know what they paid for and why.
There will always be discounted cruises available, just not at Norwegian Cruise Line, Regent Seven Seas, or Oceania. And that may well be a good thing for the company and guests alike.
Good luck with that strategy.
I have no idea what the coeditors that NCL owes Billions too, will think of that move. -Tom
Wow. I do love Oceania and would book a cruise with them again. Maybe this means I’ll get a half empty ship I guess. What about supply and demand? I cheaper price won’t “devalue” anything unless amenities and offerings decline as well.
Wont have to ... Theyre being swamped with calls to book ...
Good luck to NHLH on their bravado. Empty cabins on a cruise ship like empty seats on an airplane are lost revenue that never comes back; while the cost of fuel and crew is essentially the same whether the ship is full or not.
“Good luck with that strategy.”
Most that cruise with NCL are not bargain hunters. They pay the premium so the riff-raff can’t comingle.
Maybe they should fill the empty cabins with the homeless from L.A...
We have all heard that line before, and the pent-up demand line, but the fact is they didn't make the money they predicted for this year, and don't look like they are going to make any money for the rest of the year, to pay off their massive debts. - Tom
Hmmm, I usually prefer Royal Caribbean, but I’ll have to take a look at these guys for 2023.
Norwegian? Keep the riff-raff out? Boarded a Norwegian cruise as the pandemic started, and it got cancelled before sailing. The ship was falling apart and looked like a ghetto. My wife and I swore we would never book them again. It’s on my avoid list. Royal Caribbean and Princess were good cruises.
Is Norwegian the line that dropped the “vaccinated” requirement?
“Norwegian Cruise Line Won’t Be Dropping Prices to Fill Ships”
Other than a few more servings of food, what’s the downside of dropping prices to fill all cabins?
They WILL drop prices, but they don’t want to advertise it.
“Unvaccinated passengers aged 12 and older will now be allowed to board Norwegian cruise ships with only a negative PCR or Antigen COVID-19 test taken within 72 hours prior to embarkment, depending on local regulations. Passengers aged 11 and under are not required to be vaccinated or provide a negative COVID test, according to Norwegian.
The new policy will go into effect across all three cruise brands effective Sept 3.”
Until we can get a guarantee that ...
If the ship forces us mid-trip into covid testing, that we will get to stay in an already paid for balcony cabin. No moving us to quarantine on a lower deck and inside air. Our reason to buy a cabin will be the assurance that we can stay there, no matter what any test say.
Well darn. I don’t see any NCL cruises in my future.
If the ship forces us mid-trip into covid testing, that we will get to stay in an already paid for balcony cabin. No moving us to quarantine on a lower deck and inside air. Our reason to buy a cabin will be the assurance that we can stay there, no matter what any test say.
I just had lunch with an avid cruiser, she told me on "Celebrity Edge", about two months ago, she was quarantined along with her female traveling partner.
They both shared a balcony cabin. They were separated by one staying in the balcony cabin and her being transferred to a balcony cabin on the other side of the ship.
It looks like different Lines have different ways of quarantining their passengers.
Eleven out of 22 people in her scrabble group came down with covid. How many on the shp came down with it was not reported.- Tom
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.