Tag Archives: Norwegian Cruise Line Holdings

For RCCL’s Fain, China a case of deja vu

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Two weeks ago I wrote about Frank Del Rio’s take on China and the obstacles he saw to further growth there, but the Norwegian Cruise Line Holdings CEO is clearly not the only cruise chief thinking a lot about development in Asia.

Royal Caribbean Cruises Ltd. chairman Richard Fain delivered some insights into his thinking on China on a recent conference call with investors. He listed four areas in which China is similar to the industry in North America and Europe, at a comparable stage of maturity.

China has troubled cruise investors, most recently because of price softness in Shanghai.

Drawing on 30 years of decision-making experience, Fain said he’s seen it before. “It is striking how many parallels there are in China’s evolution today compared to other places in other times where we have developed a market for cruising,” Fain said.

Cruising in North America in the 1980s looked much like China does today, according to Fain’s analysis.

“It was poorly known to the population at large,” Fain said. “Distribution was through a small number of specialist agencies. There was little choice of itineraries, and growth was episodic and dictated by the arrival of new ships.”

In addition, favorable word of mouth was the main way people found out about cruising, he said.

Fain characterized travel agencies specializing in cruises in the 1980s as a “niche” business and said China’s embryonic cruise travel agency system will evolve with time, as in the U.S.

He said worries about the paucity of destinations in China parallel the same concerns in the U.S market years ago. When Royal Caribbean was trying to decide on a fourth ship, there was “a great deal of hand wringing” about whether there would be interest “beyond the established group of then popular destinations.

“Today we all look back on that concern and find it laughable, but then it was a real concern. Similarly in China, our attachment area today for customers is small and our itineraries are limited, but a quick look at the map shows just how enormous the potential really is.”

Norwegian Cruise Line disappointed in Caribbean returns

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Norwegian Cruise Line Holdings CEO Frank Del Rio said the company’s “lofty” expectations for the Caribbean this summer have not been met, one factor in revising expectations downward for the rest of the year.

In a conference call to discuss second-quarter results, Norwegian lowered its guidance for second-half earnings and said it will not make its previously forecast goal of earning $5 a share in 2017.

A big part of the problem is lower demand for European cruises by North Americans due to geopolitical factors. But Norwegian surprisingly said that keeping two big new ships, Norwegian Escape and Norwegian Getaway, in Miami for the summer has not worked out.

“Today is not a happy day at Norwegian headquarters for obvious reasons,” Del Rio said. “We had to reset expectations based on the current booking environment.”

Although yields are still up in the Caribbean from last year by mid-single digits, Del Rio said strong pricing growth did not fully materialize.

As a result, in 2017 Norwegian Getaway will be deployed on Baltic itineraries for the summer months. “It’s a recognition that high expectations just aren’t being met,” Del Rio said, “almost exclusively due to heavy concentration of inventory during the weak period.”


The Norwegian Getaway is leaving Miami for the Baltics next summer.

Del Rio also delivered bad news about Europe. Norwegian had been seeing modest traction in the weeks following the Brussels terrorist attack in March. But with the bombing of the airport in Istanbul, the Nice truck massacre and the failed coup in Turkey, that “evaporated,” Del Rio said.

About 70% of Norwegian’s passengers on European itineraries are sourced in North America, considerably higher than competing cruise companies.  Attracting more Europeans will produce lower ticket and onboard spending revenue, Del Rio said.

Del Rio also said South American itineraries are soft, and are being impacted by perceptions about the Zika virus.

Norwegian reported a decline in earnings in the second quarter to $145.2 million, down from $158.5 million a year earlier. Revenue increased 9.3%, to $1.2 billion.

In late morning trading, shares of NCLH were down over 9%, to $39.04, while stocks overall were up slightly.

NCL reports slump in American demand for European cruises

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Photo taken by Dave Jones

Cruises in Europe are suffering from a slump in demand from American passengers, Norwegian Cruise Line Holdings confirmed today.

The parent company of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises, followed rival Royal Caribbean Cruises in describing the European demand as being ‘soft”.

Neither company gave a reason but security fears following terrorist attacks in Mediterranean destinations such as Turkey, Egypt, Tunisia plus those in Paris and Brussels are seen as the likely cause.

Wendy Beck, executive vice president and chief financial officer of Norwegian Cruise Line Holdings, said: “Continued strong demand in the Caribbean, Alaska, Bermuda, and Hawaii is offsetting softness in Europe which comes mainly as a result of lower demand from North American consumers.

“While this softness is tempering yield growth mainly in the second quarter, strong bookings and pricing in other core markets, as well as the addition of Seven Seas Explorer to our fleet, are contributing to strong yield performance in the back half of the year, keeping us on track to deliver expected earnings growth of approximately 30%.”

The current booked position for 2016 was described as being “on par” with last year record levels and at higher prices.

This came as the company revealed that booking trends for the first half of 2017 remain strong at higher prices.

Small ship Sirena joined the Oceania Cruises’ fleet in March, with its first sailing in late April following a multi-million dollar upgrade and refurbishment.

Seven Seas Explorer, the first new build for Regent Seven Seas Cruises in more than 13 years, will join the fleet in the third quarter.

Norwegian Cruise Line Holdings also disclosed the disposal of an interest in an unspecified land-based operation in Hawaii.

The company moved back into the black in the three months to March 31 with net income of $73.2 million compared to a loss of $21.5 million for the same winter period last year.

Total revenue increased 14.9% to $1.1 billion compared to $938.2 million year-on-year.

Adjusted net cruise costs increased 1.5%, primarily due to an increase in marketing expense as well as two scheduled dry-docks in the quarter compared to the prior year which had one dry-dock in the period, according to the company.

President and chief executive, Frank Del Rio, said: “We are pleased to report another quarter of solid financial performance and significant earnings growth driven primarily by strong pricing with robust demand in the Caribbean driving net yield growth above our expectations.

“Our recent announcements regarding our China-dedicated ship, Norwegian Joy, have been extremely well-received in the Chinese market giving us strong momentum prior to the ship’s introduction in 2017.”