Skift Take

Do healthy cruise line bookings signal a robust economy? We'll find out.

Consumer confidence fell and stocks continued their slump Tuesday. But Frank Del Rio said he sees reason for optimism.

The president and CEO of Norwegian Cruise Line Holdings told analysts Tuesday in an earnings call that the Miami-based cruise company entered the year with more reservations on the books — at higher prices — than ever before.

And customers are even looking past the uncertainty of the upcoming election season to plan their cruises for next year. The first half of 2017, Del Rio said, is 30 percent more booked at higher prices than the same time a year ago.

“We all know what the pundits have been saying about the overall economy and the threat of recession, et cetera, et cetera,” he said. “But I’ve always believed that the cruise industry, because of our elongated booking curve, is a very strong indicator of future  economic activity. And I hope that what we’re seeing for 2017 carries on and it proves out that the economy remains strong.”

Norwegian Cruise Line Holdings, the world’s third-largest cruise company, reported fourth-quarter revenues of $1.04 billion and profits of just over $38 million, compared to a loss of more than $25 million at the same time last year. Full-year revenues increased to $4.3 billion, while net income jumped to $427 million.

Del Rio attributed the future booking activity to confidence from travelers, the strength of the Norwegian Cruise Line, Oceania, and Regent Seven Seas brands, and the company’s strategies over the past year to generate demand.

“These initiatives resonated incredibly well and included our market-to-fill approach to pricing, which directs our target market and our past guests to focus on the deal aspect and value proposition of a cruise vacation rather than just on low price,” he said.

One area where discounts — or “pricing action” — has been needed is in the Mediterranean, where demand has suffered following the terrorist attacks in Paris in November. North Americans especially have been hesitant to book voyages to the Eastern Mediterranean, according to Norwegian. The parent company also announced after a suicide bombing last month that all three brands would call on Greece and Italy instead of ports in Turkey for the rest of the year.

“We are confident that the Mediterranean area, with its unique destinations and world-class attractions, will soon recover and return to its stature as one of the premium regions in our deployment portfolio,” Del Rio said.

But itineraries around North America — including Alaska, Hawaii, Bermuda, Canada and the Caribbean — more than offset the weak demand in Europe, executives said.

Widespread news about the mosquito-borne Zika virus, which has been spreading through Latin America and the Caribbean, has not taken a toll on business. The illness has been linked to brain damage in babies whose mothers were infected while pregnant.

“Simply put, the impact of Zika virus has been negligible across our brands,” Del Rio said. “And we believe based on past experience from similar outbreaks that any remaining concerns will soon subside.”

Del Rio also said he remained confident in the decision to send a new ship to China in the middle of next year. Even as some cruise giants caution that prices are dropping in the increasingly competitive market, Norwegian is customizing its upcoming ship for Chinese passengers. The company is also working on relationships with travel agents there and preparing to spend heavily to enter the market, with $15 million earmarked for this year and another $15 million for early 2017.

“Everything that I’ve seen, everything that my team on the ground sees, the discussions we’re having with the big-charter travel agents, operators, it reinforces our belief that overall there is no better place to deploy a new vessel — like we are deploying in 2017 — than in China,” Del Rio said.


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Tags: cruise, earnings, norwegian cruise line holdings

Photo credit: Norwegian Escape is shown in Tortola. Danny Lehman / Norwegian Cruise Line

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