Skift Take

We wondered how the terror attacks in Europe would affect travel plans this summer. Now we're getting a glimpse of the impact, at least when it comes to Mediterranean cruises.

Another cruise operator is reporting weak demand from North Americans for sailings in the Mediterranean.

The CEO of Norwegian Cruise Line Holdings said during the company’s first-quarter earnings call Tuesday that Americans had been shying away from Mediterranean itineraries in the wake of terror attacks in France, Turkey, and Belgium.

“Typically when these kind of events happen, cancellations are not what cause the weakness; if you’re booked, you tend to stay,” said president and CEO Frank Del Rio. “But what tends  to happen is new bookings are harder to come by. That’s what happened after Paris, it’s what happened after the Istanbul situation in early January, and it’s what happened after Brussels.”

But, Del Rio said, destinations closer to North America such as Alaska, Hawaii, Bermuda, New England, and the Caribbean are performing well.

That echoes trends that Royal Caribbean Cruises, the world’s second largest cruise company, described during its earnings report late last month.

Norwegian Cruise Line Holdings is the smaller rival of Royal Caribbean and cruise giant Carnival Corp. It owns the mass-market brand Norwegian Cruise Line as well as high-end Oceania Cruises and luxury Regent Seven Seas Cruises.

The cruise operator reported profits of more than $73 million for the quarter that ended March 31, up from a loss of $21.5 million a year ago. Revenues increased 15 percent to $1.1 billion.

Del Rio said the company has “tempered expectations” for the second quarter due to the softer demand in Europe and the greater reliance on Europeans — who tend to spend less money — to fill those ships. Through the third and fourth quarters, pricing is up but occupancy is slightly lower than it was a year ago, mainly due to the slump in Europe during the traditionally busy summer season.

For now, about a third of passengers on European sailings come from Europe, though Norwegian is trying to diversify its passenger base by opening sales offices or increasing existing marketing efforts in Australia, Brazil, China, Germany, and the UK.

“That takes time, but we’re already seeing an increase in business from these non-North American markets,” Del Rio said.

Norwegian has seen an uptick in European business over the past four weeks, Del Rio said, as news coverage of the attacks has faded and more time has passed without any new incidents.

“We’re hopeful the worst is behind us,” Del Rio said.

He also said during the call that Norwegian has started offering “cruise-only” rates at times — as opposed to fares that include free beverages, specialty dining or other packages — to better compete in online search results.

“When guests search for cruise options online, the Norwegian brands were at times at a competitive disadvantage,” he said.

Norwegian has focused on its “Free at Sea” promotions rather than discounts to draw passengers, preferring to focus on added value instead of price.

A spokeswoman said that the stripped-down “Sail Away” rates are occasionally offered on the lowest level category of each type of stateroom, which makes up less than 10 percent of the line’s inventory.

“This allows the channel that struggles to present the complexity of Free at Sea to still effectively market our brand and allow us to capture business that we temporarily were not capturing,” the spokeswoman wrote.


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Tags: cruise, earnings, norwegian cruise line holdings

Photo credit: Norwegian Jade sails by Santorini in Greece. Norwegian Cruise Line

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