Skift Take

Could cruise lines actually benefit from stricter regulations on American travel to Cuba? Norwegian Cruise Line Holdings CEO Frank Del Rio thinks so — and with even more cruises scheduled to the island next year, he'll find out if he's right.

With new regulations limiting what Americans can do in Cuba and where they can stay, Norwegian Cruise Line Holdings president and CEO Frank Del Rio said Thursday the cruise industry stands to benefit.

“Of course yesterday’s [Office of Foreign Assets Control] regulations that were issued cleared up a lot of the mystery and a lot of the concerns that some people had, which is very, very good for the cruise industry,” Del Rio told analysts during his company’s third-quarter earnings call. “I think yesterday’s regulations clearly show that going on a cruise to Cuba is the easiest and [most] hassle-free way to visit the island.”

The Trump administration on Wednesday said travelers will no longer be allowed to visit Cuba on “people-to-people” trips as individuals but must travel with an approved U.S. organization. They will also be prohibited from staying at a long list of hotels, including many operated by European hotel companies.

The U.S. State Department also issued a warning at the end of September that said Americans should not visit Cuba in light of mysterious attacks on embassy employees in Havana. In response to an analyst question, Del Rio said those messages have prompted questions but no slump in demand.

“For the first week or so we probably had more chatter on the calls, people wanting to know what it really meant more than anything else,” he said. “We didn’t really see a slowdown in bookings.”

He said Cuba cruises continue to attract bookings far in advance at prices that are “substantial.” And the company is doubling its cruises to the island next year.

“Cuba remains the star of the show for the year,” Del Rio said.

Despite the impact of major hurricanes in the Caribbean, which forced cruise cancellations and itinerary changes and slowed bookings to the region for several weeks, the company reported that revenue had increased 11 percent to $1.7 million. Profits jumped from about $342 million in the third quarter of last year to almost $401 million during the same time this year.

Some of that increase was due to the addition of Norwegian Joy, which launched in June. The 3,883-passenger ship sails from China, and Del Rio said the company is profitable there.

He said he is optimistic about the potential for 2018, in part because industry-wide capacity will be down, and China and South Korea have agreed to normalize relations following a dispute that kept cruise ships from taking Chinese passengers to South Korean destinations.

“Anytime you have flat to lesser capacity, those that remain in the marketplace should enjoy some renewed strength on the demand side,” Del Rio said. “And the renewed conversation about South Korea can only help.”

He said the company recently obtained an operational license, which will allow it to sell cruises directly to consumers in China. That will allow Norwegian to make more use of a partnership with Chinese commerce giant Alibaba.

“If it can be achieved, certainly having another strong channel to distribute our brand product directly to the consumer, where the cruise line has more influence, more control of the pricing, would be a good thing,” Del Rio said.


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Tags: cruise, cuba, earnings, norwegian cruise line holdings

Photo credit: Norwegian Sky is shown in Havana. Parent company Norwegian Cruise Line Holdings said Cuba business is strong for all of its brands. Norwegian Cruise Line

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