Skift Take

Norwegian Cruise Line Holdings CEO Frank Del Rio has been preaching the gospel of higher prices for years now — and practicing what he preaches. For now, it looks like passengers are willing to keep paying up.

After a “breakout” year that saw revenue and profit soar, Norwegian Cruise Line Holdings is keeping the focus on raising prices for its three brands.

Executives said in an earnings call Thursday that demand in 2018 was stronger than expected and onboard spending was “robust” across all source markets and destinations at Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises.

And the momentum is continuing: The company entered 2019 with more future business on the books than ever before at record prices. Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings, said the passengers were booking future cruises even earlier than they did a year ago.

“So we’re focusing on price; we’re pushing price higher everywhere we can both in 2019 and 2020,” he said. “While we still have a lot of cabins to fill, the emphasis will be on raising prices across all three brands.”

Analysts liked the sound of that: “With a firm foundation of business in place, we believe NCLH should be able to push pricing higher as it yield optimizes remaining inventory,” Stifel analyst Steve Wieczynski wrote in a note to investors.

For the fourth quarter, revenue jumped 10.5 percent to $1.4 billion. Profit increased to more than $154 million, up from nearly $99 million a year earlier.

Full-year revenue increased more than 12 percent to $6.1 billion as profit jumped from $760 million to $955 million.

Del Rio credited the new 4,004-passenger Norwegian Bliss, which debuted in April, for driving strong numbers.

“We have experienced performance that can only be described as extraordinary with demand, ticket pricing, and onboard revenue metrics that have all shattered records and surpassed our highest expectations,” he said. Unusually, the ship is in some cases commanding the same or higher prices than it did a year earlier.

The high-end Oceania and luxury Regent brands are more than 80 percent booked for this year and nearly one-third booked for 2020.

“So well-booked are these brands for 2019 that they are now pivoting their marketing initiatives earlier in the year than ever before to build an even stronger base for 2020 sailings,” Del Rio said. The parent company announced in January that it was ordering two new 1,200-passenger ships for Oceania and a new 750-passenger ship for Regent.

Along with previously announced orders, the company is awaiting 11 new ships by 2027 — a 50 percent increase in capacity.

Norwegian forecast adjusted earnings per share of $5.20-$5.30 for 2019, up front $4.92 in 2018. The company also said it is on track to meet long-term financial targets around earnings growth, leverage, and return on invested capital by 2020.

Del Rio said the company’s expectations for 2019 should ease concerns about the state of the U.S. economy and cruise industry capacity growth.

“Despite stock market volatility, fear of trade wars, Brexit uncertainty, and other short-term disruptions such as the recent government shutdown, our indications are that consumers remain confident in both the short and long term,” he said.

Shares closed at $55.51 Thursday, up more than 3 percent.

“With a solid 2018 in the rearview mirror, we were relieved to hear that numerous past positive demand contributors appear intact and could further bolster financial growth ahead,” Morningstar analyst Jaime Katz wrote in a note to investors.


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Tags: earnings, ncl, norwegian cruise line holdings, Oceania, travel advisor innovation report

Photo credit: Norwegian Bliss, which commanded high prices in 2018, is shown in Alaska in this promotional photo. Norwegian Cruise Line

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