Norwegian Cruise Line Sees No Danger on the Horizon

The good times are here to stay, according to Norwegian Cruise Line Holdings CEO Frank Del Rio, as fears of a global economic downturn and industry oversupply recede into the background.

Norwegian reported a 15 percent rise in first quarter profit to $118.2 million with revenue up 8.5 percent to $1.4 billion.

The impressive start to the year means Norwegian expects to generate record earnings in 2019 and strong consumer demand is likely to carry on through the following year.

“As we have stated over the last few quarters, we continue to see a strong macroeconomic environment…and that fears of a near-term recession or downturn have greatly diminished, particularly in the United States as evidenced by strong first quarter GDP growth and recent Fed commentary,” Del Rio said on an earnings call on Thursday.

Norwegian’s decision to move ships out of the Chinese market and into North America also appears to be paying off.

“Fears of industry oversupply have also now subsided as the industry overall and Norwegian Cruise Line Holdings in particular, have shown their ability to successfully absorb new capacity coming online.

“But all this would not be possible without a confident consumer willing to spend money on vacation travel. Consumers across the globe continue to have a strong appetite for cruise. This is especially true here in North America where we maintain an advantage, given our strong sourcing in the region and a focus on global versus national brand and our exit from the lower yielding China market.”

Norwegian Cruise Line Holdings includes the Norwegian, Oceania, and Regent Seven Seas brands and has a 26 ships in its combined fleet.

Del Rio said the company was increasingly taking a “global” approach to its onboard offering. Its Norwegian brand recently scrapped “Premium All Inclusive” package in Europe, designed at the time of its launch in 2017 to help boost bookings with the lure of free drinks, in favor of its more flexible “Free At Sea” offering.

So far the change doesn’t seem to have hurt the company.

“Results over the first five weeks of Free at Sea in the U.K. and Germany is an encouraging double-digit increase in booking volumes over the prior year, and even more over the first quarter of this year, at comparable net pricing from those two important source markets, despite the dampening influences of Brexit and other regional economic factors,” Del Rio said.

Cuba Update

Last month the Trump administration’s national security advisor John Bolton outlined potential changes to U.S. citizen travel to Cuba. Details remain fairly sketchy but it looks like change is coming with a Treasury Department spokesperson telling Skift that it would implement changes to non-family travel to Cuba “in the coming months”.

Norwegian operates a number of itineraries to Cuba and Del Rio said it was business- –as-usual until the company heard otherwise.

“Current regulations continue to allow for people to people travel, and we continue to follow and comply with any and all directives in the various agencies of the federal government. We expect more clarity sometime in the future regarding travel to Cuba, but in the meantime, we will continue to offer cruises to the island as planned.”