Norwegian Cruise Faces Surging Demand and Pressing Need to Pare Costs

Norwegian Cruise Line plans to cut across the company in 2023, even as demand surges, in order to increase its profit margins, executives said during a Tuesday earnings call.

The cruise company is still in recovery mode. For the full year 2022, revenue amounted to $4.8 billion, down from $6.5 billion in 2019. Onboard spending was a bright spot. Revenue per passenger per cruise day was up 25 percent higher than in the comparable period in 2019. Norwegian served around a total of 1.7 million guests in 2022.

In the fourth quarter, revenue totaled $1.52 billion, up from $1.48 billion for the same period in 2019. Total revenue per passenger cruise day rose 23 percent year over year. Occupancy rose 87 percent quarter over quarter.  

Heading into 2023, booking volume looks strong. January of this year was a record for the company even though pricing was higher than in 2019. Occupancy is expected to average around 100 percent for the first quarter and is on track to reach historical levels. The cruise company expects booking levels to stay strong in the year ahead as long as the job market remains strong, said Cruise President and CEO Frank J. Del Rio.

With demand now surging, the company is cutting back on costs by 15 percent across the business to maximize profitability for the year ahead.  Marketing spend, which rose in 2022 to win back guests, will be scaled back. “We've said before, we spent a lot on marketing in 2022 going after the customer, creating that demand, elevating pricing,” said Norwegian Cruise Executive Vice President and Chief Financial Officer Mark Kempa. “We believe we've been successful there.” 

The company will also be cutting back on some of its offerings. Norwegian, for example, will cut the turndown service on its lower cabin categories. “We're not degrading the product. We're squarely focused on making sure that the guest experience is wholly intact, but we're going to align ourselves to what is the new normal for the hospitality sector,” said Kempa. “I think it's the right thing to do.”