During Norwegian Cruise Line Holdings’ Q2 2021 earnings call, President and CEO Frank J. Del Rio discussed how happy the company has been with the restart of its cruise vessels. The first vessel launched last week operating out of Athens and the cruise “went off without a hitch.” Additionally, onboard revenue “significantly exceeded” the company’s target – using 2019 parameters – by more than 50 percent.
[See how Norwegian's Q2 results stack up against Royal Caribbean.]
The company predicts that it will have eight ships representing approximately 40 percent of its total capacity, operating by the end of the third quarter, and 17 ships representing approximately 75 percent of its capacity operating by year-end. The company said initially its vessels will be sailing at 60 percent capacity for their first thirty days after their initial restart. They will then carry 80 percent occupancy for days 30 to 60. After day 60, the company hopes the ships will be able to return to normal load factors.
Del Rio also commented on how happy the company is with its current booking trends. In particular, he highlighted how demand for 2022 sailings are very strong and that the company has experienced “record-breaking demand” across all three of its brands.
“This outsized demand is even more impressive when considering that this strength is true despite significantly reduced levels of demand-generating marketing investments,” he added.
Additionally, full-year 2022 load factor continues to be meaningfully ahead of 2019 record levels by a wide margin, Del Rio noted. And when considering the booking curve with the same point in time versus two or three years ago, the company is booked nine or 10 weeks ahead of those levels.
“Pricing is also higher than 2019's record level, even when including the dilutive effect of future cruise credits,” he added. “Approximately 75 percent of our book position in 2022 is comprised of new cash bookings, with the remainder comprised of future cruise credit bookings. So far, approximately 45 percent of our outstanding future cruise credits have been redeemed.
Also interesting to note, Regent Seven Seas Cruises broke its opening day booking record for its 2024 World Cruise – a 132 night sailing. It sold out in under three hours.
“Not only was this without a doubt the strongest World Cruise launch day in the line's history, but it also saw a strong increase in new-to-brand guests, which comprise approximately one-third of bookings,” Del Rio continued. “This is further evidence of the continued demand we are seeing both from our loyal past guests and new-to-brand cruisers even for these long exotic itineraries.”
Another positive indicator of pent up demand can be seen in the company’s advanced ticket sales which increased approximately $300 million on a gross basis or over 50% versus the prior quarters' builds.
When asked during the Q&A session of the call if the company was worried about Delta’s impact on future bookings, Del Rio’s response was “I’m not focused on 2021, it’s a transitional year…And discussing the likely course of the Delta variant with Dr. Gottlieb, we think this is a transitory, temporary phenomena. It’s going to run through the population very quickly. We don’t think it will have lasting effects.”
Safest Vacation Environment
To ensure the safety of its passengers, Royal Caribbean said not only is it requiring all passengers and crew members to be vaccinated, but it tests everyone prior to boarding. Additionally, it has spent tens of millions of dollars to upgrade its air filtration systems.
“When we say the health and safety of our guests, crew, and communities we visit is a number one priority, we mean it. It is not a slogan nor a tag line,” Del Rio explained. “The legal actions we have taken in Florida reflect our deep commitment to resume sailing in accordance with our robust, science-backed SailSAFE health and safety protocols outlined on Slide 6. Nothing takes priority over health and safety, and we have gone to great lengths and expense to pursue this commitment to our guests, crew, and all stakeholders.”
[Federal Judge sides with Norwegian, says it can require proof of vaccination in Florida.]
Norwegian’s goal is also to ensure that its vacation experience is the safest available to any hospitality guest anywhere.
“When you look at all the measures we are taking, and you look at that vis-à-vis any other hospitality-driven type venue in the world, what we’re providing our customers with is one of the safest experiences,” said Mark Kempa, EVP and CFO.
No Labor Shortage Here
When asked if the company was experiencing the same labor staffing issues that other hospitality brands have been experiencing, Kempa said that Norwegian Cruise Line hasn’t been struggling to find staff the way hotel and restaurant brands are.
“The vast majority of our labor force – which is ship-based – comes from overseas,” he explained. “Quite frankly, our crew are ecstatic to come back to work. Unlike other areas of the world, they have not received government assistance. When we see employees on the vessel, they just break down in tears of joy because they have the opportunity to work again.”