Norwegian Cruise Line Holdings will focus on the price of its cruises rather than the occupancy of its ships as the company’s full fleet returns to service this spring.
Frank del Rio, Norwegian Cruise Line (NCL) Holdings president and chief executive, emphasised the company’s determination not to discount to achieve higher occupancy.
Speaking as NCL Holdings announced a $4.5 billion loss for the year to December, del Rio insisted he would take higher prices over occupancy “any day”.
He said: “We will not chase short-term occupancy by sacrificing price. We’ve seen the effect that has over the years. Having four or five points more occupancy at discounted pricing is not the right move.”
Del Rio argued the temptation to discount “wasn’t hard to resist”, adding: “We’re happy to see a roughly 10% increase in prices. We market to sell, not discount to sell.
“Our total net revenue is up over 20% when some of our competitors are flat [on revenue]. We prefer mounting pricing power in exchange for a couple of points’ occupancy. We lead the industry on that. We’ll take that trade any day.”
He reported onboard spending “reached an all-time high” following the restart of operations from July last year and insisted: “We lead the industry in onboard revenue yields and ticket yields. We believe in marketing to stimulate demand and you pay for what you get. We’re going to continue doing that.”
Del Rio noted the end of 2021 and early 2022 were “all about the Omicron wave”, leading to some cancelled sailings “as ports began implementing onerous conditions for docking and cancellations increased.
“This did have an impact on booking,” he said, with the company dropping its planned marketing around the turn of the year. Del Rio explained: “We recognised cruising was not top of consumers’ minds in December and January so we pulled marketing.
“[But] we didn’t drop prices. We recognised Omicron would have an impact and reduced our marketing for those eight weeks.”
Now, he said: “We have a lot of dry powder [and] we’re more competitive than ever. We can move to higher [booking] revenue and onboard revenue yields.”
NCL Holdings is the parent company of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises and del Rio said: “All three brands are performing well.”
Chief financial officer Mark Kempa agreed. Referring to high average on-board spending rates, he said: “It’s a fallacy to think we’re just getting these per diems [spending rates by the day] because of lower occupancy. It’s not because of capacity limits.”
NCL reported an overall occupancy rate of just over 51% in the final three months of last year, reflecting its “self-imposed occupancy limits”.
Del Rio and Kempa declined to say when the lines would return near to 100% occupancy.
Kempa also acknowledged: “We are experiencing upward pressure on costs. Recent geopolitical developments have pushed the fuel price higher.”
Del Rio forecast the company would return to a “positive adjusted net income” for the second half of this year but gave no guidance on its likely full year performance.