Norwegian Cruise Line Holdings: Virus depressing bookings globally

The Norwegian Spirit has been moved from Asia to Europe.
The Norwegian Spirit has been moved from Asia to Europe.

The coronavirus Covid-19 outbreak has caused a slowdown in new bookings and increased cancellations worldwide, Norwegian Cruise Line Holdings reported to investors today.

NCLH CEO Frank Del Rio said that the impact of the virus extends beyond Asia, threatening what in early January looked to be the start of a record year for the company.

“The resiliency of our business model will be tested once again by a noncontrollable external factor,” he said. “The effect of the coronavirus outbreak on our business has been swift and severe and the continuous global headline news coverage has been substantial and relentless.”

NCLH said in an earnings release that it has cancelled 40 cruises across its three brands due to the outbreak: 10 on Oceania, six on Regent Seven Seas, and 24 on Norwegian Cruise Line (21 were on the Norwegian Spirit, which was redeployed to the Eastern Mediterranean from Asia earlier this month.

NCLH CFO Mark Kempa called the outright cancellation of cruises on Oceania and Regent Seven Seas “a significant impact for us.”

Image result for regent seven seas asia cruises

“Those are very long lead-booking itineraries with very high per diems,” he said. “Those voyages were completely sold out.”

Despite the Spirit’s extremely condensed booking window, Del Rio said the relocation of the ship provides the best opportunity to maximize its earnings and revenue potential and “demonstrates our nimbleness and ability to redeploy our assets as necessary.”

Looking ahead, Del Rio said that “given the unknown duration and severity of the outbreak, there may additional impacts that are not yet quantifiable. It is affecting the broader consumer demand environment that extends to our global deployment outside of Asia, which cannot be quantified at this time.

“The cruise industry was at the forefront of headline news for reasons that we know and that has caused near panic in the travelling public,” he added. “So, we’ve seen a meaningful decrease in new bookings. A meaningful increase in cancellations. Not just for our Asia sailings but throughout the deployment.”

Del Rio said he’s heard from travel partners and business partners that they are seeing similar trends across their portfolios.

“Business is soft, people are scared to travel,” he said. “Until we see the levelling off of new cases and the cruise industry not being the poster child for the virus, this may continue for some time.”

But he also said that “nothing is permanent.”

“Consumers do have a relatively short memory, thank god. We have seen other major events affecting the cruise industry that were quickly overcome,” Del Rio said.

Silver linings 

Del Rio also pointed to “silver linings,” including what he called the “underlying resilience of our business and potential for a reasonably timed recovery.”

The strong booked position prior to the outbreak, he said, “demonstrates the strong demand fundamentals of our business.”

He also said that in the past five days, NCLH has seen an improvement in week-over-week booking volumes and a decrease in cancellations compared with the prior three weeks.

“I don’t want to call it a turnaround trend just yet, but it is at least one data point of a possible positive change,” he said.

“We are no longer seeing a week-over-week acceleration in the declines in bookings and increases in cancellations. We’re seeing a moderation.”

Del Rio said the bookings decrease is similar to what the company experienced during similar geopolitical events and the financial crisis a decade ago. The difference with this crisis, he said, is the increase in cancellations.

“As an industry and company, we have faced and overcome challenges similar to Covid-19,” Del Rio said.  “I am confident this challenge will not be different. It usually takes eight-plus weeks from the time the news cycle peaks to when we can expect a return to normal booking patterns. It’s not a question of if, but when.”

Norwegian Strategic on Alaska

Norwegian Bliss

Norwegian Cruise Line Holdings (NCLH) President and CEO Frank Del Rio underscored his enthusiasm for Alaska on the company’s third-quarter earnings call.

He said the company will continue to make investments and cultivate partnerships in the region, noting the new pier NCLH has agreed to build in Ketchikan, its $20 million purchase of 2.9 acres of waterfront property in Juneau, and the construction of a second pier at Icy Point Strait.

“We are investing in port facilities and guest experiences,” he said. “Alaska is destination-centric and you much have the land capabilities in place. We have almost doubled our capacity in Alaska over the past three years and will be even stronger as we finalize our investments.”

NCLH’s Q3 Alaska capacity was up 17 per cent over the same period last year.

In Ketchikan, NCLH has entered into a 30-year preferential berthing agreement with Ward Cove Dock Group, which allows for the construction of a new double ship pier in Ward Cove.

Meanwhile, current zoning laws are said to prevent a pier from being built on the property in Juneau.

The pier will be built to simultaneously accommodate two of Norwegian Cruise Line’s 4,200-passenger Breakaway-Plus class ships and is expected to be ready for the summer 2020 season.

NCLH partnered with the Port of Seattle in 2015 on the renovation and expansion of the Bell Street Terminal at Pier 66 which was ready for the 2018 season and the 4,000-berth Norwegian Bliss.

NCLH and the port entered into a 15-year lease agreement providing its ships priority berth space in Seattle for the full term of the lease in return for passenger volume guarantees. NCLH manages the cruise operations at Pier 66, while the port operates the facilities outside the cruise season.

Next year, the Norwegian brand will have three ships in Alaska, with the Norwegian Bliss, Joy and Sun will be from Seattle. In 2021, the new Encore will take over for the Joy. Oceania and Regent will each have one ship in the Alaska market, with the Regatta and the Seven Seas Mariner from Seattle, Vancouver and Seward.

Del Rio cited what he called “incredibly strong ticket pricing and onboard spend” in the Alaska market and also noted the lengthening of the season, which now runs all the way from April to October.

“In the coming years, we will further bolster our presence and commitment to the region,” Del Rio noted.

Norwegian Encore draws applause for big views and thrills

The Observation Lounge on the Norwegian Encore offers ample seating and food and drink options.

The Observation Lounge on the Norwegian Encore offers ample seating and food and drink options. Photo Credit: Rebecca Tobin

ONBOARD THE NORWEGIAN ENCORE  — When Harry Sommer, the incoming president and CEO of Norwegian Cruise Line, spoke to travel advisors aboard the line’s newest megaship, the Encore, he reeled off a list of its activities: 29 dining options, a collection of virtual reality games, laser tag and the 1,100-foot racetrack.

But surprisingly, it was the “huge, huge” observation lounge that elicited spontaneous applause from the travel advisors in the audience. 

“Prime waterfront property,” Sommer said. “I think some of our cruise line competition uses that to put cabins; we like all our guests to experience that type of view. The exact same view the captain gets from the bridge.”

He then deadpanned, “Though he hasn’t invited me yet.” 

Sommer wasn’t kidding when he said the observation lounge was huge. It takes up a generous chunk of Deck 15 and offers vistas both port and starboard plus two-deck-high, floor-to-ceiling windows over the bow. There are loungers galore for disappearing with a book plus couches grouped in conversational seatings.

The decor is done up in soothing shades of sea green, taupe and wood tones, and basket-style chandeliers are suspended from the very forward part of the room. Three buffet stations and a bar offer food and drink at various times of the day. 

Haven passengers get their own generously sized forward lounge on the deck above. 

The Encore is the billion-dollar finale in Norwegian’s Breakaway-Plus class, so many of the travel advisors who saw the ship in New York, like those who would later tour it in Miami, were familiar with the ship’s layout. Agents, media and Norwegian VIPs were able to tour and stay on the ship during a two-day visit to New York  —  a “cruise” in name only, as the Encore remained docked. 

The Encore is not too different from its sisters, although, of course, there are tweaks here and there. More than one travel advisor on the ship raved about the interior decor. More than one executive pointed to the design influence of Frank Del Rio, the CEO of parent company Norwegian Cruise Line Holdings. 

A unique feature on the Encore that is destined to become a recurring feature on other ships is a new restaurant, Onda by Scarpetta, which specializes in upscale Italian cuisine. 

On the interior entrance, Onda is tucked behind Cellars, the wine bar runs in partnership with Michael Mondavi. But it’s also part of the wraparound Waterfront dining and drinking promenade and as such has tables for dining outdoors.

Also unique to the Encore is the slate of entertainment, and advisors I spoke with talked up the main-theatre productions of “Choir of Man,” which got two standing ovations during my viewing, and the Tony Award-winning musical “Kinky Boots.” 

In the category of super-active vacation, the Encore doesn’t disappoint. 

The Speedway go-kart racetrack is wider and longer than on other Breakaway-Plus ships, and each participant gets to drive for eight minutes, a suitable number of laps around the track. Passengers who aren’t into driving can watch the action from the observation platform.

Behind the go-karts is the laser tag zone, where teams of up to five players each are pitted against each other in the ruins of Atlantis. Adjacent is the gravity-defying Ocean Loops waterslide that twists and turns off the side of the ship. 

One deck below, passengers will find the Galaxy Pavilion, a collection of intense VR games, and yet another deck below that is the gym  —  and the spa, for when they’re ready to trade activity for a massage.

Another feature new to Norwegian, although not unique to the Encore, was the presence of water cartons instead of plastic bottles. In his remarks to agents (see a report, this page), Sommer talked about Norwegian’s investment in “doing the right thing,” which includes eliminating single-use plastic and plastic straws fleetwide.

“You can’t get a plastic straw on any of our ships,” he said. “Don’t ask.”