Norwegian Joy’s Onboard Revenue More Than Doubles in Alaska

Norwegian Joy’s Onboard Revenue More Than Doubles in Alaska

Norwegian Joy in Seattle

The decision to move the Norwegian Joy from China to the North American market has been successful for Norwegian Cruise Line.

“The redeployment of Norwegian Joy to Alaska resulted to a profound improvement to her profitability, especially in the top line driven by more than doubling of her onboard revenue generation,” said Frank Del Rio, president and CEO, on the Norwegian Cruise Line Holdings’ second-quarter earnings call.

The decision to pull the ship from China came in 2018, as part of the company’s strategic itinerary optimization initiative which also included its entry into new European homeports.

The North American launch of Norwegian Joy generated over $2.5 billion media impressions and further elevated Norwegian Cruise Line’s already the preeminent position in the all-important growing and high-yielding Alaska market, Del Rio said.

“We are extremely pleased to not only see her garnering the high pricing she rightfully deserves but also to see her deliver a customer experience that ranks her first in guest satisfaction for the Norwegian brand, driven by the high-tech and industry-first innovation onboard.”

Next year is shaping up to be even stronger for Joy in North America.

“And I may add that we won’t have the challenges of selling Joy, a very large ship, in a very abbreviated eight-, or nine-month booking cycle like we did this year when we announced her departure from China,” Del Rio explained.”We have a regular (18- to 24-month) booking cycle in front of us.”

According to Andy Stuart, president and CEO of Norwegian Cruise Line, Joy is ahead in the pricing of the vessel she replaced in the Alaska market.

Bullish on Alaska, the growth will grow with the Norwegian Sun joining the market in 2020, sailing seven- to 15-day cruises from Seattle.

“We believe the Norwegian Sun Alaska deployment will generate yield that will approach, if not be equal to what she was commanding in her Cuba deployment led by strong onboard spending,” Del Rio said.

Royal Caribbean: New Experiences at Sea and on Land

The Symphony of the Seas

Introducing the Symphony of the Seas in the North American market in November, Royal Caribbean International President Michael Bayley said that the features on the new ship will be introduced on the 2009-built Oasis, the first ship in the class, when she goes into a two-month drydock in Europe this year, and then on the sister ship, the 2010-built Allure, next year. “Through our Royal Amplified program the Oasis and the Allure will re-enter service with literally all the services and features we have on the Symphony,” Bayley said in a press conference aboard the Symphony.

With the continued growth of the industry, Bayley said it is important to attract more first-time cruise passengers. However, as they often start by taking a short cruise they are not experiencing the best that the industry has to offer.

“We have been using our old ships to convince people to start cruising,” he explained. “We are now changing that strategy by upgrading our short-cruise ships. As a result, we have seen a strong increase in demand.”

In May, Royal Caribbean expects to introduce its Perfect Day concept on CoCoCay. Redoing its private out-island in the Bahamas, passengers will find a state-of-the-art water park in addition to beaches and a variety of water sports offerings.

“Perfect Day has been designed after feedback from our guests,” Bayley said. “We asked them what would be their perfect day. The sweet spot is multi-generational travel – there will be something to do for all ages, whether they want ‘thrill or chill.’”

The United States generates about 55 per cent of Royal Caribbean’s total business, according to Bayley, who added that Europe, Latin America and Asia-Pacific are also huge markets for the brand.

As for ship deployment, he said that is based on the business viability of each market.

But despite the Symphony being the world’s largest ship at 228,081 tons and literally a destination by herself, while also receiving a top net promoter score, Bayley said that one of the biggest drivers selling cruises are destinations. “People want to go somewhere and explore,” he added.

“But as we plan our future with bigger ships and new onboard features and services, destinations must also plan their future, and sometimes they can do better. We are open to partnering with destinations to help them in their development. Today, we are looking at some 50 port projects around the world.”

The Symphony’s arrival in the Port of Miami coincided with the introduction of Royal Caribbean’s new Terminal A. Resembling the shape of a ship, the sleek terminal will homeport the Symphony and the Allure.

Up to now, Miami has handled about 750,000 passengers a year for Royal Caribbean. With the new terminal, the cruise line hopes to boost that number to 2 million passengers a year.

This year Royal Caribbean will also be introducing the new Spectrum of the Seas in China, while the Ovation redeploys to Alaska.

At press time, Royal Caribbean had five more ships on order, including the Spectrum of the Seas, slated to enter service this spring; another Quantum-class ship in 2020; another Oasis-class vessel for 2021 delivery; and the first of the new Icon class of LNG-fueled vessels in 2022, with a sister ship following in 2024.

China redeployments could help boost Caribbean cruise prices

By Tom Stieghorst
China is suddenly the hot spot for large new cruise ships, a development that could help cure the plague of overcapacity and low prices seen in the Caribbean market this winter.

The latest ship to join the fleet cruising from China is the Costa Serena, which will be stationed in Shanghai, starting mid-2015.

At 3,780 passengers, the Serena will be the largest of three Costa vessels operating year-round from China and the largest Carnival Corp. asset in the region. The company’s Princess Cruises subsidiary plans to offer a summer of sailings from Shanghai on the Sapphire Princess, starting May 21.

The Costa move comes on the heels of a head-turning announcement by Royal Caribbean International that it will put the as-yet-undelivered Quantum of the Seas year-round in Shanghai, after a six-month stint at Bayonne, N.J.’s Port Liberty from November to May.

Robin FarleyRobin Farley, a leisure industry analyst at UBS Securities, said that, taken together, the moves have implications beyond the Asia market.

“We believe the emergence of China as a major sourcing market can provide new demand for tonnage that can be redeployed from more mature markets, which could also potentially drive pricing in those existing markets,” Farley wrote in a note to investors.

More specifically, she said, the withdrawal of the Quantum from the domestic market reduces Royal’s capacity in North America by 1.5%; the ship represents 3% of its 2014 Caribbean capacity.

Except for the Oasis-class ships, at 4,180 passengers the Quantum would be the largest ship in the Royal fleet.

The impact of the shift of the Serena is a little more indirect on the North American market, since it is currently deployed on Mediterranean and Red Sea itineraries.

But if the loss of one ship in those regions results in Costa shifting a ship from the Caribbean (in the winter) to cover the void, it could reduce capacity in the Caribbean another 1%, Farley said.

Although the changes are small in absolute terms, a reduction at the margins could have a relatively larger impact on pricing as supply and demand come back towards equilibrium.

Sourcing of cruise passengers in China on a sizeable scale only started in 2006 when Costa positioned its first ship there, the 1,000-passenger Costa Allegra.

Since then, it has ratcheted up capacity with a series of bigger ships, including the current Costa Atlantica (2,680 guests) and Costa Victoria (2,394 guests) operating from Shanghai.

The debut of a second brand, Princess, with its 2,670-passenger Sapphire Princess, will increase Carnival Corp. capacity in China this year by 74%. Adding the Serena next year will mean 140% growth over two years.

Carnival has set up a dedicated unit in Asia (Carnival Asia, based in Singapore) and is laying the groundwork for selling more cruises to residents of that region, particularly in China.

“We have never been more committed to China as a market of great strategic importance for our company,” Carnival CEO Arnold Donald said.

Carnival has set up 10 offices in Asia, including five in China: Shanghai, Beijing, Tianjin, Guangzhou and Chengdu. It said seven of its 10 brands sail in Asia, and 23 ships will visit 90 ports with an estimated 1,439 port calls planned this year, including 220 in China.

Patrick Scholes, a leisure industries analyst with SunTrust Robinson Humphries, said the cruise lines are relatively slow to fully concentrate on China compared with other leisure industries. “It almost seems like the U.S. cruise lines are a day late,” he said.

Scholes pointed to the gaming giants like Las Vegas Sands and Wynn, who were not in the China market 10 years ago but “now they get the vast majority of their business out of Macau and China.”

Global hotel operators also converged on China about 10 years ago. “Now their strongest pipelines for opening new hotels are in China,” Scholes said.

Recently, Scholes said, cruise companies have started to shift their development attention to China. “Welcome to the party,” he said.

Scholes agreed that the increased desire to put competitive tonnage in China could help solve the industry’s structural impasse of recent years in which prices have been anemic even as capacity growth has been kept moderate.

“It sounds like [Caribbean] capacity for the first half of next year will be down simply because a lot of the ships are moving to Europe and Asia,” Scholes said. “So that will be a positive.”