Norwegian’s Del Rio sees room for expansion

Norwegian Cruise Line entered the Chinese market last year with the Norwegian Joy.Norwegian Cruise Line Holdings CEO Frank Del Rio told analysts that his ships were “in the right place at the right time” in 2017 but admitted that there were plenty of spots on the map he’d like to cover with new ships.

“We have so many markets that are unserved by us or grossly underpenetrated by us,” Del Rio said in a question-and-answer session with analysts to discuss fourth quarter and 2017 earnings in February.

“We don’t have a presence in the Mid-Atlantic states,” he said. “We’re not in Baltimore. We’re not in Charleston. We don’t have a presence at all in the world’s second-largest port, which is Fort Lauderdale.”

And the list kept growing.

“We don’t have a presence in the Gulf states of Texas or Alabama,” he said. “We don’t have a year-round presence in Tampa or New Orleans or Los Angeles. We only have three ships in Alaska, which is a very high-yielding market. Some of our competitors have up to eight vessels.”

Del Rio said that given the fleet size and the company’s intention to build only one new ship a year for its Norwegian Cruise Line brand, it could be a couple of years before he would consider adding a second ship in China, because, although profitable, it was not a banner year in China in 2017.

“I don’t think China is hitting on all cylinders as it can,” he said, referencing the continued tensions with South Korea and the resulting uniformity of short cruise itineraries, which only visit Japan.

Del Rio said that the Wave season for 2018 started strong and the company’s outlook is bullish, driven by a strong economy and consumer demand.

“Our overall booked position during the first seven weeks of 2018 further improved compared to the same time last year,” he said.

In addition to Norwegian Cruise Line, NCLH owns Oceania Cruises and Regent Seven Seas Cruises. The three lines operate a combined fleet of 25 ships with some 50,400 berths, offering itineraries to more than 450 destinations.

On average, guests of NCLH brands are booking five weeks earlier than they did at the end of 2016, Del Rio said.

NCLH net income rose 23% last year, to $780 million, as European pricing and bookings recovered faster than expected and the booking curve extended to a near-optimal length.

Revenue rose 10.7%, to $5.4 billion.


Costa Serena to Sail Two Cruises from South Korea

Costa Serena
Costa Serena

The Costa Serena will deploy to South Korea for a pair of week-long sailings next May as the ship has been chartered by Lotte Tour.

The first voyage sails for seven days and six nights, from Incheon to Busan, according to a spokesperson. Calls include Ishigaki, Taipei, and Keelung.

Second cruise sails eight days and seven nights, round-trip from Busan, with calls in Sokcho, Vladivostok, Tomakomai, and Hakodate.

China’s ban leaves cruise lines scrambling

Image result for Majestic Princess
Majestic Princess

Cruise lines have started to tear up their northern China itineraries following an order from the Chinese government to the country’s travel agencies to stop selling itineraries that include South Korea.

The Chinese directive follows the announcement late last month by the South Korean and U.S. governments that components for a new U.S.-developed anti-missile system were to arrive in South Korea last week for installation.

Known as the Terminal High Altitude Area Defense system, it is designed to intercept missiles up to 125 miles away as a means of protecting South Korea from missile strikes by North Korea, which has undertaken a series of long-range missile tests in recent months and tested a nuclear weapon as recently as last September.

The Chinese and Russian governments have objected to the installation of the missile-defense system because it employs powerful radar technology that the two countries assert can see into their territories.

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Genting Dream

Japan and South Korea are the main cruise destinations reachable from northern China on the four- and five-day itineraries preferred by most Chinese. With Korea suddenly off limits, cruises operated for Chinese passengers out of ports such as Tianjin and Shanghai will now focus primarily on visiting Japan, experts said.

In a statement, Costa Cruises said it would “remove calls to South Korean ports for our upcoming cruises homeported out of China, replacing them with cruising at sea or calls to destinations in Japan.”

Royal Caribbean International also said it will curtail visits to South Korean ports due to “recent developments regarding the situation in South Korea.”

Delivery of the parts for the missile-defense system came as North Korea tested four missiles launched in the direction of Japan that fell into the sea.

Dwain Wall, an executive at and a consultant familiar with the Chinese market, said there is no question that the Chinese government has the authority to order Chinese travel companies to stop selling cruises to Korea.

“There is a very tight licensing and regulatory control over travel agencies” in China, Wall said. “It does impact cruise, but it’s low season, thank God, and [the cruise lines have] been sort of able to regroup and change the ports to Japanese ports.”

If China’s ban persists into the busier summer months it could both overwhelm the port capacity in Japan and reduce demand for cruises in China because of the lack of destination variety.

Image result for ovation of the seas

Richard Fain, chairman of Royal Caribbean Cruises Ltd., said he could not predict how long the chill in China-Korea relations might last.

Stock analysts blamed news of the Korea tiff for a pull-back in cruise shares last week but said that it was excessive.

As a share of cruise lines’ global capacity, the analysts said China accounts for 9% of RCCL’s, 6% of Carnival Corp.’s and 4% to 5% of Norwegian Cruise Line Holdings’. Further, they pointed out, not all of that capacity is sailing from north China.