Cruise lines brace for a downturn as presidential election looms

Photo Credit: Elnur/Shutterstock

With less than a year to go until the 2020 presidential election, travel suppliers and sellers are bracing for the slowdown that typically accompanies an election year’s commotion and distractions.

Every four years, sales run into headwinds as politicians and interest groups load up on ad time and consumers, especially in battleground states, are besieged with debates about the fate of the nation. 

And this time, the quadrennial cycle could be a doozy, as impeachment proceedings run parallel to the election campaign.

“It will be a very interesting Wave season, for sure,” said John Chernesky, senior vice president for North American sales and trade marketing at Princess Cruises. 

Chernesky said Princess is taking steps to mitigate the anticipated pause in bookings momentum that has built up this year.

“I think at Princess we’re seeing a good forward booking curve going into 2020, but we’re not oblivious to the fact that, historically, there has been a business downturn in the election years,” Chernesky said. “So we’re trying to work with our trade partners as best we can to essentially base-load as much as possible into the [coming] year. 

“We know the marketing spend next year is going to be less effective than this year, because there’s going to be so many distractions,” Chernesky said.

In 2016, presidential candidates Donald Trump and Hillary Clinton spent $1.8 billion on the election, much of it for television ads, some of the same news, public affairs and sports programming favoured by cruise lines.

Eva Jenner, vice president of sales at Holland America Line (HAL), said what’s true for Princess and HAL is true industrywide.

“We all are aiming at the same goal of base-loading and having a further [out] booking window than ever before,” she said.

For agents, that means that some of the best pricing for 2020 is available now when consumer receptivity to the cruise line marketing message hasn’t yet become blocked by political static.

“If nothing more, it might be a great year for consumers,” said Michelle Fee, president of Coral Springs, Fla.-based Cruise Planners. “It’s the travel advisor’s job to let the consumer know, ‘Hey, this is a great deal. You might not see this next year.’ So we need to continue to be in the marketplace and get the word out.”\

Although travel advisors have been aware of it for years, the presidential election-year slump in sales was documented in research by the Virtuoso travel network that it released at its Las Vegas conference in August.

Virtuoso found that U.S. travel sales grew an average of 14.3% in a year before a presidential election, but only an average of 2.9% in the year of an election. In 2016, sales actually fell 0.2%, after growing 15.4% the year before.

One reason for the slump, according to some, is the reluctance of consumers to make big-purchase decisions while economic uncertainty hangs in the air. Some support for that theory comes from data on auto and home sales.

Meyers Research, a real estate data firm, examined the past 13 presidential elections and found that home-sales activity dropped 15% in the November of an election year, versus 8% in the same month a year later.

And a 2016 study for, a site for car shoppers, found shopping behavior dropped 9% year over year in the months going into a presidential election in battleground states where no one candidate was a clear favourite.

James Grace, then director of analytics product management at the site, attributed some of the slumps to a spike in the cost of digital advertising, leading to fewer car ads and diminished shopping.

Sheer uncertainty could also factor into the presidential election-year slump. For example, travel sales in the U.K. have sputtered this year as the government has repeatedly tried and failed to resolve the terms of its exit from the EU.

But Fee said the daily combat between Trump and Democrats might have already caused consumers to tune out.

“If you look back historically, there are things that happened that used to shut our business down,” Fee said. “If something would happen in Europe, it was six months before people would travel there.” 

Not anymore, Fee said. “Today, we’re numb to all of it, so they might be numb to the presidential election, too.”

Fee is telling Cruise Planners agents to stay positive and stick to business. 

“I feel like we need to focus on people who we know travel through it all and who might be celebrating some kind of milestone,” she said.

With newly developed analytics, agency groups such as Cruise Planners can find prospects celebrating a 25th wedding anniversary or a 60th birthday, for example. 

“They’re not going to wait until next year to go because of an election year,” Fee said.

Another positive for agents that could help offset the election-year drag is a tsunami of new cruise ships. Twenty-one vessels are set to debut in 2020, including first vessels from new lines such as Virgin Voyages and the Ritz-Carlton Yacht Collection as well as the first ship with a roller coaster being rolled out by Carnival Cruise Line.

Doug Seagle, Seabourn’s vice president of business development, said, “A good counter to everything that’s going on in the world is that there’s a lot of new product out there. New product raises consumer awareness and creates excitement. Our travel partners want to get that message out there so that it counters the negativity in the marketplace.”

MSC Cruises brand campaign to support Wave push

MSC Cruises brand campaign to support Wave push

MSC Cruises is to launch a new brand campaign designed to support the trade during the peak Wave sales period.

Launching in January, the campaign – The Sea At Its Most – will appear on TV, in newspapers, on the line’s digital platforms and out-of-home displays.

Music to accompany the campaign has been created by Italian composer Ennio Morricone.

The line’s UK and Ireland managing director, Antonio Paradiso (pictured), said the campaign will help agents to “present cruise in a different way” to the customer.

Speaking as new ship MSC Grandiosa called in Southampton, he said: “The new brand campaign is supposed to support your daily business. You are travel agents, so you know the complexities of selling a cruise to customers.

More: MSC Cruises ‘very close’ to fulfilling UK market ambition

 MSC Cruises delays the opening of a private island

“We always have high expectations for Wave and in Q1 we have the opportunities to get the message out and we know that the customers are more willing to buy a holiday.

“Over the years, we have been challenging those misconceptions and stereotypes about the cruise industry. We always focus on the word ‘cruise’ but we forget we are selling a holiday.

“[The campaign] will help present cruise in a different way and reduce all those questions about what it is really all about.”

Earlier, chief executive Gianni Onorato outlined plans for the line to carry three million passengers in 2020 and hit 5.5 million by 2027, by which time 12 more ship is expected to have been added to the fleet.

“We will continue to build ships and be as innovative and creative as we can,” Onorato said.

NCLH Reports Fourth Quarter and Full Year 2018

Norwegian Breakaway

Norwegian Cruise Line Holdings today reported financial results for the fourth quarter and full year ended December 31, 2018, as well as provided guidance for the first quarter and full year 2019.

“The team at Norwegian Cruise Line Holdings delivered a breakout year in 2018, once again generating industry-leading record financial performance.  Strong global demand for our portfolio of brands, the successful, record-breaking introduction of Norwegian Bliss and the flawless execution of our demand creation strategies drove our fifth consecutive year of double-digit earnings per share growth,” said Frank Del Rio, president and chief executive officer.  “Building on this momentum, we entered 2019 in the best booked position in our Company’s history, with pricing above prior year’s record levels.  The strong start to this year’s WAVE season, coupled with our moderate in-year capacity growth and our solid booked position across our three brands, has us well-positioned to continue driving price throughout the year and into 2020, where we will also benefit from the first full year of sailings from Norwegian Encore and the addition of Regent’s Seven Seas Splendor.”


  • The company generated GAAP net income of $954.8 million or EPS of $4.25.  Adjusted Net Income was $1.1 billion or Adjusted EPS of $4.92.
  • The company beat full year Adjusted EPS expectations by $0.07, and surpassed the midpoint of its initial February 2018 Adjusted EPS guidance by $0.37, despite a $0.07 impact from unfavorable fuel prices.
  • Total revenue increased 12.2% to $6.1 billion. Gross Yield increased 3.4%.
  • Net Yield increased 3.5% on a Constant Currency basis, exceeding the Company’s initial February 2018 guidance by 150 basis points.
  • Achieved record gross Adjusted EBITDA Margin of 31.3%.
  • Adjusted ROIC increased to 11.0% from 10.1% the prior year.
  • Reached year-end Net Leverage target of low three times.
  • Authorized $1 billion, three-year share repurchase program and embarked on meaningful capital returns to shareholders by opportunistically repurchasing approximately $665 million shares under previous and current program. Approximately $600 million remains available under current authorization.
  • Record-breaking introduction of Norwegian Bliss, the first cruise ship specifically designed with features and amenities for the ultimate Alaska cruising experience.
  • Broke ground on new, state-of-the-art passenger terminal at PortMiami.

Full Year 2019 Highlights

  • Company’s 2019 booked position at all-time high entering the year and at higher pricing.
  • Net Yield growth guidance on a Constant Currency basis for full year and first quarter 2019 of 3.0% to 4.0% and approximately 2.5%, respectively.
  • Norwegian Joy to join record-breaking sister ship, Norwegian Bliss, in Alaska in spring 2019.
  • Norwegian Encore, the fourth and final ship in the tremendously successful Breakaway Plus Class, will join the fleet in the Caribbean in the fourth quarter.
  • Company reaffirms expectations to achieve its Full Speed Ahead 2020 targets provided at its 2018 Investor Day.

Full Year 2018 Results

GAAP net income was $954.8 million or EPS of $4.25 compared to $759.9 million or $3.31 in the prior year.  The Company generated Adjusted Net Income of $1.1 billion or Adjusted EPS of $4.92 compared to $907.7 million or $3.96 in the prior year.  Strong growth in 2018 including an increase in GAAP EPS of 28.4% and Adjusted EPS of 24.2% follows strong 2017 growth of 19.1% and 16.1%, respectively, further demonstrating the Company’s continued underlying earnings power.

Revenue increased 12.2% to $6.1 billion compared to $5.4 billion in 2017. This increase was primarily attributed to an 8.5% increase in Capacity Days due to the delivery of Norwegian Bliss in April 2018 and Norwegian Joy in April 2017, as well as strong organic pricing growth across all core markets.  Gross Yield increased 3.4%. Net Yield increased 3.5% on a Constant Currency basis and 3.7% on an as reported basis.

Cruise operating expense increased 10.2% in 2018 compared to 2017, primarily due to an increase in Capacity Days.  Gross Cruise Costs per Capacity Day increased 2.7%.  Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.6% on a Constant Currency basis and 2.9% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $483 from $465 in 2017.  The Company reported fuel expense of $392.7 million in the period.

Interest expense, net was $270.4 million in 2018 compared to $267.8 million in 2017. The increase in interest expense primarily reflects additional debt incurred in connection with the delivery of Norwegian Bliss and Norwegian Joy in the second quarter of 2018 and 2017, respectively, Project Leonardo financing costs, and higher interest rates due to LIBOR rate increases. The increase in interest expense was partially offset by the benefit from the October 2017 full redemption of the 4.625% Senior Notes due 2020 and the benefit from the partial redemption totaling $135 million of the 4.75% Senior Notes due 2021 in April. This year’s results included a non-recurring $6.3 million redemption premium and write-off of fees in connection with the partial redemption. 2017 included losses on extinguishment of debt and debt modification costs of $23.9 million.

Other income (expense), net was income of $20.7 million in 2018 compared to expense of $10.4 million in 2017. Other income in 2018 was primarily due to gains on foreign currency exchange.  Other expense in 2017 was primarily due to losses on foreign currency exchange.

Fourth Quarter 2018 Results

GAAP net income was $154.6 million or EPS of $0.70 compared to $98.8 million or $0.43 in the prior year.  The Company generated Adjusted Net Income of $188.8 million or Adjusted EPS of $0.85 compared to $156.8 million or $0.68 in the prior year.

Revenue increased 10.5% to $1.4 billion compared to $1.2 billion in 2017.  These increases were primarily attributed to the addition of Norwegian Bliss to the fleet, along with strong organic ticket pricing growth across all core markets and robust onboard spending.  Gross Yield increased 3.0%. Net Yield increased 4.7% on a Constant Currency basis and 4.2% on an as reported basis.

Total cruise operating expense increased 8.5% in 2018 compared to 2017, primarily due to an increase in Capacity Days.  Gross Cruise Costs per Capacity Day increased 1.8%.  Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 3.6% on a Constant Currency basis and 3.4% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $496 from $460 in 2017.  The Company reported fuel expense of $104.4 million in the period.

Interest expense, net decreased to $68.2 million in 2018 from $84.3 million in 2017. In connection with the redemption of senior notes and refinancing of certain of credit facilities, interest expense, net included losses on extinguishment of debt and debt modification costs of $23.9 million in 2017.

2019 Outlook

“2018 marked a key inflection point for the Company as we have made significant progress towards achieving our Full Speed Ahead 2020 Targets.  Our cash generation continues to accelerate and we remain keenly focused on returning meaningful capital to our shareholders, already returning approximately one-third of our three-year targeted capital distribution,” said Mark Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.  “We are confident in our outlook for 2019 and beyond, and have built upon our foundation for measured capacity growth by enhancing our growth profile through 2027, with announced orders for all three of our award-winning brands, now totaling eleven vessels, enabling us to expand our presence both globally and domestically and further diversify our product offerings to continue driving outsized shareholder returns.”

2019 Guidance and Sensitivities

In addition to announcing the results for the fourth quarter and full year 2018, the Company also provided guidance for the first quarter and full year 2019, along with accompanying sensitivities. The Company does not provide guidance on a GAAP basis because the Company is unable to predict, with reasonable certainty, the future movement of foreign exchange rates or the future impact of certain gains and charges. These items are uncertain and will depend on several factors, including industry conditions, and could be material to the Company’s results computed in accordance with GAAP. The Company has not provided reconciliations between the Company’s 2019 guidance and the most directly comparable GAAP measures because it would be too difficult to prepare a reliable U.S. GAAP quantitative reconciliation without unreasonable effort.