The parent company of Norwegian Cruise Line says passengers are still splurging on luxury trips.
There’s no indication that consumers are “shying away from taking cruise vacations,” its CEO said.
Despite passenger numbers rebounding post-pandemic, the company posted an annual net loss of $2.27 billion.
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The parent company of Norwegian Cruise Line says that the sluggish economy isn’t deterring wealthy passengers from splashing out on luxury cruise trips.
“We simply haven’t seen any indication that the consumer is shying away from taking cruise vacations,” Frank del Rio, the CEO of Norwegian Cruise Line Holdings, said at its earnings call Tuesday. The Miami-based company owns Norwegian Cruise Line, Regent Seven Seas, and Oceania, which currently have 29 ships between them.
Between them, the cruise lines carried nearly 1.7 million guests in 2022. Though this represents a drop of more than a third compared to 2019, this was because of low occupancy rates in the first half of 2022, and numbers ramped up in the second half of the year.
“We are encouraged to see that our target consumer, which tends to skew more upmarket in the broader cruise industry, continues to be financially healthy and resilient and is prioritizing consumption of experiences over the purchase of physical goods,” del Rio told investors Tuesday. This comes after the cruise industry ground to a halt during the pandemic.
“It’s our view that as long as consumers have a job and the labor markets remain strong, that they’ll continue spending on the things they normally spend their money on, including vacations,” del Rio added. “We simply don’t see a weakening consumer.”
Del Rio said that onboard revenue was a “bright spot,” with passengers spending on average around 25% more per cruise day in the fourth quarter than during the same period in 2019. Just over two-thirds of its 2022 revenue came from ticket sales, with the rest from purchases made on board its ships and other forms of revenue.
“The bottom-line is our target consumer continues to be willing to spend on travel and experiences now and in the future,” del Rio said.
Del Rio said that Norwegian Cruise Line reported record sales in November, in part because of Black Friday and Cyber Monday sales. He added that wave season – typically the first three months of each year when cruise lines see booming sales – likely “started two months earlier than usual.”
The company had spent money on marketing rather than offering discounts to stimulate demand, he said.
Mark Kempa, the holding company’s CFO, said that customers were set to take longer and more exotic cruise journeys in early 2023 as these trips had been slower to resume following the pandemic. Caribbean cruises were more booked up than Alaska ones, he said.
But despite their confidence in passenger demand, the execs said the company wasn’t immune to inflation and was working to cut costs.
The company posted $4.84 billion in revenues for 2022 and a net loss of $2.27 billion. In 2019, it posted annual revenues of $6.46 billion, with a net profit of $930 million.
Kempa said that the company was going to reduce costs on “everyday things – everything we do on our corporate side, on our ship side, whether it’s optimizing our supply chain initiatives, optimizing our itineraries so that we’re getting the best fuel consumption.”
“There is no silver bullet in this industry, but it’s a lot of little things that can add up,” he added.
Norwegian’s share price dropped around 10% in trading Tuesday, according to Markets Insider data.
Norwegian Cruise Line Says Customers Still Splash Out Despite Economy
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