In a sign of confidence in the return of cruising, Norwegian Cruise Line Holdings (NCLH) said today that despite ships sailing at under half capacity last quarter, the cruise line is NOT dropping prices in order to get passengers back on its ships.
In an investor update and conference call, NCLH, the parent of Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises, revealed that its occupancy percentage across all lines was just 48% in the first quarter of the year. That included a time when the Omicron variant impacted sailing, as well as the start of the Russian conflict in Ukraine.
All told, the company carried a total of 191,150 passengers for the three months ending March 31, for a total of about 1.4 million passenger cruise days. There were nearly 3 million available capacity days on its ships.
Despite that slow comeback in occupancy, there are signs of strength in the business. For one, advanced ticket sales spiked during the quarter, with total advanced sales now above pre-pandemic averages.
Furthermore, the company said that booking volumes are approaching the pace needed to sail at “historical load factor levels.” For reference, the company saw occupancy of 107% in 2019 before the pause in cruising. (A percentage above 100% means each cabin had at least two people, and some had more.)
Still, executives made it clear they refuse to cut prices in order to fill ships. Historically, Norwegian is known for having the highest yields per passenger (a measure of revenue per passenger day) versus other public cruise companies.
“You have heard me say time and time again that we will not sacrifice our industry leading pricing to temporarily bolster our load factors,” said Norwegian Cruise Line Holdings CEO Frank Del Rio during the call. “And I continue to stand behind that philosophy.”
“While our first quarter load factors were somewhat tempered, our net per diem growth over first quarter of 2019 record pricing was…significant. A trade-off and an outcome that is much more meaningful for the company’s long-term success.”
With Full Fleet Returned, Now a Focus on Occupancy
Norwegian made headlines just a few days ago with the announcement that it had returned its full fleet back to sailing. And now without the split focus of returning the fleet and trying to operate cruises, the company says it will focus on ramping up capacity “in a disciplined manner” while still focusing on guest satisfaction and high revenue generation.
In fact, this quarter the company aims to sail at 65% capacity, with full occupancy coming in 2023.
“I think it’s going to be in the first half of 2023,” said Chief Financial Officer Mark Kempa when asked about reaching historical occupancy. “[The second quarter] we expect is going to be in the 65% range. Obviously when you look at the third and fourth quarter, that’s going to continue to build. But we’re going to maintain our pricing discipline.”
He further went on to emphasis again that cutting prices just to fill ships wasn’t in the plan. “We’re not going to chase short-term load and damage the brand for the long term,” he added.
In other words, if you were hoping to find a deal on a Norwegian cruise anytime soon given the slow return to full capacity, it doesn’t look like it’s going to happen.
Comparing NCLH Occupancy to Rivals
For comparison, Royal Caribbean International announced just days ago that its occupancy across all companies was 68% — 20 points higher than Norwegian. The cruise line is planning to reach 100% occupancy by the end of the year, with some ships already reaching that level.
Carnival Corporation, which operates on a different quarterly calendar than Norwegian or Royal Caribbean, said about six weeks ago that its occupancy was at 54% for the first quarter. It added that for the month of March occupancy was already closer to 70%.
Only time will tell if Norwegian’s focus on higher prices instead of higher occupancy will be the winning strategy in the return to sailing.