Norwegian CEO: Int'l passengers represent 'big opportunity'

Norwegian Getaway

Fans of Norwegian Cruise Line may notice more international passengers on the ships in coming years, and certainly will see more Canadians, newly named CEO Frank Del Rio said.

"We think there's a lot of opportunity — relatively low-hanging fruit — to expand Norwegian internationally," Del Rio said in his first call with Wall Street analysts as president and CEO of Norwegian Cruise Line Holdings.

Frank Del Rio

Del Rio was promoted in mid-January from his role as president and CEO of Norwegian's Prestige Cruise subsidiary, the parent company to Oceania Cruises and Regent Seven Seas Cruises.

He told analysts that if Norwegian sourced passengers internationally at the same rate as the Prestige brands, it would mean an extra 210,000 passengers a year — enough to fill a whole new ship.

Canada alone would account for 100,000 of those passengers. "The big opportunity is outside the U.S., especially in Canada," Del Rio said.

As part of Norwegian's recently announced 40% expansion of its sales force, it is beefing up its presence in Canada and has created a director of sales position for that country.

He said Norwegian is trying to find travel agents that have "gaps" in their sales of one of the company's brands, adding that often agents selling Oceania and Regent in Canada don't sell Norwegian.

He also said that he considers Norwegian's relations with travel agents in no need of mending. "Andy Stuart [executive vice president of global sales and passenger services] and his team are liked — loved if you will — by the agent community. They know him well," Del Rio said.

In the call, new Prestige President Jason Montague said there was a notable pause in bookings for the two Prestige brands when it was announced that Norwegian would be buying them, but he said reservations picked up after Del Rio was named to succeed Kevin Sheehan as CEO of Norwegian.

Del Rio said Wave season had been on pace until about three weeks ago when bookings accelerated. He said it wasn't one reason but pointed to Norwegian's promotional offers as a factor.

Cruise line stocks all rose on the strength of Del Rio's comment about Wave season.

Del Rio said in general the strategic direction set by Sheehan would continue. "I know that some of you are expecting some sort of revolutionary announcement regarding Norwegian's future," he said. 

"But it is simply too early in the game to make any definitive declarations about expanding into new markets, ordering new ships or any other major strategic announcement," he said. "These things may happen in time, but if they do happen it will be after intense study and careful consideration."

On the call, Del Rio said net income in 2014 solidly improved, rising to $338.4 million, from $101.7 million, despite a fourth-quarter loss of $25.6 million due to financing costs of the Prestige acquisition.

Revenue expanded to $3.13 billion, from $2.75 billion.

Del Rio noted that Prestige has a "market to fill" philosophy rather than the "discount to fill" model, and said that while he wouldn't take an identical approach at Norwegian, the value-add concept is "worth pursuing."

He also said the percentage of air/sea purchases at Norwegian is less than 2%, while it is almost 100% at Prestige with its "free air" value promotions, and that in the future Norwegian could have higher air sales as itineraries diversify.

Prestige is already providing the holding company with diversification into higher yielding markets, Del Rio said.

For 2015, deployment companywide in Asia, the South Pacific and Africa will be 3.3%, up from negligible in 2014. Likewise, deployment in South America will go from zero to 1.6% of capacity. 

In the Caribbean, the company expects to deploy 40.4% of its overall capacity, down from 47.9% last year. For the Norwegian brand only, Caribbean capacity will be 45.5% in 2015.