Norwegian Cruise Line's Andy Stuart ~ Q & A

Norwegian president and COO Andy Stuart

Norwegian Cruise Line has worked hard to make value-added amenities rather than price discounting its go-to tool for making sales. The current Free at Sea promotion offers a pick among five items, including shore excursions, WiFi, unlimited beverages, specialty dining and third and fourth berths free. But Norwegian introduced Sail Away fares in March designed to eliminate those amenities with a reduction in fare after finding that the value of Free at Sea was hard to convey in some online searches. It disclosed the fares in a recent conference call with Wall Street analysts. Norwegian president and COO Andy Stuart spoke with senior editor Tom Stieghorst about Sail Away.

Q: What are Sail Away fares?

Andy Stuart

A: As a brand, we want our business to be very focused on value and away from price. The majority of what we sell comes with some value-added feature, either a beverage package or an internet package or onboard credit or free shore excursion or some other way. The Sail Away fares ... come without a value-add.

Q: Why were they created?

A: What we were seeing is there are environments where the fares look too expensive. If you just have a conversation, it's quite easy to explain. If you move into a more price-driven environment, it becomes more complicated. Most online sites were designed to show a particular cruise for seven nights or three nights or four nights. It tends to be cruise, the number of days it is and price.

In an online environment, it starts to get a little more complicated. There are two things going on. The higher prices move the cruise down in the search results. The second thing going on is even when we were well-positioned in search results, with the higher price the value-add doesn't come through.

Q: How long has Sail Away been available?

A: We started testing it in March and April on a relatively small number of cruises, and we were quite pleased with it. It's been widely available since the beginning of May.

Q: How much lower are the fares?

A: It's hard to generalize because of the varying length of cruises involved and different itineraries. In most cases, if a customer were choosing between the Sail Away fare and a fare that includes the value-added items, we would expect them to choose the value-add. The cost of a beverage package on its own can be $600, and I don't think any of the Sail Away fares are reduced by that much. 

Q: Are they available only to OTAs?

A: They're generally available. In the conference call we were talking about the OTAs because that's the environment where people are selling in an online world.

Q: Can Sail Away be purchased as soon as inventory becomes available?

A: Most of these are available close-in, but we're testing a lot of different things. But they're only available in four categories; you can't buy them on a suite. So it's a tiny percentage of our inventory. There's one inside, one outside, one balcony and one minisuite. It's less than 10% [of the inventory]. 

Q: Are Sail Away fares contrary to Norwegian's value-add strategy? If not, why not?

A: It's not contrary. The reason it isn't is that it applies to such a small percentage of our inventory. Secondly, the discount will never equal the value of the value-add. It's a tactic that we think will ultimately be used on a very small percentage of our business.