Frank Del Rio Forecasting Record 2023 for Norwegian Cruise Line Holdings

Frank Del Rio Forecasting Record 2023 for Norwegian Cruise Line Holdings

Norwegian Cruise Line Holdings (NCLH) will generate record EBITDA and net yield in 2023, according to a very upbeat and confident Frank Del Rio, CEO and president, who spoke at a two-hour presentation aboard the Norwegian Prima in New York City on Thursday morning.

Del Rio said that bookings for 2023 were up from 2019, including a 16 per cent capacity increase, and at significantly higher prices.

Talking about the so-called key value drivers, Del Rio asked analysts not to lump NCLH in the same pool as the other cruise companies, and that the company differentiates itself in many ways, including targeting a more upmarket demographic, featuring ships for its three brands that are at the top of each market segment, and premium itineraries.

Other companies, he said, have so many brands they are sabotaging each other. In contrast, Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises (the NCLH brands) are clearly differentiated, each in a different market segment.  Del Rio described the brands as stand-alone that do not compete against each other.

Del Rio went on to say that itineraries are the number one driver of pricing and that he spends more time on itinerary planning than anything else. Another key driver is the cabin mix and he noted that the brands have a richer mix of cabins, with a higher percentage of outside balcony cabins.

He said that NCLH’s go-to-market strategy is focused on filling the ships, offering consumers value and deals they are happy with, while not discounting, and noted that they are beating their competitors by a large margin.

Pricing is almost irrelevant, according to Del Rio, who said the key is to have consumers feel they get a deal. And when products are bundled in that consumers buy dining and beverage packages up front, as well shore excursions, they come onboard with a so-called “fresh wallet” and spend more.

He noted that onboard spending on the Norwegian Prima on its trans-Atlantic crossing had been double of the company’s average.

By comparison, in 2018, 52 per cent of the passengers bought packages in advance of their cruise. For 2022, Del Rio said that number has increased to 85 per cent. He added that also means that more cruises are “sticking,” meaning there are fewer cancellations and higher advance deposits.

The average booking curve is now more than eight months out, he noted. From 171 days in 2016, the booking curve is now 245 days. The extended booking window also gives the company more visibility and the ability to manage pricing to maximize ticket and onboard yield.

Another key factor contributing to a strong 2023 is that NCLH is a U.S.-centric company, according to Del Rio, who said that 78 per cent of the passengers come from the U.S.

Among the trends noted were more direct bookings with the travel agency community constricting during the pandemic and with consumer behaviour changing to more online purchasing.

Looking forward, Del Rio and Mark Kempa, CFO and executive vice president, said the brands will continue to benefit from the underserved and unserved markets while continuing to be U.S.-centric.

They also said that NCLH has a lot of “headroom” to raise prices while comparing cruise to land vacations.

Among the key takeaways from the presentation, Del Rio underscored that not all cruise companies are created equal and that NCLH has laid the foundation for a strong 2023, surpassing 2019, targeting a higher-end demographic, which is reflected in its stronger pricing and bookings.

Norwegian Cruise Line Holdings Maintaining Strong Pricing, Won't Discount to Fill

 Maintaining Strong Pricing, Won't Discount to Fill

Norwegian Cruise Line Holdings won't be discounting ticket prices to chase short-term occupancy levels, said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings, on the company's second-quarter earnings call.

"We could, like others, chase short-term occupancy and sell cruises for crazy prices, but we don't want to do that. We never have done that. That is not our strategy," he said.

"I remind you what happened back in '08 and '09, when (during) the great recession, certain cruise companies did drop their prices to ridiculous levels. And it took them, in some cases, 10 plus years, and in some cases, they've not yet reached those pre-great recession yields. I'm not willing to mortgage the company for 10-plus years in order to window dress the next quarter or so. I just won't do it. We're here for the long term," he said.

"We're managing the business on a long-term basis. COVID had a major impact. We were shut down for 18 months or so, and the recovery is not instant mashed potatoes. If you want instant mashed potatoes, you got to go elsewhere because we're here for the long run. And our pricing strategy, how disciplined it is, is proof of that.

"We simply don't want to chase short-term occupancy at the expense of long-term pricing. Pricing has a long tail," he added.

Del Rio said the company had 40% more ticket sales on the books right now compared to 2018 despite a 20% increase in capacity.

"And I've been doing this for 30 years. I've managed cruise companies in good times and in bad times, and I am convinced beyond a shadow of a doubt that you don't sacrifice the long-term pricing power of your brand in order to achieve short-term load factor gains," Del Rio continued.

Norwegian Cruise Line Raises Onboard Prices and Posts Strong Onboard Revenue Numbers

Norwegian Cruise Line Raises Onboard Prices and Posts Strong Onboard Revenue Numbers

Onboard revenue is seen as a real-time now indicator of how guests are feeling about their financial situation right now and while onboard company ships, according to Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings.

"Onboard revenue generation has continued to be impressive, even as we continue to ramp up occupancy carrying more guests across all ships and cabin classes. In the second quarter, onboard revenue per passenger cruise day was approximately 30 per cent higher than during the comparable 2019 period," he said, on the company's second-quarter earnings call.

Mark Kempa, CFO, added that the company had raised prices for "all of our offerings" onboard the ships.

"We've gotten smarter in the pre-marketing of our products, creating that sense of urgency before the consumer steps onboard," he said. "Those consumers who have a stronger propensity for presales, they also spend more, about 30% or 40% more once they're on board. So, it's a combination of all those. But the numbers are strong. We're seeing a strong consumer today, spending today's dollars. And we feel that bodes well for ourselves and the industry."

Del Rio said that pre-cruise revenue was up 50 per cent compared to 2019 levels.

"We continue to focus on enhancing our market-leading bundled offerings and increasing quality touch points with our guests starting from the time of booking to capture even more revenue pre-cruise, allowing guests to arrive on board with an ever fresher wallet, which ultimately results in higher overall spend. In fact, our pre-cruise revenue on a per passenger day basis for the second quarter of '22 is up over 50% versus 2019 levels. At a high level, guests who make pre-cruise purchases tend to spend approximately double that of guests who do not pre-book onboard activities," he said.

Del Rio: Full NCLH Fleet to Operate by Late Spring; Adapt to Situation

Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings, spoke on Thursday morning along with Dr Scott Gottlieb, former Commissioner of the U.S. Food and Drug Administration and Chairman of the Norwegian Cruise Line Holdings SailSAFE Global Health and Wellness Council.

Del Rio said the company, which operates the Norwegian, Regent and Oceania brands, had spared no expense to operate safely and he still plans to have the company’s full fleet operating by late spring.

“We have made every effort (and) spared no expense to have the most stringent protocols in the hospitality and leisure space,” he said, on a webinar for media and travel partners. “We will simply not take risks with the well-being of our crew and our guests for the sake of profit.”

Commenting on close-in voyage cancellations, Del Rio said that the virus was spreading quickly, but also disappearing quickly.

“With the rapid spread of Omicron across the globe our industry has gotten a lot of press. Most of it negative press,” he continued. “And all of it has been biased to some degree … taking advantage of the fact that our industry offers robust testing, that we track cases and that we diligently report them to the CDC and other public health administrations.”

Del Rio said the different rules for the cruise industry for public safety had hurt the business. 

“The media and even some politicians turn to this hard data that we provide and they take this news and sensationalize it for a cheap headline. We are the only industry they can pick on because of our honesty,” he continued, adding that the industry had survived two years of “this monster” and told travel advisors it was not time to quit.

Dr Gottlieb stressed that he thought the Omicron wave was peaking in parts of the U.S. and some areas of the country would see the same in a few weeks before cases start going down. That, combined with new treatments, should paint a positive picture of the future.

Onboard, Dr Gottlieb said the cruise industry had the ability to tightly control the environment and noted that Norwegian had invested heavily in onboard therapeutics and testing.

“The cruising environment lends itself to being able to introduce those measures.”

Del Rio admitted that the Omicron timing had a dampening effect on wave season.

Dr Gottlieb mentioned that he felt confident there would be a low prevalence of COVID this summer, people would be back to travelling and consumer confidence would be up.

In light of the past two years, Del Rio said: "Continue to expect the unexpected and adapt."

Norwegian Cruise Line Onboard Revenue Up on Initial Sailings

Initial onboard revenue metrics off the Norwegian Jade's initial European cruises from Athens were very strong.

"As an indication of this top-notch service delivery, our onboard revenue on this first crew significantly exceeded our target, which was focused on 2019 actual results by over 50 per cent," said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings.

It's a sign of pent up demand, according to Del Rio, with the consumer willing to spend.

Added Mark Kempa, executive vice president and CFO: "And when you look at the spending trends of it, it was your normal areas. Shore ex was very intense, food and beverage and then casino. So it's great to see that we're seeing the trends that we're used to. Customers are willing to spend. While it's early, it is certainly very, very encouraging."

Norwegian CEO Frank Del Rio: ‘Let Us Cruise’

"Just let us cruise, CDC,” said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings (NCLH), on the company's Thursday earnings call, expressing his frustration with what he called ridiculous regulations and overreach by the agency.

“But is it not just the CDC (holding the industry back),” Del Rio added. “To be fair, the rest of the world has to open up as well – Europe, Asia and South America.

“How quickly we can return to normal will depend on travel restrictions being lifted and borders being opened.

“There are 50 million people who have not been able to cruise for the last year and a half and now want to cruise. There is pent up demand setting us up for a beautiful scenario to improve pricing.”

Forward bookings and pricing are up compared to 2019 which was a record year, Del Rio said. 

Part of Del Rio’s frustration comes from Norwegian submitting an “ironclad proposal” to the CDC on April 5 and has not yet received an answer, which also puts the mid-July return to service in jeopardy.

Among the impractical and onerous requirements, the CDC has released is that passengers must wear face masks onboard all the time, only lifting the mask to take a bite of food or a sip of a drink, according to Del Rio. He said he was hoping these requirements would not be applicable to fully vaccinated ships.

NCLH will require 100 per cent vaccinations of passengers and crew wherever the ships are sailing and do not plan to participate in the simulated sailing program of the CDC, Del Rio noted.

He said he was outraged that the cruise industry is being treated differently than airlines, casinos, etc. and said that cruise ships will be the safest place on earth.

“We will have 100 per cent vaccinated passengers and crew in addition to our SailSAFE program,” he said.

Royal Caribbean CEO Fain Takes Home $12 Million for 2020

Royal Caribbean Group Chairman and CEO Richard Fain saw total compensation of just over $12 million for the fiscal year 2020, according to a company SEC filing.

Fain saw his base salary cut by nearly 50 per cent, but made up for it with $11 million in stock awards.

Other company executives also had a good year, with CFO Jason Liberty seeing total compensation of $5.6 million, up from 2019.

Royal Caribbean International President and CEO Michael Bayley earned $7.4 million, also up from 2019.

The SEC filing noted that executives did forgo portions of their base salaries

The company said it wants to establish a mix of compensation components, including fixed and variable pay and short- and long-term incentives, that encourages "focus on both the short- and long-term interests of the company and its shareholders."

Of note, Carnival Corporation CEO Arnold Donald took home $11 million and Norwegian Cruise Line Holdings CEO Frank Del Rio saw compensation of $36.4 million.

Royal Caribbean Group Compensation Table:

Name and Principal Position	Fiscal Year	Salary ($)	Stock Awards ($)	One-Time Stock Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and NQDC Earnings	All Other Compensation	Total ($)
Richard D. Fain Chairman/CEO	2020	$645,000	$11,171,146		$3,042,000*	$154,879	$112,478	$12,083,503*
	2019	$1,276,923	$8,699,024		$4,006,080	$189,347	$187,545	$14,358,919
	2018	$1,100,000	$7,664,567		$3,500,000		$157,949	$12,422,715
	2017	$1,100,000	$7,661,433		$4,327,400	$99,493	$155,087	$13,343,413
	2016	$1,092,308	$6,441,770		$2,740,222		$131,384	$10,405,684
	2015	$1,038,462	$5,803,644		$2,426,667		$119,796	$9,388,569
	2014	$1,000,000	$3,673,186	$4,923,759	$2,246,222	$56,611	$114,100	$12,013,878
	2013	$1,000,000	$3,371,587		$2,083,629	$250,089	$127,858	$6,833,163
Jason T. Liberty CFO	2020	$818,798	$3,228,563		$1,411,938	$89,503	$100,429	$5,649,231
	2019	$788,462	$2,621,510		$1,731,002	$91,472	$113,674	$5,424,004
	2018	$788,462	$2,136,947		$1,685,523		$140,932	$4,751,864
	2017	$692,308	$1,700,547	$2,792,203	$1,521,533	$57,849	$125,806	$6,890,246
	2016	$592,308	$1,127,080		$798,217	$21,980	$88,478	$2,628,062
	2015	$511,538	$765,923		$655.175		$66,801	$1,999,437
	2014	$444,231	$519,248	$716.111	$508.197	$6,393	$79,563	$2,273,743
	2013	$380,019	$373,728		$364.324	$25,741	$77,676	$1,221,488
Michael W. Bayley President/CEO RCI	2020	$866,346	$4,943,887		$1,435,000	$74,355	$116,244	$7,435,832
	2019	$941,923​	$4,061,696		$1,803,361	$110,1190	$140,711	$7,057,881
	2018	$870,769	$3,086,742		$1,577,143		$187,432	$5,722,086
	2017	$792,308	$2,834,275	$2,792,203	$1,519,461	$121,223	$135,123	$8,194,593
	2016	$696,154	$1,784,470		$938,428	$11,630	$107,334	$3,866,773
	2015	$675,000	$1,436,142		$986,229		$115,934	$3,213,305
	2014	$598,846	$944,096	$1,909,604	$861,000	$15,897	$79,207	$4,408,650
	2013	$575,00	$770,630		$658,891	$67,786	$101,625	$2,173,932
Lisa Lutoff-Perlo President/CEO Celebrity	2020	$710,558	$2,719,084		$1,092,650	$130,177	$96,854	$4,749,323
	2019	$770,769	$2,278,490		$1,098,258	$140,211	$142,114	$4,429,842
	2018	$688,462	$1,786,762		$1,228,438		$136,520	$3,840,202
	2017	$596,154	$1,558,865	$1,861,505	$1,072,083	$64,609	$123,701	$5,276,917
	2016	$546,154	$1,033,167		$639,532		$92,045	$2,310,898
Harri Kulovaara EVP Maritime	2020	$803,846	$1,483,167		$830,250	$81,764	$107,746	$3,606,773
	2019	$761,923	$1,139,243		$870,446	$98,382	$102,335	$3,422,329
	2018	$692,308	$893,480	$924,236	$764,728		$109,262	$3,844,014

*Declined Non-Equity Incentive Plan Compensation of $3,042,000

NCLH CHIEF 'ENCOURAGED BY FUTURE DEMAND' AMID COVID CHALLENGES

Norwegian Jade currently in Naples.

Despite Norwegian Cruise Line Holdings (NCLH) facing “a long road of recovery ahead”, the group’s chief says he is “encouraged by continued demand” for future sailings from customers across its brands.

In an update released with NCLH’s 2020 third-quarter results, president and chief executive Frank Del Rio said recently issued framework by the US CDC was “a step in the right direction” on the industry’s path to a safe resumption of operations.

 

“We will continue to collaborate with the CDC on next steps to relaunch operations with a shared goal of protecting the health and safety of our guests, crew and the communities we visit.”

 

NCLH reported a net loss during the three months to 30 September of $677.4 million compared with a profit of $450.6 million year-on-year.

 

Revenue fell to $6.5 million, from $1.9 billion over the same period last year “due to the complete suspension of voyages in the quarter”.

 

NCLH added that it had a sustained monthly average cash burn of $150 million in the third quarter – which it expected to rise to $175 million a month in the current quarter.

 

Despite booking levels as a result of Covid-19 remaining “below historical levels”, NCLH said there “continues to be demand for future cruise vacations” particularly for sailings in the second half of 2021.

The group reported $1.2 billion of advance ticket sales at the end of September, including about $850 million of future cruise credits.

 

NCLH said pricing for 2021 “is in line with pre-pandemic levels”, even after including “the dilutive impact” of future cruise credits.

 

The company emphasised its claims for “pent-up future demand” through recent booking records in September and October.

 

Successes included Oceania Cruises’ Labor Day upgrade sale which was the most successful holiday promotion in the line’s history, a new World Cruise opening day booking record for Regent Seven Seas Cruises’ 2023 World Cruise and a new all-time largest single booking day in Regent’s history with the launch of its 2022-2023 Voyage Collection.

NCL Holdings forecasts ‘strong demand so long as it’s safe’

Norwegian Cruise Line Holdings chief executive Frank del Rio reported “strong demand for future cruises” as the company recorded a half-year loss of $2.65 billion this week.

Del Rio dismissed a suggestion the Covid crisis could put many cruise-focused travel agencies out of business, but he described the Covid infection of passengers and crew on Hurtigruten’s MS Roald Amundsen as “disappointing”.

He suggested Norwegian Cruise Line Holdings could see a “limited” return of sailing in November and December.

The company’s sailings are currently suspended through to the end of October.

Del Rio insisted: “There continues to be strong demand for future cruises despite our reduced marketing. Consumer demand is evident across markets.”

He forecast: “The last two months of 2020 could see a return of sailing with limited capacity.  We’ve taken important initial steps.

“We’re developing safety protocols with the formation of the Healthy Sail Panel which demonstrates our commitment to combating the spread of Covid and bringing back cruising sooner rather than later.”

The Healthy Sail Panel of experts, set up in collaboration with Royal Caribbean International in July, is working to develop recommendations for a safe resumption of cruising.

Del Rio said: “The panel will submit its initial recommendations to the [US] government and Centers for Disease Control (CDC) for evaluation.”

He acknowledged: “Things will be different, of course. We’ll be mindful of how measures impact on the cruise experience.”

NCL Holdings chief financial officer Mark Kempa said: “We expect to launch with a handful of ships at first with low occupancy.

“Our break-even [on operating ships] is at around 40% of normal revenue. Layer on corporate overheads and it would require 60% of normal revenue.”

Asked whether the crisis could transform cruise distribution, which remains overwhelmingly through travel agencies, del Rio said: “We have seen smaller travel agencies folding and larger ones furloughing employees. We’ve seen an uptick indirect business.”

But he argued: “It might be exaggerated because of the partial closures of agencies. We think travel agencies will survive. Travel agencies have shown their resilience over the long term.

“Not too long ago people were predicting the demise of travel agencies, but they came back stronger. Long term you won’t see much change.”

Del Rio insisted: “We enjoy a very loyal customer base in the cruise industry. Between 15 million and 20 million people have not been allowed to cruise this year – there will be a lot of pent-up demand.

“People are booking. We’ve not seen any major shifts in consumer behaviour. We’ve not changed our itineraries. If people favour cruising closer to home or not going to Asia, we’re not seeing it.

“My instinct is we will be [operating] somewhere in the range of 75% of capacity for the full year 2021. It might start at 50%-60%, with the limitation being concern about the spread of Covid more than about consumer demand.

“So long as we can ascertain cruising is safe we’ll have customers coming back in droves.”

Del Rio added: “We’re hopeful we’ll be able to put together a comprehensive set of health and safety protocols that get us back quickly.”

Asked about the Covid outbreak on the Hurtigruten ship which infected more than 50 passengers and crew, Del Rio said: “It’s disappointing – the re-emergence of Covid aboard vessels.

“But it’s an opportunity to learn something. The cruise companies and ports which suffered these setbacks have handled it well. We’ve not had a repeat of what happened at the start of the crisis.”

Kempa reported the group paid out $725 million in cash refunds to customers in the three months to June, more than the company’s cash burn of $575 million during the quarter.

He said future cruise credits make up 30% of advance bookings and monthly cash burn had fallen to about $160 million.

The company ended June with $2.26 billion in liquidity after raising $2.3 billion during the second quarter.

Norwegian Cruise Line Holdings operates 28 ships like Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

Royal Caribbean and Norwegian to Partner on Health Protocols

Royal Caribbean Group and Norwegian Cruise Line Holdings announced a collaboration to "develop enhanced cruise health and safety standards in response to the global COVID-19 pandemic," according to a press release.

The companies have asked Governor Mike Leavitt and Dr Scott Gottlieb to serve as co-chairs of a newly formed group of experts called the "Healthy Sail Panel."

The panel is tasked with collaboratively developing recommendations for cruise lines to advance their public health response to COVID-19, improve safety, and achieve readiness for the safe resumption of operations, according to a press release.

The expert panel has been working for nearly a month and will offer its initial recommendations by the end of August.

The cruise lines said its work will be "open source," and could be freely adopted by any company or industry that would benefit from the group's scientific and medical insights.

"This unprecedented disease requires us to develop unprecedented standards in health and safety," said Richard D. Fain, chairman and CEO of Royal Caribbean Group. "Bringing aboard these respected experts to guide us forward demonstrates our commitment to protecting our guests, our crews and the communities we visit."

"We compete for the vacationing consumer's business every day, but we never compete on health and safety standards," said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings Ltd. "While the cruise industry has always had rigorous health standards, the unique challenges posed by COVID-19 provide an opportunity to raise the bar even higher."

Fain and Del Rio said they initiated the panel to assure the plans they will submit to the U.S. Centers for Disease Control and Prevention (CDC) and other regulators apply the best available public health, science and engineering insights. The work of the panel will be shared with the entire industry and regulators.

"In convening the Healthy Sail Panel, we sought the participation of a diverse group of leading experts in areas of science and public health that are directly relevant to the considerations listed by the No Sail Order," said Governor Leavitt. "We view our work as a profoundly important public health effort. The health and safety of passengers, crew, and the communities that cruise ships visit will be the principal focus of this project."

Dr Gottlieb said, "We know that the public health issues that must be addressed are complex, and in some areas, tackling them will require novel approaches. Our goal in assembling this team of leading experts was to develop best practices that can improve safety and provide a roadmap for reducing the risks of COVID-19."

The panel is co-chaired by Governor Leavitt, former Secretary of the U.S. Department Health and Human Services (HHS), and Dr Scott Gottlieb, former commissioner of the U.S. Food and Drug Administration (FDA). The panel's members are globally recognized experts from various disciplines, including public health, infectious disease, biosecurity, hospitality and maritime operations.

NCL Holdings says cruisers eager for exotic sailings

Oceania Cruises' Marina.

Norwegian Cruise Line Holdings Ltd. (NCLH) said that consumers are booking cruises to far-flung destinations in 2021, with Japan and Dubai among the top itineraries, along with several world cruise segments.

NCLH CEO Frank Del Rio said during the company's earnings call that for its Oceania and Regent brands, demand for those itineraries in the first and second quarters of next year indicates that people will be willing to take long-haul flights.

"And so, this notion that people aren't going to want to cruise to faraway places or exotic destinations, what we're seeing is defying that," he said. "So we're not seeing any particular area of strength other than these Japanese itineraries, these world cruise segments that are sold out, literally."

Del Rio also said during the call that he anticipates it would take about six months to resume service across its entire, three-brand fleet.

"The return to service of a phased approach of roughly five vessels per month is what we believe we operationally could handle in terms of bringing back the ships from cold lay-up, including re-crewing the vessels etc.," Del Rio said. "Given that we have 28 vessels if you bring back an average of five vessels a month, it's going to take about six months to get all ships back operating."

During the earnings call, Del Rio said that timeline assumes that the itineraries those ships would operate are available.

"So the six-month ramp-up assumes more than anything else our operational capability to ramp up and that the ports are open," he said.

Del Rio said that consumer demand is not a concern.

"We believe consumer demand and the bookings that follow are based on our ability to market, travel agents being back open again, the whole industry being back in operation as opposed to sitting idle," he said. "There is pent-up demand, let's not forget that. People only talk about the negative, but the fact that the industry has been shut down now over four months, there'll be pent-up demand. People will want to cruise again."

He also acknowledged that it will take time for cruising to come back to where it had been.

"We just have to be patient," he said, adding that "no one is more impatient than me. But I recognize that this is going to be a recovery effort that's going to take multiple quarters, perhaps multiple years to get back to the good old days of 2019."

$211M loss in the first quarter

NCLH reported an expected loss of $211.3 million for the first quarter of 2020, compared with income of $181.8 million one year prior. Revenue decreased 11.2%, to $1.2 billion, compared to $1.4 billion in 2019, for the quarter ended March 31.

NCLH said it had "taken decisive action to significantly strengthen our financial position" in response to the Covid-19 global pandemic, including the company's $2.4 billion capital raise, which Del Rio said positions the line "to weather an unlikely scenario of over 18 months of suspended voyages."

"Our guests continue to demonstrate their desire for cruise vacations," Del Rio said. "And we continue to experience demand for voyages further in the future across our three brands."

NCLH reported "significant softness in near-term demand and an elevated rate of cancellations for existing bookings."

But the company also said there "continues to be demand for cruise vacations, particularly beginning in the fourth quarter 2020 accelerating through 2021."

The company reported that slightly more than half of its guests booked on cancelled sailings had requested cash refunds instead of future cruise credits.

NCLH said that it had begun developing a comprehensive and multifaceted strategy to enhance its health and safety protocols, including "enhanced screenings, upgraded cleaning and disinfection protocols and plans for social distancing."

NCLH said it had furloughed approximately 20% of its shoreside workforce through July 31.

Norwegian Plans Phased Return to Service

Norwegian Plans Phased Return to Service

Norwegian Dawn

“I will do everything humanly possible to be able to look my own family in the eyes and say they will be safe on our cruise ships,” said Frank Del Rio, chairman and CEO of Norwegian Cruise Line Holdings (NCLH), on the company's first-quarter earnings call.

Del Rio said NCLH is working with experts to develop health protocols that will be robust to gain CDC approval and generate confidence among the public. The same process must be replicated around the world.

When the no-sail order is lifted by the CDC, Del Rio said he expects that the company’s brands will return to service in a phased order of roughly five vessels a month, assuming ports are open and they can sail their designated itineraries.

Norwegian Bliss

With 28 vessels, it will take roughly six months to bring the whole fleet back into service. It is also unknown at this point whether they will be allowed to sail at 100 per cent capacity.

Consumer demand is still there, according to Del Rio, despite all the negative press. He noted that bookings are still coming in, despite the suspension of marketing activities, and expects that cash coming in will overtake the net cash outflow (refunds) in the next 60 days.

“There is pent up demand; people want to cruise again,” he added, noting that world cruise segments for the Regent and Oceania brands were sold out, with customers flying to embarkation points in Japan and Dubai.

However, with a booking curve from six to eight months out, it will take time before the pipeline is full or nearly full, he said.

Mark Kempa, CFO and executive vice president, commented that he sees 2021 as a transition year and that NCLH may be able to rebuild in earnest in 2022, bringing the company back on the track it was prior to COVID-19.

Newbuild deliveries may be delayed 12 to 18 months, added Del Rio.

Norwegian Cruise Line reports $1.9bn loss

Norwegian Cruise Line reports $1.9bn loss

Norwegian Cruise Line reported a first-quarter loss of $1.9 billion, with the impact of a coronavirus-enforced suspension of sailings exacerbated by a $1.6 billion write-down in goodwill.

However, Norwegian Cruise Line insisted it is now “well-positioned” to withstand even 18 months of suspended operations after raising $2.4 billion in funds in early May.

Norwegian Cruise Line president and chief executive officer Frank Del Rio said: “We’ve taken decisive action to strengthen our financial position, including our highly successful and oversubscribed $2.4 billion capital raise announced last week.

“We believe this, coupled with other liquidity-enhancing initiatives, makes us well-positioned to weather an unlikely scenario of over 18 months of suspended voyages.”

Del Rio added: “We continue to experience demand for voyages in the future across our three brands.

“As we prepare to resume sailings, we’re working alongside the US and global public health agencies and governments to develop and implement enhanced cruise health and safety standards.”

He reported, “demand for cruise vacations particularly beginning in the fourth quarter of 2020, accelerating through 2021”.

Norwegian described overall bookings and pricing for 2021 as “within historical ranges”.

The cruise line noted all three of its brands had begun the year “in a record booked position and at higher prices” than last year despite a 7% increase in capacity.

However, it reported “slightly over half of the guests” had declined to rebook or accept cruise credits in place of cash refunds for cancelled cruises despite being offered “typically 125% of the cruise fare paid.

The company’s credits are valid through to the end of December 2022.

Norwegian revealed it had $1.8 billion of advance ticket sales at the end March, of which $800 million were for cancelled voyages to the end of June and $370 million for voyages scheduled for the second half of this year.

The company said it continues to take bookings for later this year, 2021 and 2022, and to receive new deposits and final payments.

Norwegian reported it has pared its operating costs to between $70 million and $110 million per month while voyages are suspended, following a series of cost-cutting measures.

Additional capital-spending reductions and deferred debt payments mean its monthly cash burn has been reduced to between $120 million and $160 million per month.

However, this excludes cash refunds to customers.

Norwegian noted it had debts totalling $8.6 billion at the end of March, with available cash and cash equivalents of just $1.4 billion.

However, a series of capital markets transactions launched on May 5 had raised $2.4 billion, including a $400 million investment by US private equity firm L Catterton.

Norwegian Cruise Line chief financial officer Mark Kempa said: “Our swift actions to preserve cash and secure additional liquidity provide a strong foundation to withstand the operational and financial impact of Covid-19.

“We are confident the company can navigate through an unlikely extended zero-revenue scenario and emerge in a strong position.”

Frank Del Rio on travel advisors: 'I know what they're going through'

Frank Del Rio at CruiseWorld in 2016. Photo Credit: Ed McDonald Photography

In the second of two parts of a wide-ranging interview with Travel Weekly editor in chief Arnie Weissmann, Norwegian Cruise Line Holdings CEO Frank Del Rio talked about relaunching operations and the importance of travel advisors in the cruise industry's recovery. Part 1: Del Rio on closing a $2.4 billion round in tough times.

Remarking that the Covid-19 crisis has put travel advisors under "tremendous stress," Norwegian Cruise Line Holdings CEO Frank Del Rio said he speaks with at least two or three agents every day.

"We believe in a strong agency distribution system," Del Rio said. "Before the pandemic, our company had the highest yield in the industry, which meant that travel agents were earning the most by selling our three brands [Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises].

"I know what they're going through, and we've got to be able to do the things we need to do to make sure they survive. The cruise industry without travel agents would be like pancakes without maple syrup. It just doesn't work.

"Yesterday, I got an email from a travel agent who I'm very close to, and she says, 'Frank, I've got dozens of people who want to book -- when are you going to reopen?'

"So, I picked up the phone and I called Jan [Fishbein, of Cruzunlimited]. Jan is in her early 80s. She has been a travel agent for the last 30 years. I know Jan well because she was the first travel agent to make a booking in 2003 when we opened Oceania.

Oceana cruise ship Marina.

"I called her and the first question I asked was, 'Jan, how old are these customers that you claim to want to cruise?' She said, 'Frank, they're my normal customers, they're senior citizens, they're in their 70s.' I go, 'Really, Jan? And they want to cruise?' 'Yeah. Why not?'

"I said, 'Where do they want to cruise?' 'Well, they want to cruise in August and September; some want to go in the Caribbean, some want to go to Alaska, there's a few that want to go through the Panama Canal.'

"She's pushing me -- 'When are you going to open? When are you going to open?' -- and I say, 'Jan, I'm working on it! I'm working on it! It's not just up to me.'

"But it gave me such encouragement. When you combine those types of conversations with the numbers that we're seeing, if that doesn't give you a reason to have hope and be encouraged, I don't know what does."

The numbers that Del Rio is seeing that give him encouragement go backwards and forward in time, and reflect, he believes, strong pent-up demand.

"2021 bookings are only slightly behind where 2020 bookings were a year ago," he said. "Prior to coronavirus, 2020 was going to be, by far, the best year ever. And now, with travel agents not working at full strength, with our sales and marketing teams shut down, with the terrible news cycle that we've gone through, we can still say that we're only slightly behind, and at modest reduction -- mid-single digits -- in price. This is a testimony to the resiliency of the customer and the efforts of the travel agents to preserve those customers."

Carnival Breez

And when Del Rio's longtime travel agent friend Jan Fishbein gets her wish and sailing resumes, Del Rio also plans a gradual resumption, but with a different approach from that of Carnival Corp., which has announced an Aug. 1 relaunch for Carnival Cruise Line.

"We're not looking at it like that at all," Del Rio said. "We're looking at a gradual start; we're not certain when that date is, because everything depends on the [Centers for Disease Control and Prevention] lifting the no-sail order. Whenever we do start, we'll begin with a handful of ships across the three brands. So, let's say in month one, we open up with five ships; it could be three Norwegian, one Oceania and one Regent. I don't understand the concept of how one brand could be completely open and multiple brands can be completely closed. That's mind-boggling to me. We will start across all three brands, and whenever month two is, we'll bring alongside another four, five, six ships. We think it will take roughly six months from whenever we start until when all 28 ships across the three brands are back in full service."

Del Rio said he was unconcerned that some ports might not be welcoming visitors when sailing resumes. "We visit over 500 ports around the world. And cruise lines put forth their itineraries more than two years in advance. Today, we're selling itineraries through the fall of 2022, and we don't know at this point which ports are going to be open, which ports are going to be closed. I'm not going to prejudge changing itineraries. We'll have to play it by ear; it may be that when we open a certain itinerary, a port or two on that itinerary may not be operational and we'll have to make changes. We'll go to another port in the neighbourhood. We have flexibility because, especially in Europe, it's condensed geography. There's always an alternative port to go to nearby. The good news is we're flexible, we're nimble, and ships have propellers and rudders. We can move them around as necessary."