Jefferies Cuts Norwegian Price Target

Jefferies Cuts Norwegian Price Target

Jefferies cut its price target on Norwegian Cruise Line Holdings to $17 from $18 following the company’s second quarter results.

Analyst David Katz reiterated a Hold rating, with the shares near $21 implying roughly 19% downside to his new target.

Katz described Norwegian’s new revenue management strategy as “a LT (long term) positive but a ST (short term) headwind,” with second half 2026 and 2027 yields likely under pressure before improving in 2028.

He detailed the company’s shift to a base-loading strategy, lowering early-curve pricing to build occupancy and drive stronger close-in pricing over time, alongside heavier marketing and top-of-funnel demand generation.

BNP Paribas’ Xian Siew said that the yield reset was driven largely by occupancy, which the company now expects at about 102.3%, roughly 300 basis points lower than before, partly offset by stronger per diems.

That mix, Siew said, reflected management preferring to have some empty berths rather than promote even further.”

Siew, who characterized the risk/reward as wide and balanced, noted that many bulls had already written off 2026 and shifted their focus to 2027.

Cruise Lines Leverage Drydocks to Add Capacity to Existing Ships

Cruise Lines Leverage Drydocks to Add Capacity to Existing Ships

Cruise lines continue to add a significant number of staterooms to existing ships during routine drydocks, as highlighted in the new 2026 Drydock Report from Cruise Industry News.

The additional capacity generally fills in under utilized public areas, with revenue that flows right to the bottom line.

Among upcoming programs, the 2016-built Ovation of the Seas will see the addition of 40 new staterooms, which will take over space currently occupied by various public areas.

Also included in the company’s modernization effort, the Harmony of the Seas is set to enter drydock in April for a refit that will include the creation of 91 additional staterooms.

A third ship is also getting a significant capacity increase with 68 new staterooms: the Liberty of the Seas.

Silversea’s Silver Muse saw a seven percent increase in 2025.

After entering drydock in November, the 2017-built vessel returned to service with 18 smaller staterooms replacing its original larger suites.

Norwegian Cruise Line continued to expand its ships’ capacities in 2025 by adding 26 additional staterooms to the Norwegian Bliss. The increase followed similar projects carried out onboard the Norwegian Joy and the Norwegian Encore in 2024.

A second ship, the Pride of America, saw the addition of 26 new staterooms during a drydock on the West Coast in May.

Other key capacity addition projects:

• Celestyal Discovery – 47 new staterooms
• Carnival Miracle – 5 new staterooms
• Holland America’s Zuiderdam – 11 new staterooms
• Norwegian Epic – 8 new staterooms

Cruise Lines 2024 Q3 Breakdown: By the Numbers

Cruise Lines 2024 Q3 Breakdown: By the Numbers

La Ponant and AIDA Cosmos both enjoying good passenger numbers, photo credit Spacejunkie2 Flickr

Cruise Industry News takes a look at the financial performance of the “big three” cruise corporations following the third quarter of 2024.

Traditionally, the third quarter has been the key part of the year for cruise operators, as it spans the summer months with more family travel and more deployment into higher-yielding markets such as Alaska and Europe.

Carnival Corporation, the world’s biggest cruise company, delivered the best net income performance with $1.8 billion, up from $1.1 billion in the third quarter a year prior.

The company also outpaced the gains year-over-year from Royal Caribbean Group and Norwegian Cruise Line Holdings.

Net income per passenger day was $61.96 for Carnival, Royal Caribbean Group had $75.14 of net income per passenger day, while Norwegian Cruise Line Holdings came in at $72.82

Of note, fuel cost was up for both Carnival and Royal Caribbean, but down for Norwegian, which continues to make deployment changes to published cruises for fuel efficiency.

Follow the link below to see all the numbers from the 3 leading Cruise companies:

https://cruiseindustrynews.com/cruise-news/2024/11/cruise-lines-2024-q3-breakdown-by-the-numbers/

Royal Caribbean: More New to Brand Guests

Royal Caribbean: More New to Brand Guests

Independence of the Seas in Southampton Photo credit Spacejunkie2 (Flickr)

“In the second quarter, the per cent of guests were either new to the brand or new to cruise surpassed 2019 levels by a wide margin, and we have seen post-cruise repeat booking rates nearly double 2019 levels,” said Jason Liberty, CEO of Royal Caribbean Group, speaking on the company’s second-quarter earnings call.

“While we have made positive strides in narrowing the gap to land-based vacations over the last several months, cruising remains an exceptional value proposition, allowing us to outperform broader leisure travel as we seek to further close the gap to land-based vacations, drive better revenue and welcome even more happy customers,” he said.

Liberty said that the company had double the web traffic now compared to 2019.

“In addition, our travel partners are now fully back up and running and delivering more bookings than they did in 2019,” he continued. “Our improved commercial capabilities have allowed us to capture this quality demand and expand our share of the guest wallet.”

Part of the new brand strategy has been the company’s investment in the short cruise market, with refurbished ships and Perfect Day at CocoCay. That strategy takes the next step in 2024 with the new Utopia of the Seas, which will be positioned year-round in the short cruise market.

“Utopia will be the first Oasis-class ship that will be entirely focused on short cruises in the Caribbean, supporting our strategy of competing with land-based vacation alternatives and driving new-to-cruise customers into our vacation ecosystem as we seek to close the value gap,” Liberty said.

“Demand and pricing for Utopia have far exceeded our expectations.”

Royal Caribbean: Better Than Expected Q2 2023 Results

Royal Caribbean: Better Than Expected Q2 2023 Results

Royal Caribbeans Serenade of the Seas leaving the port of Vancouver, photo credit Spacejunkie2 Flickr

Royal Caribbean Group today reported second-quarter Earnings per Share of $1.70 and Adjusted Earnings per Share of $1.82.

These results were significantly better than the company’s guidance due to more robust pricing on closer-in demand and further strength in onboard revenue, the company said in a statement.

As a result of the accelerating demand environment for its vacation experiences, the company is increasing its 2023 Adjusted Earnings per Share guidance by 33% to $6.00 – $6.20.

“Our brands continue to fire on all cylinders, resulting in record yields and second-quarter earnings significantly exceeding our expectations,” said Jason Liberty, president and CEO, of Royal Caribbean Group. “Demand for cruising and our brands is exceptionally strong and we have seen another step change in booking volumes and pricing, leading us to now expect double-digit net yield growth for the full year. We also expect to achieve record Adjusted EBITDA per APCD and Return on Invested Capital this year and are well on our way toward achieving our Trifecta goals.”

Key Highlights

Strong ticket pricing from both North America and Europe itineraries, combined with strength in onboard revenue, led to better-than-expected revenues in the second quarter and a significant increase in the company’s full-year outlook for revenue and earnings.

Second Quarter 2023:

• Gross Margin Yields increased 13.1% As-Reported, and Net Yields increased 12.9% in Constant-Currency (12.6% As-Reported), both compared to the second quarter of 2019.
• Gross Cruise Costs per Available Passenger Cruise Day (“APCD”) increased by 10.9% As-Reported, and Net Cruise Costs (“NCC”), excluding Fuel, per APCD increased by 9.0% in Constant-Currency (8.6% As-Reported), both compared to the second quarter of 2019. The favourable timing of operating expenses was offset by the increase in stock compensation expense due to the rise in share price and expected financial performance.
• Total revenues were a record $3.5 billion, Net Income was $458.8 million or $1.70 per share, Adjusted Net Income was $491.7 million or $1.82 per share, Adjusted EBITDA was a record $1.2 billion and Operating Cash Flow was $1.4 billion.

Full Year 2023 Outlook:

• Net Yields are expected to increase 11.5% to 12.0% in Constant-Currency and As-Reported, compared to 2019.
• NCC, excluding Fuel, per APCD is expected to be up approximately 7.0% in Constant-Currency (6.7% As-Reported), compared to 2019.  The increase in costs, relative to previous guidance, is driven by an increase in stock compensation expense due to the rise in share price and expected financial performance.
• Adjusted Earnings per Share for the entire year are expected to be in the range of $6.00 to $6.20 per share.

Third Quarter 2023 Outlook:

• Net Yields are expected to increase 13.5% to 14.0% in Constant-Currency (14.0% to 14.5% As-Reported), compared to the third quarter of 2019.
• NCC, excluding Fuel, per APCD is expected to increase by approximately 11.2% in Constant-Currency and As-Reported, compared to the third quarter of 2019. Approximately half of the cost increase compared to 2019 is related to structural costs, a timing shift of operating expenses from the second quarter, and an increase in stock compensation expense.
• Adjusted Earnings per Share for the third quarter are expected to be in the range of $3.38 to $3.48 per share.

Second Quarter 2023

The company reported Net Income for the second quarter of $458.8 million or $1.70 per share compared to Net Loss of $(0.5) billion or $(2.05) per share for the same period in the prior year. The company also reported an Adjusted Net Income of $491.7 million or $1.82 per share for the second quarter compared to an Adjusted Net Loss of $(0.5) billion or $(2.08) per share for the same period in the prior year.

Second-quarter revenue significantly exceeded the company’s guidance due to higher pricing and higher shipboard revenue across the company’s key itineraries, including the Caribbean and Europe. The load factor for the second quarter was 105%.

Gross Cruise Costs per APCD increased by 10.9% As-Reported, compared to 2019. NCC, excluding Fuel, per APCD increased by 8.6% As-Reported and 9.0% in constant currency, compared to 2019.  Favourable timing of operating expenses drove NCC lower, however, it was offset entirely by an increase in stock compensation expense-related costs due to the significant rise in share price and expected financial performance.

Update on Bookings

Booking volumes in the second quarter remained significantly higher than in the corresponding period in 2019 and at record pricing levels. Demand for 2023 sailings has significantly exceeded expectations and bookings for 2024 sailings are up significantly versus all prior years at record prices. Demand from the North American consumer has remained incredibly strong throughout the year, and booking volumes from European consumers who are booking European cruises this summer have accelerated.

The further increase in yield expectations for the year is the result of higher pricing and onboard revenue expectations for key itineraries, particularly in North America and Europe.  Consumer spending onboard, as well as pre-cruise purchases, continue to significantly exceed 2019 levels driven by greater participation at higher prices.

As of June 30, 2023, the Group’s customer deposit balance was at a record-high $5.7 billion.

‘EXCEPTIONAL’ Q1 BOOKINGS HELP RCG UPGRADE 2023 PROFIT PROJECTIONS

Independence of the Seas in the port of Southampton, photo credit Spacejunkie2 (Flickr).

Royal Caribbean Group (RCG) saw booking volumes in the first quarter of 2023 perform "considerably" better than expected, enabling the company to "significantly" improve its revenue expectations for all three remaining quarters of 2023.

In a recent trading update covering the three months to 31 March, the group, which owns Royal Caribbean, Silversea and Celebrity Cruises, saw an earlier start to an extended wave period generate a record level of bookings.

 

The strong trends resulted in an acceleration of the group’s booked position in relation to prior years, with the company generating "significantly" more bookings at "meaningfully" higher prices.

 

This year’s wave resulted in strong close-in demand at higher prices for the first quarter and enabled a significant improvement in revenue expectations for all three remaining quarters.

 

The increase in yield expectations for the year is predominantly related to higher load factors in the first quarter and higher prices for all four quarters, especially for Caribbean sailings.

 

Consumer spending onboard, as well as pre-cruise purchases, continue to exceed 2019 levels driven by greater participation at higher prices. The company expects load factors to reach "historical" levels by late spring.

 

"We knew that demand for our business was strong and strengthening, but we have been pleasantly surprised with how swiftly demand further accelerated well above historical trends and at higher rates," said Jason Liberty, president and chief executive of RCG.

 

"Leisure travel continues to strengthen as consumer spending further shifts towards experiences. Demand for our brands is outpacing broader travel due to a strong rebound and an attractive value proposition."

The company reported a net loss for the first quarter of $47.9 million compared to a net loss of $1.2 billion for the same period in the prior year. 

 

The group also experienced particularly strong close-in demand for Caribbean itineraries, which accounted for close to 80% of first-quarter capacity. Load factors in the first quarter were 102%.

 

Adjusted earnings per share for the full year are expected to be in the range of $4.40 to $4.80 per share.

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.

Big Cruise Companies Burning Through $1 Billion a Month

https://www.cruiseindustrynews.com/

Carnival Corporation, Royal Caribbean Group and Norwegian Cruise Line Holdings are burning through over $1 billion per month without revenue-generating cruises in service.

According to the 2020 Cruise Industry News Annual Report, the three companies account for approximately 73.8 per cent of the global cruise market share.

Carnival Corporation said that during its pause in guest operations, the monthly average cash burn rate for the second half of 2020 is estimated to be approximately $650 million per month.

At Royal Caribbean Cruises, the company said it estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations.

Norwegian Cruise Line Holdings, which has the smallest fleet of the three companies, said its cash burn is approximately $160 million per month during the suspension of operations. The average cash burn per ship per month is $5.7 million

Cruise earnings as an economic outlook

Carnival Corp. issues year-end earnings every December and looks ahead to the coming year. In some ways last year's report looks just like this year's. For example, in 2017 bookings were ahead of the prior year in both occupancy and price, which was also true of the just published report. 

But what jumps out at me was that last year, Carnival was wrong both on how strong its pricing would be and how much costs would rise in 2017.

In December 2016, Carnival projected that its net yields from revenue would rise 2.5% in 2017 and cruise costs (excluding fuel) would rise 1%.

The actual results were a net yield increase of 4.5% and a rise in costs, measured to remove the effect of currency changes, of 2.7%.

That would appear to suggest a robust business, and perhaps the prospect for continued price and cost increases in 2018, as the extraordinarily low inflation of the past few years begins to heat up.

The Federal Reserve, which controls the money supply and thus interest rates, raised its target rate this month for short-term rates by one-quarter percent. Although it said inflation in the short term is below its 2% target, it sees the prospect of 2% inflation emerging over the "medium-term."

In its December statement, it said "economic activity has been rising at a solid rate and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters."

The Fed will get a new chairman in February, and the economy will get at least a short-term boost from the comprehensive tax cut approved by legislators in the waning days of 2017.

All of which suggests that the current economic weather pattern of low interest rates, subdued inflation, modest price increases and little or no growth in wages may be on the brink of a change.

For cruise suppliers, that could mean higher nominal prices, but a decline in real revenue and income after inflation takes effect. Cruise retailers, while not immune from inflation, would benefit from higher nominal prices on which their commissions are based.

With higher inflation comes the risk of recession as policy-makers try to cool increasing prices by quickly escalating interest rates. That seems to be nowhere on the horizon. And yet, the expansion that began in mid-2009 already is the third-longest in U.S. history and if it continues into the second half of 2019 would exceed the 10-year record set by the 1990s economic boom.

It doesn't feel to me like we're in the midst of record-setting prosperity. Nevertheless, let's hope as we head into 2018 that cruise prices and the economy stay in a Goldilocks zone - not too hot, not too cold - for the foreseeable future.