Del Rio forecasts 2023 record-breaking yields for NCLH

'Pricing is sacred to us," says CEO of Norwegian Cruise Line Holdings

Norwegian Cruise Line Holdings CEO Frank Del Rio has highlighted the importance of his cruise company’s premium pricing structure during a recent presentation to investors.

Speaking aboard Norwegian Cruise Line’s Norwegian Prima while in New York City, Del Rio said NCLH was destined to achieve its best-ever yields and pre-tax earnings in 2023, urging investors “not to lump” the company with other cruise lines.

“Look at us as a standalone company. Don’t throw us into the pool of the cruise industry, because we’re different,” Del Rio told long-time and new investors of NCLH.

“We have a different fleet. We have a different management team, obviously. We have a different philosophy on how we operate our business. We focus on different things.”

NCLH Investor and Analyst Event in NYC on Norwegian Prima

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Del Rio outlined the cruise brands that makeup NCLH – Norwegian Cruise Line in the contemporary field, Oceania Cruises in the premium space and Regent Seven Seas Cruises in the luxury segment –  “operate in the very upper end”, and there is no brand crossover.

“Each one of those upper-end positionings allows us to generate the highest prices in the industry, by far,” Del Rio enthused.

“We’re different. Pricing is sacred to us. And you win, in our opinion, based on price.”

Del Rio said having one cruise brand in the luxury, premium and contemporary markets enabled the company to lead the industry on price-point. He was frank, stating pricing was managed on a daily basis, and the business reviews opportunities to raise prices when itineraries are selling fast.

“If a cruise is booking like crazy, raise prices,” he said.

“Other cruise companies have so many brands they sabotage one another. We don’t have that problem,” he said.

A slide from the NYC Investor Event specifying NCLH's peers in the Luxury, Premium and Contemporary cruise markets

While deliberately not verbally mentioning competitors in each of the three categories by name, a slide in his presentation showed seven cruise lines in the Contemporary space alone, all operated by Carnival Corporation (Carnival, Costa, P&O Cruises, Aida, Princess Cruises, Holland America Line and P&O Cruises Australia).

NCLH’s tri-brands, and the current fleet of 27 ships, will sail to 500 destinations and carry 3 million guests in 2023. That ship count prevents pricing from being diluted, he suggested.

“There are some competitors that have 15 vessels, 18 vessels in Alaska. We’ve got six. There are competitors that have vessels year-round in Australia. We don’t. In the UK. We don’t. In Europe, year-round. We don’t.”

“We’ve got girth, but not so big we don’t know what to do with the vessels. We have many, many unserved and underserved markets that will bode well for our growth.”

A further eight ships are in the pipeline for the company, including 2023 new build deliveries for NCL (Norwegian Viva), Oceania (Vista) and Regent (Seven Seas Grandeur). Del Rio noted more vessels were needed to serve dozens of markets not yet tapped.

Seven Seas Grandeur is due for delivery in late 2023

Winning formula for pricing

Del Rio told investors not to “lump us with everyone else. We are not all created equal,” he said confidently when speaking of how NCLH was “the dominant operator offering upscale experiences”.

“We have a differentiated go-to-market strategy which allows us to generate these industry-leading yields. And we don’t lead the industry by a little bit.

Not naming names, he said “we beat the competitor… we don’t beat them by a nose. We beat them by a wide margin. We believe that the go-to-market strategy of market-to-fill, not discount-to-fill, is the winning formula.”

He said NCLH was the dominant cruise operator for upscale brands, with 9,190 berths (across Regent, Oceania and NCL’s The Haven luxury ‘ship within a ship’ concept) as opposed to Viking (6,500), Royal Caribbean Group (3,350) and Carnival Corporation (2,850).

Del Rio also emphasised that NCLH has a tight-knit leadership team across the brands who have worked together for decades in the cruise space.

“We’ve got a great team. We know what to do. We’ve gone through hard times before.

“We know this playbook and we know how to get out of the situation we are in, and we’re getting out of it.”

“I’m telling you we will have record-breaking pricing, record-breaking yields in 2023. And we’ll have record EBITDA [Earnings before interest, taxes, depreciation, and amortization],” he said.

Frank Del Rio, CEO NCLH

Del Rio referred to the method of discount-to-fill as “the dark side”.

“We don’t want empty cabins and we don’t discount,” he said.

In his presentation, Del Rio said “we go after quality customers”.

For Oceania Cruises, 94% and for Regent Seven Seas, 95% of guests have a net worth of US$250K.

“That bodes well for us. These people are more resilient if there is any economic downturn.”

Itinerary design key driver

Del Rio revealed what drives pricing for the brands was their itineraries.

“[The] number one driver of yields is the itinerary,” he said, with Alaska and European journeys seeing heightened pricing, while the Caribbean was commanding lower price itineraries, and falling, due to competition.

Booking window expanding

NCLH’s average booking window has continued to expand, and as of Q3 2022 is 245 days (or 8.5 months).

Six years ago it was 171 days (5.5 months), and pre-COVID in Q3 2019 it was 225 days (about 7.5 months).

Distribution channel

Del Rio also commented on changes to the distribution channel since the pandemic, which has seen a strong shift from travel advisors to direct or direct-web sales. The topic was also recently flagged by Steve Odell, SVP and MD Asia Pacific for Regent and Oceania when chatting with LATTE.

Between 2019 and 2023, Del Rio said direct booking “went up a lot”, while the cheapest of all the channels to operate, direct-web, was projected to be the fastest growing channel.

“We love travel agent business and we do everything we can to generate business through them. It is still our largest channel, but it is no longer the fastest growth channel.”

Del Rio said NCLH was investing in the direct-web channel and injecting “all the technologies needed to really increase” reservations from that source.

View the full investor event here.

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