Americans already making far-flung bookings for next year, says cruise line CEO

May 14, 2020

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As Americans return to travel in the coming months, many industry watchers think they’ll be looking for destinations that are close to home and easy to reach. Driving trips will be popular. So will weekend getaways. More ambitious travel that involves long-distance flying will be out.

But Frank Del Rio, the president and CEO of Norwegian Cruise Line Holdings, isn’t convinced.

The hard data that he sees — and in his position, he sees a lot of it — is showing that vacationers still are interested in travel to far-flung destinations such as Asia and beyond. And they’re willing to get on long-haul airplanes to do it.

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“This notion that people aren’t going to want to cruise to faraway places or exotic destinations … what we’re seeing is defying that,” Del Rio said Thursday during a conference call with Wall Street analysts. The call came after the company released its quarterly earnings.

In response to a question about whether vacationers don’t want to fly to cruises anymore and were opting for sailings out of drive-in ports, Del Rio said the data he’s seen shows no evidence of that. In fact, he said, the top itinerary in terms of demand right now for the coming winter at the company’s Oceania Cruises and Regent Seven Seas Cruises brands is in a place about as far away as can be for a U.S.-based traveler: Japan.

“It’s Japan, it’s Dubai, it’s several of the world cruise segments,” he said, ticking off the itineraries that have been selling the best in recent weeks. “So, therefore, you have to fly there.”

Norwegian Cruise Line Holdings is the parent company of Oceania and Regent as well as its namesake, Norwegian Cruise Line. It operates 28 ships in all that sail to every continent.

In general, the destinations that customers have been choosing recently when making new bookings are the same destinations they chose before the coronavirus pandemic began, Del Rio said.

“We’re not seeing any particular area of strength, other than these Japanese itineraries, these world cruise segments, [which] are sold out, literally,” he said.

Del Rio didn’t elaborate on what, if anything, was driving the boost in bookings for Japan sailings.

Like all cruise companies, Norwegian has been hard-hit by the coronavirus outbreak. In advance of the conference call, it announced an adjusted loss of $211.3 million, or 99 cents a share, for the quarter that ended on March 31. That compares to a net income of $181.8 million, or 83 cents, in the same quarter a year ago. Second-quarter numbers are expected to be far worse.

Worries about the coronavirus outbreak have prompted many of Norwegian’s customers to cancel upcoming bookings, and the company itself has canceled many sailings. Norwegian halted all cruise operations in mid-March, as the coronavirus outbreak spread around the globe. The company already has canceled every sailing through June 11.

Related: How to cancel or postpone a cruise due to coronavirus 

Still, through it all, customers have continued to book new sailings for later this year and beyond. Indeed, in recent regulatory filings, Norwegian has said its bookings for 2021 remained “within historical ranges” of where they would normally be this far in advance, something Del Rio reiterated on Thursday. What’s more, he said the bulk of bookings for 2021 were new bookings — not just rebookings by people who recently had their cruises canceled. That’s something the company had not said before.

Norwegian Cruise Line's newest ship, Norwegian Encore, has room for 4,004 passengers at double occupancy. (Photo courtesy of Norwegian)
Norwegian Cruise Line’s newest ship, Norwegian Encore, has room for 4,004 passengers at double occupancy. (Photo courtesy of Norwegian)

 

Norwegian has been offering customers on canceled sailings a choice of a full refund or a future cruise credit worth 125% of the amount they paid, and about half of them are choosing the credit. But Del Rio said those credits weren’t what’s driving the solid booking situation for 2021.

“The vast majority of the booked position today [for 2021] … is good old cash bookings,” Del Rio said, suggesting that many people with the credits had yet to apply them to future sailings. “Over time, as people finalize their future plans, we hope that they do take advantage of those future cruise credits, which you know are good through the end of 2022.”

Related: Why Norwegian Cruise Line isn’t going out of business anytime soon   

Thursday marked the first time since the coronavirus outbreak began that Del Rio has talked in such detail about bookings for 2021.

When pressed for more color on the pace of new bookings by an analyst from Barclays, Del Rio did note that bookings for 2021 in recent weeks have been running below where they normally would be for this time of year. But that’s after being way up early in the year before the coronavirus outbreak took center stage. It’s by blending together the two periods — pre- and post-coronavirus — that the overall situation of bookings for 2021 remains “within historical ranges,” he said.

“We started the year at an incredibly booked position … we had a huge lead at the end of February,” Del Rio said. “As the COVID-19 pandemic has worked its way through the booking process, we’re taking less bookings than we were this time last year.”

Still, Del Rio was upbeat about the bookings that the company was getting for 2021, given all that has happened. He noted the company’s sales and marketing efforts have basically shut down since the coronavirus outbreak began, which means these bookings are coming in with no prompting from advertising or marketing dollars. Travel agencies also aren’t working at full strength, he noted.

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That said, over time, the company will fall further behind on 2021 bookings, he acknowledged.

“As time goes on, and we take on less bookings in the current period … you’re going to see a deficit being built over time as we continue to be shut down,” he said. “It’s not until we open all the sales and marketing activities, and the travel agents reopen for business, etc., [that] you will see a pivotal acceleration of new business.”

In an extended, one-on-one interview with TPG last week, Del Rio said his best guess was that the company’s ships would begin sailing again late in the third quarter of the year.

Additional resources for cruisers during the coronavirus outbreak:

Feature image courtesy of Norwegian Cruise Line.

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