Brace yourself for more crowded cruise ships next year

Bad news, cruise fans: The days of sailing on less-than-full ships is coming to an end.

Executives at several of the world's biggest cruise companies in recent weeks have said nearly all their ships should be running full again by the middle of next year, for the first time since the COVID-19 pandemic began.

For instance, Norwegian Cruise Line Holdings president and CEO Frank Del Rio told Wall Street analysts last week that average occupancy on the company's 29 vessels should ramp up steadily over the next six months and reach 100% by the summer.

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In fact, he suggested occupancy across the fleet could be more than 100% by the summer — something that is possible when more than two people stay in a cabin.

Occupancy on Norwegian Cruise Line Holdings' ships was about 82% during the three months that ended Oct. 31 — up from 65% in the three months before that. In both cases, that was far below normal levels.

The company owns three cruise brands: Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

"We expect load factors to continue improving sequentially to the mid-to-high 80% range in the [current quarter] ... and the steady occupancy ramp-up is expected to continue until we reach historical 100%-plus levels beginning in the second quarter of 2023," Del Rio said during a conference call to discuss the company's third-quarter earnings.

Del Rio's comments came just days after Royal Caribbean Group chief financial officer Naftali Holtz told Wall Street analysts that the company expected occupancy levels to return to historical occupancy levels at the company's cruise brands by the spring of 2023.

Royal Caribbean Group is the parent company of Royal Caribbean, Celebrity Cruises and Silversea Cruises, and it's also a part owner in German lines TUI Cruises and Hapag-Lloyd Cruises.

Holtz said Royal Caribbean Group ships finished the third quarter at a 96% occupancy level, which was up significantly from an 82% occupancy level in the second quarter but still below normal.

Royal Caribbean Group ships normally sail at more than 100% occupancies.

The world's biggest cruise company, Carnival Corporation, also is forecasting a return to 100% occupancies on ships by summer 2023. The company reported 84% occupancy for the summer months of July, August and September — up from 69% occupancy for the three months before that.

Carnival Corporation owns nine cruise brands, including Carnival Cruise Line, Princess Cruises, Holland America and Seabourn.

In normal years, most major cruise lines typically report occupancies of 100% or more for their ships. The business model followed by most major lines involves setting prices and investing in marketing at levels that will ensure such a high occupancy, as the economics of cruise ships work best when they run full.

However, occupancy levels on cruise ships fell sharply after the start of the COVID-19 pandemic in 2020. At first, cruise ships didn't operate at all, and when they started to resume operations, they sometimes sailed with fewer than half of the cabins filled; cruisers were slow to return and cruise lines struggled to lure people back — even with unusually low prices.

Occupancy levels at some lines as recently as the start of 2022 were less than 50%.

While this was a terrible situation for cruise lines, which reported massive financial losses in 2021 and through much of this year, it was a boon for cruisers who wanted to experience vessels with far smaller crowds than normal.

In 2021, some cruise ships sailed with less than 30% of the normal number of passengers while still operating with a normal crew contingent; this resulted in extraordinary service levels in some cases.

Occupancy on cruise ships has been rising throughout 2022 and already is back to normal in some regions, for some lines.

Royal Caribbean Group, for instance, reported earlier this month that its occupancy levels on Caribbean sailings were close to 105%, which is in the normal range. Occupancy for sailings in Alaska during the last quarter was about 96%, which is below normal, the company said.

Royal Caribbean Group reported occupancy levels on Europe cruises of just under 90% for the third quarter.

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