Why you may have a tough time finding a cabin when cruising in North America resumes
Eager to be aboard one of the very first cruises when cruising resumes in North America? You'll be lucky if you get a cabin.
When cruise lines initially restart operations out of U.S. ports, presumably later this year, they are likely to only restart with a few ships, each operating at only partial capacity, executives at all the major cruise lines have said. That'll create a squeeze on the number of available cabins that could make it hard for would-be cruisers to find space.
Indeed, the squeeze could be so sharp that some people who currently have bookings on ships for later this year might find their reservations canceled out from under them due to limited capacity, a top industry executive suggested on Thursday.
"We're not going to be able to start (with) all 28 vessels," Norwegian Cruise Line Holdings president and CEO Frank Del Rio told Wall Street analysts during a conference call to discuss quarterly earnings. "It's going to be ... maybe one (ship launching) a week, something like that, which means that there's going to be a lot of customers who are booked today who will be displaced."
It'll be a situation of "excess bookings, if you will, at the beginning," Del Rio said.
Del Rio said the displacement of customers with confirmed bookings for the initial period after cruising resumes will take two forms. Some passengers will have their reservations canceled outright and receive a refund. Others will be moved from ships that aren't yet operating to others that are.
"People will move from the Norwegian Jewel in Alaska to the Norwegian Bliss in Alaska, or they'll move from the Oceania Riviera in Europe to the Oceania Marina in Europe," he said.
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Norwegian Cruise Line Holdings is the parent company of Norwegian Cruise Line as well as sister brands Oceania Cruises and Regent Seven Seas Cruises.
Del Rio suggested the number of bookings the company has taken for cruises during the third quarter of this year already outstrips the likely supply of cabins that it will have available if cruising has resumed by then.
"We believe that there are enough bookings today (that) if we never took another booking, let's say, for (the third quarter), assuming a reduced capacity at the start, we don't have to take any more bookings for (the third quarter)," he said.
As more ships come on line in the months after a cruising restart, the cabin-availability squeeze will ease and fewer customers will be displaced, Del Rio told the analysts. Eventually, the company will hit an equilibrium point where supply catches up with demand.
Related: The ultimate guide to Norwegian Cruise Line
"There'll be a rebalancing, if you will, at some point, where we do need to start taking more bookings, but my guess is that that will be beginning month three, four (after the restart)," he said.
An initial imbalance between supply and demand for cruises is one reason that pricing for cruises for the second half of this year and into 2022 has remained high.
Echoing comments by Royal Caribbean Group executives earlier in the week, Del Rio said bookings for the coming year currently are "well ahead" of where they normally are for this time of year at prices that are "inline to up mid-single digits," when excluding the dilutive impact of future cruise certificates.
Del Rio noted that Norwegian Cruise Line Holdings hadn't yet received guidelines from the U.S. Centers for Disease Control and Prevention (CDC) on how much it would need to curtail capacity on ships when cruising initially resumes. The CDC regulates cruise ships operating out of U.S. ports and is establishing guidelines for how cruise ships will be allowed to return to service.
"For our own internal working purposes, we assume that at the beginning that maximum occupancy will be in the 50% range," he said. But in theory it could be more or less.
Related: A line-by-line guide to canceled sailings
The initial level of such capacity restrictions could have a significant impact on the initial supply-and-demand situation for cruises when cruising resumes.
Del Rio made the comments in part in response to questions from Wall Street analysts as to just how strong demand was for cruising in the wake of the coronavirus pandemic.
His responses to such questions were upbeat.
"Of all the things we worry about, filling vessels, generating demand just isn't one of them," he said in response to a question about demand from a Goldman Sachs analyst. "We don't have a short-term issue ... and longer-term business is better than ever."
Another question from a Tigress Financial analyst prompted Del Rio to note that 30 million people who expected to cruise over the past year hadn't been able to do it, creating unprecedented pent-up demand for cruises.
"This is a finite-capacity business. I can't cruise with 150% occupancy. So there's going to be a squeeze play here," he said. "You've got less supply. You've got pent-up demand. You've got people with money in their pocket. I think this is just the making of a boom time for the cruise industry."
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