NCLH shares slide on China 'caution'

Shares swung between $53.10 and $55.93 in heavy trading before settling at $54.07, down $1.71.

Coming off the best wave season experienced in some time, NCLH's overall booked position—both occupancy and price—is well ahead of last year.

European sailings, in particular, are showing 'renewed strength,' with pricing up well into the double digits over the past 16 weeks compared to last year, and the quality of international business is now booking at parity with North American-sourced customers, president and ceo Frank Del Rio said.

Caribbean demand continues to be strong, and Cuba is performing 'extremely well.'

Del Rio said it's all thanks to the 'trifecta' of a strong operating environment, the company's revenue optimization strategy and effective marketing. Though it's early, he added, the strong booking and pricing momentum has extended well into 2018, mainly due to the new Norwegian Bliss being in a better pre-delivery booked position than any prior Breakaway-class ship. It's also better booked than any other ship in the fleet for next year.

Yet the focus on Wednesday's earnings call was China, China and China.

Del Rio said that in early March, China's South Korean travel restriction triggered a slowdown in the signing of new charter contracts and major groups as travel agents focus on filling the closer-in sailings that were first affected by the travel ban.

Also, the restriction has had 'a bit of a chilling effect on overall demand' for cruises in China.

Norwegian Joy doesn't begin service there until June 28. Given that Chinese book very close to departure, Del Rio said it's too soon to know if voyages in the second half of the year will be impacted.

In spite of charter contracts slowing, Norwegian Joy is still better booked in the form of contracted charter space than the rest of the Norwegian fleet, at prices consistent with expectations.

The uncertainties surrounding the South Korea situation for cruises from China are 'partially mitigating tailwinds from the rest of our fleet,' Del Rio said. Without having any history in China, the company is being 'appropriately conservative' with its outlook for business there, and that's included in its guidance.

Del Rio said there had been a bit of a 'thaw' in getting new charter contracts the past couple weeks: 'For a good six weeks there was nothing, and now there is something, and that gives us hope there will be more.'

Also, he suggested the outcome of Tuesday's South Korea presidential election may bode better for resolving the issue with China than if the other candidate had won.

While the key for NCLH in 2016 was Europe, this year it's China. Del Rio said the company has a greater degree of confidence in the markets where its 24 other ships operate, because it knows those markets.

'We don't know China. And although Norwegian Joy only represents 8% of our capacity, we think it's prudent to be cautious,' he said.

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