Shares crept up by pennies after the company beat third quarter profit expectations but slightly moderated its full-year outlook on the aftermath of Hurricane Dorian. Dorian, and the abrupt end to Cuba sailings, are impacts that will diminish in the first half of 2020 as ships move out of the weaker Bahamas environment to higher-yielding destinations.
Net yield tops $300 for the first time
Q3 saw the highest quarterly revenue — $1.9bn — in NCLH history, and the company’s highest-ever quarterly net yield, nearly $301. This marked the first time net yield has ever surpassed the $300 mark, ‘not just for our company, but for any of the major cruise operators,’ Del Rio said. ‘Even more impressive is that the record revenue and record net yield came in a quarter in which we experienced a 1.8% decrease in capacity days.’
Strong on-board revenue, up mid single digits, helped the quarter.
‘The consumer is alive and well and they are not afraid to spend money,’ CFO Mark Kempa said, adding that many pre-cruise initiatives are ‘getting a lot more of the consumer’s wallet before they ever step on the ship.’
Itinerary optimization is key, too. NCLH did well in Alaska and Europe where Q3 capacity was up 17% and 13% respectively year over year.
Sourcing for European cruises
Unlike the other publicly traded cruise giants, NCLH sources most of its business for European itineraries from North America, where the economy continues strong. And Del Rio said the second biggest contingent for those cruises was from long-haul markets Australia, Asia and South America, and that those customers are much higher-yielding than people who drive or take a train or bus to the ship.
That said, despite Brexit and the weakening German and Italian economies, ticket revenue for the NCL brand’s European sailings from European-sourced customers increased a whopping 43% since the ‘Free at Sea’ promotion was introduced seven months ago.
Pricing for core western and eastern Caribbean cruises across Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises is strong, extending well into 2020, Del Rio said. He added that overall demand during the last four to six weeks has increased, including for Caribbean sailings.
Norwegian Encore, NCL’s first new Caribbean ship in four years, is the best booked, highest priced Caribbean-introduced ship in Norwegian’s history, by a wide margin, according to Del Rio. Meanwhile, Seven Seas Splendor, coming in January, is the best booked new ship for the Regent brand and the highest yielding in the company’s history.
Oceania and Regent advance bookings
Del Rio said the Regent brand, like Oceania Cruises, is nearly 70% booked for 2020, at higher prices. For Regent, this is on a 26% capacity increase.
The company’s booking window expanded 10% year over year in the third quarter. Advance ticket sales are 12.5% higher year over year, outstripping NCLH’s capacity growth of 8.7% — so sales are outpacing capacity growth by 44%.
Del Rio called it a ‘trifecta win’ to raise prices, extend the booking window and increase load in the face of what is unusually high year-end capacity growth.