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NCLH commits $30m to break into China market

NCLH commits $30m to break into China market

Norwegian Cruise Line Holdings will be spending $30m over two years to enter China with a customized ship that has features 'unique to China and to any ship sailing anywhere in the world,' Frank Del Rio said Tuesday.

The NCLH president and ceo added that the company's confident forecast of achieving $5 earnings per share in 2017 was decided before the China plan and doesn't take into account anticipated revenues or incremental costs from the new market.

NCLH will be spending $15m during 2016 in preparation to enter China plus an additional $15m in the first half of 2017, chief financial officer Wendy Beck elaborated.

Numerous China questions peppered the company's fourth quarter earnings call, including whether there is too much supply going into the market but not enough demand or infrastructure.

Del Rio noted NCLH won't have its newbuild operating there until 18 months from now but everything he observes leads him to the same conclusion: 'Overall, there is no better place to deploy a new vessel, like we are deploying in 2017, than in China.' He stated China will be accretive to earnings by the second half of 2017.

About cruise distribution currently being concentrated in the hands of a small number of ship charterers, Del Rio said he actually favors this model for now since it allows the company to focus on a known group of distributors rather than needing to break in as a new brand in a colossal market with a wide spectrum of retailers.

The NCLH chief said his view about distribution there may change a few years down the road.

 

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