NCLH to stick with 100% vaccination mandate, a 'competitive advantage'

Cruising got two boosts this week with the US approving a coronavirus vaccine for kids 5-11 and the conditional sailing order allowing ships with 95% vaccination to transition to a lower rate without making a simulation voyage.

More famlies can cruise

Health officials' recommendation of the Pfizer-BioNTech vaccine for children as young as 5 is hugely positive for cruise lines that will be able to carry more families.

The news came on the eve of NCLH's third quarter earnings release, and today President and CEO Frank Del Rio welcomed it, adding that he understands vaccine approval will be extended to even younger children in first quarter 2021. (And he likely has good sources, with his COVID-19 protocols guru Scott Gottlieb sitting on the Pfizer board.)

With the Centers for Disease Control and Prevention's extended CSO that took effect Monday, ships with 95% vaccinated crew and passengers may transition to fewer than 95% vaccinated passengers without a simulated voyage, as earlier outlined here. And, in mid-January, the CSO goes away altogether, leaving many to speculate lines will reduce the 95% rate to increase loads and carry more families with children.

100% vaccination a 'competitive advantage'

With NCLH's self-imposed 100% vaccination, its ships haven't had to operate test cruises. Del Rio didn't say what his company plans to do after Jan. 15.

But 'very soon' NCLH will extend its 100% vaccination mandate, he told analysts on the earnings call, adding his belief that's a 'competitive advantage.'

Even if that means lower occupancy.

'Our three brands will emerge from this crisis in a much better standing in consumers' eyes because of our early stance on health and safety, vaccinations, etc., and it's something we want to build on,' Del Rio said.

Cruisers more likely to be vaccinated

'I believe the target market that cruises is more likely than the general population to be vaccinated and we see time and time again a cruiser, or one who intends to cruise, is more vaccinated than those who don't intend to cruise ...

'We're not going to sacrifice the health or safety of anyone for the sake of adding a point or two or three, or whatever the number is, to load. We will continue mandating 100% vaccination as long as the science dictates it.'

Q3 occupancy 57.4%

NCLH had a 57.4% Q3 load factor, reflecting its 'self-imposed occupancy limits.' Royal Caribbean Group on Friday said it's ramping up by five to seven point a month and forecast its occupancy on core itineraries in Q4 to reach 65% to 70% and 60% to 65% overall. One Royal ship just went out at 85%.

Apart from NCLH sticking to its higher vaccination requirement, Del Rio said price integrity is more important than near-term occupancy. Remaining disciplined, even during the Delta variant bookings slowdown, has resulted in record-high loads and pricing for the second half of 2022 and all of 2023.

Not sacrificing pricing for loads

'We are simply not willing to sacrifice pricing to increase load factors in the upcoming transitional quarters,' Del Rio told analysts.

EVP/CFO Mark Kempa added pricing power helps offset inflationary cost pressures.

'We're not in a race' for occupancy, he said.

'Pricing discipline is important to us. We want to protect our long-term brand integrity. [So we'll raise occupancy] in a thoughtful manner rather than chasing that cheap customer just to gain that point of occupancy.'

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