Royal Caribbean Group and Norwegian Cruise Line Holdings both held first quarter earnings calls within the past week. The stark difference between the two calls shine a spotlight on just how much Royal Caribbean is thriving while Norwegian struggles.
It’s not just shareholders who should take note.
Both cruise lines reported 10-11% revenue increases over the same time last year, but whereas NCLH reported a total revenue of $2.3 billion, RCG earned double that at $4.5 billion. Royal also celebrated a load factor of 109% (accounting for multiple third and fourth berths sold), while Norwegian lagged at 103.8% occupancy.
Norwegian stocks fell about 8% following Monday’s call. Even though its first-quarter earnings per share was higher than anticipated, the company did not meet Wall Street’s expectations. In contrast, Royal Caribbean’s stocks rose a nearly similar amount after the company released its earnings report, primarily because it beat Wall Street’s forecasts.
Taking the Pulse
For those of us whose eyes glaze over when CEOs start spouting acronyms and numbers, what was immediately clear was the difference in tone during the two earnings calls.
Royal Caribbean Group CEO Jason Liberty swaggered through his company’s earnings call in a sea of confidence.
“We own the Caribbean,” he said, referring to cruise line Royal Caribbean whose Icon and Oasis Class megaships lure couples and families to itineraries featuring the popular company-owned destinations of Perfect Day at CocoCay and the Royal Beach Club in Nassau, Bahamas.
Liberty went on to proclaim that the line will soon “own” the Texas market, as the brand has plans to send its first Icon Class ship to Galveston in 2027 and open Perfect Day Mexico in Mahahual in 2027 and Royal Beach Club Cozumel in 2028.
“We literally will have the biggest, best, most attractive destination experience for that whole Gulf region,” he said about a market that’s known for its lack of itinerary variety.
Legend of the Seas, debuting later this year, is selling well at prices above what sister ships Icon and Star of the Seas pulled in for their inaugural seasons. Its “short product,” such as weekend cruises on splashy new Utopia of the Seas, is driving high-spending new-to-cruise customers, and 70% of all guests are pre-booking extras, often several pre-cruise purchases (Wi-Fi, drink packages, shore excursions, etc.) in one transaction.
Even increasing oil prices and geopolitical factors affecting Mediterranean and Mexico cruises aren’t phasing Royal Caribbean. Bookings at the start of the year were so strong that increasing airfares and travel disruptions are only moderating demand, and the line had very little inventory left to sell when world events began to soften interest.
The mood on NCLH’s call was entirely different. It didn’t take long for new CEO John Chidsey, who’s been in the role about three months, to discuss how he’s “streamlining the shoreside organization and making targeted role and position adjustments to improve efficiency and better align resources” – in other words: layoffs.
Chidsey’s recent appointment to CEO raised some eyebrows. He was hastily promoted from his role on the NCLH board without a lengthy talent search, and his background is not in cruise or hospitality but in the fast-food industry. However, he has a record of repositioning struggling brands and bringing financial accountability, including at his most recent position as CEO of Subway Restaurants. The board, as well as activist stakeholder Elliott Investment Management, clearly believe this kind of leadership is needed to strengthen the Norwegian brands.
Chidsey appears to be on task.
He also talked about the marketing missteps he plans to address and the revenue management tools and personnel the company needs to add to fix problems in the pricing arena.
With its internal struggles, NCLH did not need geopolitical headwinds, but that’s what the line is facing.
“Recent geopolitical developments have added pressure to an already challenged backdrop,” Chidsey acknowledged.
He reports “elevated cancellations” in Europe when NCLH was already behind competitors in filling cabins. Plus, the savings he’s carved out on the land-based operations side are getting eaten up by rising fuel costs.
It wasn’t all bad news. Chidsey asserted that the luxury brands, Oceania and Regent Seven Seas, are doing well. It’s Norwegian Cruise Line (which makes up 84% of the business in capacity days) that’s struggling, but even so, once guests have set sail, the line is seeing “healthy onboard spend.” The team is optimistic that its brands are strong and reports excitement from both travel partners and guests around the debut of Norwegian Luna earlier this year and expansion of private island Great Stirrup Cay and its Great Tides Water Park opening this summer.
The Takeaway for Travel Advisors
The very different stories at these two major cruise brands provide insight on travel advisors selling Royal Caribbean and Norwegian Cruise Line cruises.
Royal Caribbean is seeing great demand for its products and is pushing to increase the revenue it sees from every guest. Advisors should counsel clients to book Royal Caribbean cruises early because the most desirable cabins and suites will sell out, and fares will rise quickly as ships fill up.
The same advice is true for onboard attractions and private destination experiences. Cruisers will snap up cabanas or passes to the adults-only Hideaway Beach at Perfect Day at CocoCay or entry to the Royal Beach Clubs, and reservations at popular onboard dining experiences, such as Royal Railway — Utopia Station or Izumi Teppanyaki, must be booked as far in advance as possible.
Travelers who cruise for the destinations should look carefully at itineraries as the company prioritizes its owned destinations over other ports. This is especially true in the Caribbean, but Royal Beach Club Santorini is now open and the company has partnered with Alaska Native-owned Goldbelt Incorporated to explore the development of a new port outside Juneau on Douglas Island.
With Norwegian Cruise Line, there’s a window in which the need to fill cabins in the short term and get back on track with revenue management may result in comparatively lower fares on modern cruise ships. Advisors should look for exceptional values among NCL’s sailings and promote these to clients because if Chidsey can pull off his corporate turnaround, fares will be climbing in 2027.
It’s also likely a great time to book sailings to Great Stirrup Cay before word starts to spread about the new water park. Cruise travelers who get there first might experience better rates and smaller crowds before Norwegian’s efforts to increase load factors and pricing take effect.
Chidsey also mentioned that he’d like to attract more families, and NCLH Chief Financial Officer Mark Kempa discussed “taking our existing fleet and ensuring that we're maximizing space across our existing assets so we can add more thirds and fourths and get more of the families.”
Advisors should stay tuned to what steps Norwegian Cruise Line takes to make its ships more attractive to families, and be ready to market those enhancements to your family clientele.
Business is often cyclical, and if Chidsey and team can successfully turn Norwegian Cruise Line around, the line will become more competitive with Royal Caribbean. If he doesn’t, Royal Caribbean will continue to be the leader in cruise innovation, blowing everyone else out of the water, charging even more for its attraction-packed ships, and leaving the other lines in its wake.
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