Norwegian Cruise Line (NCLH) – Get the Norway Cruise Line Holdings Ltd Report removed mandatory Covid vaccinations on cruises from US ports, making it the first major cruise line to do so.
In theory, this should bring more passengers on board and perhaps win over some ex-Royal Caribbean International (RCL) – Get the Royal Caribbean Group Report and Carnival Cruise Lines (CCL) – Get the Carnival Corporation Report passengers who were banned from sailing on those lines.
Norwegian CEO Frank Del Rio trumpeted the changes during the cruise line’s second-quarter earnings call.
“Simply put, vaccinated individuals, including those entering NCLH ships from US ports, will no longer have any pre-cruise protocols,” he said.
“And those who are unvaccinated or choose not to provide proof of vaccination will be required to provide a negative result within 72 hours prior to departure. In addition, all guests 11 years of age and older will be exempt from vaccination and testing requirements of any kind.”
Del Rio also tried to make it clear that the company wasn’t making these changes simply to get more passengers on board.
“Last month, CDC terminated its voluntary Covid-19 program for cruise ships. This was a strong signal of confidence from CDC that the industry’s Covid-19 mitigation and management plans are robust and effective,” he added.
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Norwegian sees a strong trend
Del Rio also noted that booking trends remain strong and that on-board spending has been higher than normal. Royal Caribbean CEO Jason Liberty also discussed these topics during his company’s call.
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Like his counterpart, Del Rio sees this as a very positive sign not only for the Norwegian, but for the industry as well.
“The second is our on-board revenue generation, which is a real-time indicator now of how our guests feel about their financial situation now and while on our ships,” he said.
“Revenue generation on board has continued to be impressive, even as we continue to increase frequency, carrying more guests across all ships and cabin classes. In the second quarter, on-board revenue per passenger cruise day was approximately 30% higher than during the comparable 2019 period.”
That number matches what Liberty said Royal Caribbean passengers were spending.
Norwegian customers shop early and often
Del Rio explained that passengers weren’t just spending after they boarded the ship. They also opened their wallets before boarding.
“We continue to focus on enhancing our market-leading packaged offerings and increasing the quality touchpoints with our guests starting at the moment of booking to capture even more upfront revenue, allowing guests to arrive on board with an increasingly fresh portfolio, which ultimately results in higher overall spending,” he said.
Pre-cruise revenue per passenger for Q2 2022 was up 50% compared to pre-pandemic 2019 levels. Del Rio noted that pre-cruise spending generally works as a predictor of on-board spending.
“At a high level, guests who make pre-cruise purchases tend to spend roughly twice as much as those who don’t book onboard activities,” he added.
“And while the broader economy has experienced a pullback in consumer spending on physical goods, we continue to see a strong appetite for spending on travel and experiences, particularly by affluent consumers.”
