Since introducing its new "no NCFs" policy in early November, Norwegian Cruise Line (NCL) has had "the three best weeks" in the brand's history, according to Harry Sommer, NCL's president and CEO. He gleefully announced the sales results to hundreds of Dream Vacations and CruiseOne advisors during the two trade groups' "Forward" national conference on Norwegian Encore.
What's clear is that advisors will likely earn more commission from NCL in 2023. Here's how Sommer explained the factors that contribute to that potential.
When looking at the third quarter 2022 results that parent company Norwegian Cruise Line Holdings just published, the company's net per diem—the price points—are 40 percent higher than the other two big cruise companies. But Sommer also said that result is "disproportionately led by NCL," given that Oceania Cruises and Regent Seven Seas Cruises are relatively small fleet-wise when compared to the NCL fleet of 17 ships.
NCL's fare approach is to "market to fill" rather than slash fares to fill cabins. "We’re not about cost control, we’re not about pinching pennies," Sommer told the advisors. Rather, "we're about demand generation, which we believe leads to the highest revenue, which leads to the highest commission.”
Part of that 40 percent higher price point, too, is because "we have 'Free at Sea,' the drink package, free Wi-Fi [within 'Free at Sea'] and the majority of our guests now buy air from us,” he added. “But all that’s commissionable to you.” Given that the commission received by advisors was already 40 percent higher than the other major cruise companies, “now post that announcement [about the no NCFs], it’s probably 50 to 60 percent higher," Sommer estimated.
“Absolutely, we see the pendulum swing—to higher trade sales," he said. In fact, this month NCL's trade sales are tracking similarly to what they were in the same period in 2019. "That is a huge improvement over what we see over the early part of the year where some of our trade partners still had furloughed employees and were bringing them back," he explained.
Insight and Intel
The booking insight came during a general session Q&A conducted by David Crooks, senior vice president, product and operations, World Travel Holdings. Sommer told the audience that he personally had gone out to talk with individual agencies about how their business was faring—and learned that cruise-selling advisors were making good progress in selling more all-inclusive resorts in both Mexico and the Dominican Republic.
So, when he asked agency owners and advisors why those resort sales were up and why cruise lines weren't getting those sales, he heard two reasons. The first was a lack of COVID-19 protocols at the resorts. The second was that advisors were being paid commission on the entire all-inclusive resort price. "So I said, 'great, we’re going to do both,'" said Sommer.
In October, NCL announced that it would eliminate all COVID-19 testing, masking and vaccination requirements, unless dictated by individual ports or countries. And the "no NCFs" policy of earlier this month speaks for itself with the initial positive results. But while upbeat about this month's results, Sommer also said that more work needs to be done: "We have a couple of more ships coming and with our itineraries, we have about 8 percent more bookings [to secure] in 2023, year-over-year, compared to 2019."
Upgraded Fleet
On the fleet side, during the past few years, NCLH has invested more than $1.5 billion in upgrading existing NCL ships. Jewel-class ships and others, too, were refreshed, received new spaces, new entertainment and more crewmembers.
Now, the new Norwegian Prima is taking the product elevation to an even higher level, Sommer said, telling the audience that more than 10,000 travel advisors have already toured the new ship worldwide. In fact, Norwegian Prima is receiving the brand’s highest guest satisfaction rates, and Sommer said that the new ship is NCL's "best sold ship for 2023."
Arriving in August 2023 is sister Norwegian Viva, which he called a “virtual sister" to Norwegian Prima adding, "and then there’s a three, four, five and six. We’ll be able to continue to elevate the product.” After Norwegian Viva is delivered, the next three are going to be a little bit bigger with new amenities," including larger sundecks.
Where will the Prima-class fleet be positioned moving forward? Sommer told Crooks and the audience that Norwegian Encore, Norwegian Bliss and Norwegian Joy will continue to serve the Alaska market. At times, two of them are positioned there, other times all three. “So, we’ll probably be putting the Prima-class ships on the East Coast of the U.S. or in Europe," he noted. Those itineraries will likely include the Caribbean and possibly Bermuda.
One new highly anticipated amenity coming fleet-wide, said Sommer, is the introduction of Starlink, the broadband Internet service that's reportedly far faster and more reliable than what most ships now have at sea. He said that it's been tested on two NCL ships, and will be aboard most—if not all—of the fleet by the end of 2023.
International Air and Free at Sea
Since many clients are concerned about the high cost of international air travel, Crooks asked Sommer for his perspective. As part of "Free at Sea," the line provides air for the second guest in the cabin, so even if air is high, while guests pay for one fare, they don't have to handle that for the second. That "really takes the risk from our guests of having to worry about pricing," Sommer explained.
In fact, showing that program's popularity, Sommer said that often NCL often buys air for 2,500 guests on one cruise. "We didn’t realize how successful it was going to be," he said, noting that "Free at Sea" is most popular for vacations in Europe and Alaska, a bit less so for close-to-home cruises.
That's kept the air call center busy. “We had to ramp up staff…but now in our air call center, we’re now getting a speed-of-answer of about 60 seconds last week,” Sommer stressed. “So, that seems to be under control. And we’ll continue to work on fine-tuning.”
Pride of America Update
Yes, NCL has had some crew staffing issues for Pride of America, an American-flagged ship that by law requires an American crew. So, while the line is operating the ship, it's doing so at far less capacity and with a few closed onboard venues. Crooks asked, “When do you see changes?”
Sommer explained that all ships outside of Hawaii are staffed at higher levels today than they were in February 2020.Then he addressed the Hawaii staffing: “So, for Hawaii, the magic [crew] number is 900,” Sommer noted. When the line has that many crew, the ship is fully staffed. At that point, approximately 2,000 guests create the optimum ratio of crew-to-guests.
For Pride of America’s start-up, Sommer said that the ship "was probably closer to 650" crew members. But, at the same time, he stressed that NCL limited occupancy to 40 percent. “So, she was two thirds staffed but only 40 percent full of guests."
“We’re now sitting at just under 800 [crew members on Pride of America], so we’ve made significant progress,” he explained. "We think we’ll be at the full 900 by early January,” adding that the ship is fully sold out through June.
Sommer's Forward View
What about capacity, Crooks inquired. “When do you see your ships sailing capacity-wise at where you were in 2019?”
Sommer responded: “We’re going to have 4,300 people on this ship (Norwegian Encore) next week. That’s as full as she gets.” He said NCL’s ships in North America and Europe are at or near 100 percent occupancy.
The only challenges the line has are during the winter. During that time, it's sailing with four ships in exotic markets—one ship each operating from the Canary Islands, South Africa, South America or Australia. “Those ships won’t be 100 percent full because they have a longer lead booking lead time, if you will, and during the summer things are still a little bit slow for the most exotic itineraries," Sommer noted. Some guests still are also not wanting to travel long distances internationally.
So, "we’ll have four ships not 100 percent full," said Sommer, "but the rest of the fleet will be basically full from this point forward." So, on April 1, 2023, when those ships are no longer in those exotic destinations, and instead operating in Hawaii, the rest of the U.S., Canada and Europe, he believes they’ll be 100 percent full.
Crooks asked Sommer what excites him the most about next year and beyond in the cruise industry. The NCL CEO responded by saying, “I get excited about a lot of things," and ran down his list:
- "I get excited about all our ships in operation. And when Pride of America is fully staffed in January we’ll have all of our staff back.
- "I’m excited because, as I mentioned, the last three weeks have been the busiest in this company’s history from a booking perspective.
- "I’m excited about seeing new ships.
- "And I’m excited to travel.
- "I’m excited not to talk about COVID anymore.”
For more information on Norwegian Cruise Line, visit www.ncl.com.
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