With new ships, Norwegian Cruise Line goes smaller

With new ships, Norwegian Cruise Line goes smaller

Norwegian Cruise Line has signed pact with Italy’s Fincantieri to build at least four 3,300-passenger ships between 2022 and 2025.

Norwegian Cruise Line Holdings chairman Frank Del Rio said the new class of ship will be a high earner but at the same time be more versatile in deployment.

The four ships, being delivered from 2022 through 2025, will be designed with the same Freestyle cruising attributes as the current Breakaway Plus class.

“The size of these vessels provides optimal balance between deployment flexibility and earnings potential, allowing us to add new ports of call worldwide while maintaining a strong return profile,” Del Rio said.

The new ships will have about 15% less space overall and about 22% less passenger capacity than Breakaway Plus ships such as the Norwegian Escape.

That will mean fewer cabins to sell and potentially less onboard revenue than the Escape. Nevertheless, Del Rio said he expects the new class of ships to pay for themselves within about five years, the same payback period for current newbuilds.

The ships were valued at $800 million each, making them worth about $845 million at the current exchange rates. The next Breakaway Plus ship, the Norwegian Bliss, is projected to cost nearly $1.1 billion.

While it is unusual, Norwegian has stepped down in size in the past. For example, the Norwegian Breakaway, built in 2012, is smaller than her predecessor, the Norwegian Epic. But generally, consecutive classes of ships get bigger because fixed costs can be spread out over a larger number of passengers, creating economies of scale.

By building smaller, less expensive ships, Del Rio said, Norwegian is trying to create more deployment options.

“The addition of these vessels will allow us to substitute newer, state-of-the-art vessels with a richer stateroom mix in premium destinations, which in turn will allow us to deploy existing vessels to domestic or international homeports where we currently do not have a presence,” Del Rio said to analysts Feb. 22.

Del Rio did not say which homeports would be added.

Deployment flexibility has proven important this year to Norwegian, which moved the Norwegian Getaway from year-round Caribbean itineraries to Europe to sail in the Baltic this summer.

That reduced Caribbean capacity by mid-single digits, to 37%. It boosted European capacity by 10%, to 23% of Norwegian’s overall fleet, while enabling it to drop capacity in the Mediterranean, where security fears affected demand last year.

So far, the mix appears to be working. Del Rio told analysts that 2017 is off to a solid start.

“The booking momentum we experienced leading up to our last earnings call has accelerated into Wave season, enabling us to build a strong base of business,” he said. “We are in the best-booked position in the company’s history. … In the last eight-week period, business has really taken off and has been the most robust since the financial crisis some 10 years ago.”

Even the Mediterranean, which lagged last year, is seeing a rebound. He said pricing over the last eight weeks is up double digits across all three of the company’s brands — Norwegian, Oceania Cruises and Regent Seven Seas Cruises — with the Med leading the way.

“Clearly the North American consumer is more engaged this year,” Del Rio said.

  • Originally in Travel Weekly News By Tom Stieghorst /

 

 

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