After pandemic chaos, Norwegian Cruise Line CEO says consumers still ‘willing to spend on travel’

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After the COVID-19 pandemic brought widespread disruption to the travel industry, Norwegian Cruise Line Holdings Ltd. says its affluent target customers are opening their wallets for travel now and in the future.

The cruise operator reported a wider-than-expected fourth-quarter loss before market open Tuesday, although revenue was higher than forecast. Norwegian’s
NCLH,
-11.71%

stock tumbled 11.8% Tuesday, while the S&P 500
SPX,
+0.21%

gained 0.1%.

“The last three years have been unlike anything we could have imagined,” said Norwegian CEO Frank Del Rio on a conference call to discuss the company’s fourth-quarter results Tuesday. However, the company enters 2023 with strong bookings and pricing, he said, noting, “We ended the year on a record book position for 2023.”

Demand for “wave season” has been very strong, according to Norwegian, which said it saw its highest-ever booking months in November 2022 and January 2023. “Wave season,” which occurs during the first quarter, is the peak period for cruise promotion.

Related: Norwegian Cruise stock drops after wider-than-expected loss, while revenue tops forecasts

Del Rio said that the company’s target customer, who tends to be “more upmarket,” continues to be financially healthy. “Our target consumer continues to be willing to spend on travel now, and in the future,” he said.

Norwegian’s occupancy level was 87% in the fourth quarter and is expected to reach 100% in the first quarter. “The ramp is continuing through the first quarter,” said Del Rio, noting that occupancy is expected to return to historical levels in the second quarter.

Since the company reported its third-quarter results in November, Norwegian has seen positive booking momentum, boosted by a Black Friday and Cyber Monday push, according to the CEO.

Norwegian’s 2023 capacity is expected to increase 19% compared with 2019, which includes the delivery of three new ships: Oceania Cruises’ Vista, Norwegian Viva and Regent’s Seven Seas Grandeur.

Overall, Norwegian expects to see a return to “normalized operations” in 2023, according to a presentation slide that accompanied the company’s fourth-quarter results.

Now read: Norwegian Cruise CEO’s total pay more than doubles to over $36 million during year of COVID

Speaking during the conference call, Norwegian’s CFO Mark Kempa noted that total revenue per passenger in the fourth quarter was up approximately 24% over 2019. The CFO also pointed to the company’s positive adjusted free cash flow in the quarter as an important milestone. “This represents another stepping stone as we return to a normalized operating environment,” he said.

Norwegian’s stock has fallen 20.8% over the last 12 months.

Of 18 analysts surveyed by FactSet, eight have an overweight or buy rating, eight have a hold rating and two have a sell rating for Norwegian.

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