Norwegian Cruise Line Holdings CEO Frank Del Rio said the
company’s “lofty” expectations for the Caribbean this summer have not been met,
one factor in revising expectations downward for the rest of the year.
In a conference call to discuss second-quarter results,
Norwegian lowered its guidance for second-half earnings and said it will not
make its previously forecast goal of earning $5 a share in 2017.
A big part of the problem is lower demand for European
cruises by North Americans due to geopolitical factors. But Norwegian
surprisingly said that keeping two big new ships, Norwegian Escape and Norwegian Getaway, in Miami for the summer has not worked out.
“Today is not a happy day at Norwegian headquarters for
obvious reasons,” Del Rio said. “We had to reset expectations based on the
current booking environment.”
Although yields are still up in the Caribbean from last year
by mid-single digits, Del Rio said strong pricing growth did not fully
As a result, in 2017 Norwegian Getaway will be deployed on
Baltic itineraries for the summer months. “It’s a recognition that high
expectations just aren’t being met,” Del Rio said, “almost exclusively due to heavy
concentration of inventory during the weak period.”
Del Rio also delivered bad news about Europe. Norwegian had
been seeing modest traction in the weeks following the Brussels terrorist
attack in March. But with the bombing of the airport in Istanbul, the Nice
truck massacre and the failed coup in Turkey, that “evaporated,” Del Rio said.
About 70% of Norwegian’s passengers on European itineraries
are sourced in North America, considerably higher than competing cruise companies. Attracting more Europeans will produce lower
ticket and onboard spending revenue, Del Rio said.
Del Rio also said South American itineraries are soft, and
are being impacted by perceptions about the Zika virus.
Norwegian reported a decline in earnings in the second
quarter to $145.2 million, down from $158.5 million a year earlier. Revenue
increased 9.3%, to $1.2 billion.
In late morning trading, shares of NCLH were down over 9%,
to $39.04, while stocks overall were up slightly.
Read More —> Source link