Norwegian Cruise Line does not make as many headlines or spend as much on advertising as its two main rivals, Royal Caribbean Group and Carnival Cruise Line, do.
That may be because Norwegian (NCLH) caters to a different customer than its mass-market rivals.
Royal Caribbean's (RCL) namesake brand has built its business around families, offering them the biggest and boldest ships packed with family-friendly features. Carnival has done the same.
Norwegian goes after a more upscale market. It's not that families aren't welcome or that new ships like Norwegian Prima don't compare favorably with RCL's Wonder of the Seas and Carnival's (CCL) flagships, Mardi Gras and Celebration.
DON'T MISS: Norwegian Debuts its Newest Class of Cruise Ships
It's more a question of the target audience on which Norwegian focuses. The cruise line has opted not to discount and instead seeks to build a higher value proposition than Royal Caribbean and Carnival.
That's very different from NCLH's two mass-market rivals, which came back from the 15-month covid shutdown with a plan to aggressively rebuild passenger counts.
You can argue that both plans have worked. Royal and Carnival -- at least with their core brands -- may have lowered basic fares on many cruises, but they have made that money up with onboard purchases.
Norwegian has followed a different model, according to comments from Chief Executive Frank Del Rio during the cruise line's fourth-quarter-earnings call.
"With our full fleet back to the high seas, we significantly ramped up occupancy levels, carrying nearly 1.7 million guests; welcomed our newest ship, Norwegian Prima, to our world-class fleet, reached several critical financial inflection points, maintained our industry-leading pricing and, perhaps more telling, ended the year in a record book position for 2023 and at record prices," he said.
It's the pricing piece that's the key for the cruise line moving forward.
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Norwegian Targets a Different Customer
Carnival, Royal Caribbean, and MSC serve the broadest markets when it comes to the cruise industry. Del Rio shared some information on his cruise line's core audience during the earnings call.
"First, we are encouraged to see that our target consumer, which tends to skew more upmarket in the broader cruise industry, continues to be financially healthy and resilient and is prioritizing consumption of experiences over the purchase of physical goods," he shared.
That customer has been booking at record prices and, once onboard, has been spending money.
"Onboard revenue also continues to be a bright spot, with gross onboard revenue per passenger cruise day in the quarter approximately 25% higher than the comparable 2019 period," he shared.
"The bottom line is our target consumer continues to be willing to spend on travel and experiences now and in the future."
Norwegian Plans More Changes, Higher Prices
Carnival and Royal Caribbean have been moving prices higher, especially on their newer ships. Both cruise lines have largely returned to precovid pricing levels (albeit with deals being out there, especially on shorter cruises).
Norwegian has taken a slightly different approach: While it always held the line on pricing, it now plans to push that even higher. Del Rio explained how his company operated after it completed its successful return to service.
"We then shifted our focus to relaunching our operations while providing our discerning guests the same unparalleled vacation experience they expect from our leading brands. We also took this unique opportunity to raise the bar on pricing for the long term," he shared.
Passengers may not be thrilled to hear that the cruise line plans to keep raising prices, but Del Rio was speaking to investors and he shared more positive news for shareholders as the call continued.
"Now that our phased occupancy ramp is nearly complete and our loyal guests know that cruising in our brands is back and even better than before, we are squarely focused on how to maximize profitability as we embark on a period of transformational growth," the CEO added.
"Every aspect of our business is being evaluated through the lens of how we can realize our full value potential for all stakeholders."
