Chapter 1: What is the main topic discussed in this episode?
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I want to talk a little bit about cruise lines right now. Norwegian is embarking on its largest new build order in company history as it looks to surpass the competition. Over the past five years, the company's stock has lagged behind competitors, Royal Caribbean and Carnival. The industry as a whole has seen demand rebound while costs continue to climb.
Joining us now is Harry Sommer, Norwegian Cruise Lines President and CEO. And Harry, we've been talking about cruises all for the entire morning now because Carnival came out with better numbers than expected and yet its stock also traded down. What do you think the problem is? Why isn't the market embracing better numbers and newer product?
Well, first off, nice to be here this morning. Thank you for having me. I'll say I'm not really here to discuss Carnival's earnings. Of course not. But I think overall, the cruise lines have had a tremendous run-up in stock, us included. I think over the last three months, our stock is up the most in the industry, and we're very, very proud of that. Consumer demand is robust.
The guests love the guests' experience. It reflects a tremendous value and a much better experience than hotels and resorts. And our stock price has seen a run-up in the last few months as a result of that.
Well, I mean, the reason I ask about better results is I was just reading in a story that you make more money at Norwegian than any of your competitors in terms of the amount passengers spend on board, right? And that seems to be what investors want. That's what analysts are after. Plus, you have higher-end, newer ships coming out to court the luxury consumer. That also is what
we read that people want. And yet your stock, even though you've had a great three months, has really underperformed over the longer term. So why aren't investors seeing these products and these results and rewarding you for them?
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Chapter 2: What is Norwegian Cruise Lines' strategy for fleet upgrades?
Listen, we are super passionate about delivering a fantastic onboard guest experience. And I think the spending results you've talked about in terms of onboard revenue are a reflection of the great experience our guests get onboard the ship, that we give them things that they value and are willing to pay for. And we're very super excited about that.
Listen, I can't talk about, you know, I can't really talk to what happened six months ago or a year ago. I'm very happy with what our stocks performed the last three, four, five months now. Again, outperforming all the other stocks. in the industry. And our goal is to continue this run by delivering great experiences to our guests and great financial results to the investment community.
Harry, there's certainly a lot more people going on cruises that maybe didn't in the past. I'd say my parents are among them. They went on one of your luxury competitors who shall not be named on this program. Even so, this question is for them because they looked around and said, hey, everyone is our age or older. Everyone's in their 60s.
and older, and that's something you hear about cruise operators. What do you do to attract the younger generations? And if you can't, is it a problem down the line for this industry?
You know, I think if you look at the cruise industry, there's really a bifurcation. There are a series of luxury lines, perhaps like the ones that your parents went on. We have two luxury lines in our fleet, Oceana Cruises, which is our entry luxury level product, and Regent Seven Sea Cruises, which is our ultra luxury product.
It's true in that demographic, these cruises are a little bit more expensive. We do tend to attract an older clientele. but we also have our contemporary brand Norwegian Cruise Line, where a large percentage of our guests are 40 and younger. We continue to develop amenities, entertainment, activities on board the ship that are relevant to those people, and they're absolutely responding.
The demographic between 35 and, say, 45 is our fastest-growing demographic for that brand right now, and we continue to focus on that so that we can have a new generation of people that will cruise over and over and over again. The repeat rate of these guests are at all-time highs on any given ship.
About 45% of our guests are repeat customers, which is one of the reasons we announced our loyalty match program this morning, so people can go between lines and have a great experience, the experience that they deserve.
You have the Oceana, that's the luxury brand that you operate, Allura. It's a new boat coming back from its maiden voyage, I think tomorrow. Yes. Tell us what's different. What's new? What are you offering consumers that differentiates this boat from, you know, other sort of luxury high-end big cruise lines?
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Chapter 3: How has consumer demand impacted Norwegian Cruise Lines' performance?
So guests feel like they're being pampered at every single moment. Of course, the bedrock of Oceana Cruises is the finest cuisine at sea. We win every culinary award out there. And for this new ship, the Allura, we have upped the game even further. We've reintroduced a French restaurant concept, Jacques, which is extremely popular with our guests.
We have a new creperie, which has fantastic sweets, freshly made all day long, crepes, ice cream, and things like that, and pastries. But I mean, super high end, not the normal fare you would get on a contemporary cruise line. And our guests are enthusiastic about it. We have new shopping on board. We have new experiences in the theater, all the things that our guests value.
And Harry, it goes back to what Matt was saying, that you have this great capture rate of getting guests to spend on the boat itself. But you're talking about some serious luxury offerings. As we were saying, things that are expensive that not everyday people can necessarily afford. You also have more mass premium type offerings too.
How does the behavior differ between the more luxury offering and those more mass offerings that you're giving?
You know, traditionally on the higher end brand that we have, Regent, which is our ultra luxury, it is all inclusive by nature. So guests are getting, you know, free shore excursions, lots of free things, gratuities are included, you know, on board. So they're not really paying that much extra on that brand. Norwegian is a little bit different.
We do have some fantastic bundles that guests can buy into, like 70% off drinks packages that we're running right now, 70% off specialty dining and things along those lines, so that guests can get a deal and enjoy luxury amenities onboard our contemporary ship. But it tends to be a little bit more on the onboard spend side than the ticket price on our contemporary brand.
Hey, Harry, this has been great. Thank you so much for joining us. Please come back again soon. Harry Sommer of Norwegian Cruise Lines ahead of their maiden voyage of the Allura coming back to the U.S. shores.
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