Norwegian CEO: Refunds make more sense for us than credits

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The Norwegian Encore. The company reported that pricing for the second half of 2021 is in line with prepandemic levels.
The Norwegian Encore. The company reported that pricing for the second half of 2021 is in line with prepandemic levels.

Norwegian Cruise Line Holdings (NCLH) said it stopped offering future cruise credits (FCCs) in the fall, so as to not negatively impact future business.

"When we do cancel a set of sailings, everyone gets a cash refund," said Frank Del Rio, NCLH CEO.  "We're no longer offering the option of an FCC."

Del Rio said NCLH has the liquidity to offer the cash, and FCCs are dilutive to future business because they generally have a 25% rebooking bonus added to them.

"We don't want to negatively impact future business any more than the effect of the existing FCCs," Del Rio said. "So today there is no choice: You get your money back."

Del Rio said that while it varies by brand, roughly 40% of all FCCs it has issued have been redeemed.

"So there remains 60% of FCCs in that bucket of folks with the ability to rebook," he said.

Del Rio added that while investors may think of FCCs as being "not as good" as a cash booking, he thinks they are both important.

Frank Del Rio
Frank Del Rio

"Customers who took an FCC showed a great deal of confidence and support in our cruises, " he said. "And we want to make sure they get their cruise. If we have to extend their booking date or sailings date as the suspensions continue, we will do so. We actively encourage people to redeem their FCC, we want them to take a cruise and we also want to clear the deck, so to speak, as soon as possible, so we can get back to what we do best: selling cruises at the highest yield in the industry."

NCLH said that while its overall cumulative booked position for the second half of 2021 remains below historical levels, pricing is in line with prepandemic levels, even after including the dilutive impact of FCCs.  And while it still early in the booking cycle, the company said that its overall cumulative booked position for the first half of 2022 is "significantly ahead" of 2019's record levels, with pricing in line when excluding the dilutive impact of FCCs.

As of Dec. 31, NCLH said it had $1.2 billion of advance ticket sales, including about $850 million in FCCs.

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