Norwegian Cruise Line’s announcement last week that it will sail to destinations in Asia and Australia for the first time in more than a decade was the tip of the iceberg for developments in Asia, as its parent, Norwegian Cruise Line Holdings (NCLH), considered hastening its plans to enter the China cruise market to catch up with competitors there.
“I think you’ve heard the other lines several times now mention how their most profitable ships, their high-yielding ships, are based in China — and everything that we have seen indicated that is correct — and so we want in on that action,” Frank Del Rio, president and CEO of NCLH, said on the company’s second-quarter earnings call last week.
“Some of our competitors are now celebrating close to 10 years of being in China,” Del Rio said. “And given that the Norwegian fleet has now grown or will have grown by 2019 to 17 vessels, it’s time for us to take a look and deploy some of our tonnage there.”
NCLH’s other brands are Oceania Cruises and Regent Seven Seas Cruises.
Del Rio said the company is looking into possibly sending a vessel to China that would be dedicated to the China source market as early as 2017 and will likely make a final announcement about those plans earlier than the originally estimated time frame of spring 2016.
In February, Del Rio told investors that China was being studied as a deployment option for a ship on order for 2018.
Patrick Scholes, an analyst with SunTrust Robinson Humphrey, said NCLH could find itself at an advantage by being late to the China market.
“They’re obviously not the first mover in Asia,” he said. The advantage with “the slow-go approach,” Scholes said, is that “you can always see what worked, at least in theory, and what didn’t work for these companies and where they position themselves in terms of customers and itineraries."
He said he could see Norwegian Cruise Line targeting the middle to upper-middle class in China, a “niche that hasn’t really been tapped” by competitors, who are targeting a more elite demographic.
In the meantime, Norwegian Cruise Line will be sending the Norwegian Star to Asia and Australia for the fall/winter 2016-2017. Itineraries are aimed not at the Asia source market but rather at the North American and global source markets.
Speaking in a webinar Aug. 4, Andy Stuart, president and COO of Norwegian Cruise Line, told travel agents, “This is not a ship going out to Asia for Asians. This is a ship going out for our core, target audience. We’re definitely marketing globally, but the North American market is a huge and very important market for these itineraries."
Stuart said that the Norwegian Star’s journey eastward would begin after its summer season in Northern Europe next year. The ship will sail to Barcelona, then to Istanbul and the Holy Land, then to Dubai via the Suez Canal, on to India, and ultimately to Asia where it will visit ports in Thailand, Malaysia, Singapore and Hong Kong before continuing to Australia and New Zealand.
He said he was aware that airfare to these regions would be a major factor in selling the cruises and said Norwegian was working with airline partners to try to secure attractive fares for cruise sellers.
In addition to China, Del Rio said, “I believe that Cuba can have a similar positive impact on the industry as a whole, given its proximity to the United States and given that the Caribbean as a whole represents some 40% of the industry’s deployment.”
He said the company had applied to the Treasury Department’s Office of Foreign Assets Control for a license to operate Cuba cruises and with the Commerce Department for an export license, and that NCLH has approached the Cuban government for the proper permissions to operate there.
He called a possible Cuba deployment a work in progress but said the company hoped it will receive the applicable permissions from both governments before the year is over. The first vessel to sail to Cuba would most likely come from the Oceania Cruises fleet, Del Rio said, although he did not offer a time frame.