Norwegian Cruise Line Holdings' occupancy broke into the triple digits for the first time in three years, executives said during the company's first-quarter earnings call Monday.
NCLH averaged 101.5% occupancy in the first quarter, exceeding the company's expectation of 100%. Some sailings reached 115%, said Norwegian Cruise Line president Harry Sommer, who will succeed Frank Del Rio as NCLH CEO on June 30. However, occupancy fell short of the 105.5% reached in Q1 2019.
Cruise lines consider a ship to be 100% occupied when two people are staying in every cabin. When there's third and fourth passengers in cabins, occupancy can exceed 100%.
NCLH is shifting focus slightly away from high occupancy as one of its brands, Norwegian Cruise Line, begins offering longer sailings that executives expect will lead to fewer third and fourth passengers, Sommer said.
"We think the shift to premium itineraries, primarily in Europe and Alaska but a little bit in Asia as well, allows us to get the type of customer that we need to support our revenue goals and our revenue growth for the future."
Over time, the company expects this strategy will be accretive for the line's earnings and margins, Sommer said.
The philosophy behind the longer itineraries is to get "better guests to get higher pricing and to maximize the value that we're getting out of each of our assets," said CFO Mark Kempa. "The economics on going to those itineraries obviously favors the company or we would not be doing that, so I wouldn't get caught up too much on the slight impact to occupancy."
Both pricing and net yields are expected to increase in the second half of 2023. The company said Q4 is poised to show its strongest growth over 2019, benefiting from extended Alaska and European seasons this year. The company is also expected to benefit from the debut of three new ships. The Oceania Vista begins sailing this month, the Norwegian Viva is due out in August and the Seven Seas Grandeur will debut later this year.
A busy Wave season
Sommer said the company finished Wave season 60% to 65% booked for the following 12 months. The booked position for the second half of 2023 alone is ahead of 2019, according to the company.
"We were very happy with the way Wave turned out, and our booked position both on a basis of itself and compared to 2019 is doing very well," said Sommer.
Truist Securities analyst Patrick Scholes said the results were encouraging after Q4 results fell short of NCLH's guidance. In Q1, the company met or beat its expectations for net per diem growth, net yield growth, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
"Additionally encouraging is the pace of occupancy ramp-up given company-specific concerns around this metric," he said.
NCLH -- which owns Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises -- reported $1.8 billion in revenue during the quarter, up from $1.5 million in Q4 2022. The company also reported a net loss of $159 million.