Norwegian Cruise Line Holdings is willing to be flexible with many aspects of doing business as it returns to cruising except one: what it charges its passengers.
It is far better for the New York-listed company's long-term bottom line to keep prices where they are, despite the eagerness to fill as many berths as possible during a post-pandemic recovery, chief executive Frank Del Rio said.
"It's so important to keep that pricing discipline," he said on Wednesday on an earnings call with analysts.
"We've seen time and time again that companies have dropped prices, as we saw back in 2008 and 2009 during the Great Recession.
"There are some who have not yet recovered to their pre-Great Recession yields more than a decade later."
He said Norwegian can stay firm on pricing as it anticipates four new ships by 2023 during an inflationary period.
"We are primarily a fixed-cost business and during inflationary times, we come out ahead," he said. "We're seeing that we have pricing power.
"We're fixated on maintaining pricing and will sacrifice short-term load factors in order to preserve long-term pricing."
Bookings are still robust
Norwegian said in its third-quarter earnings report that 2022 bookings are "in line" with 2019 record levels despite the dilutive impact of future cruise credits and a temporary setback from the Delta variant.
"Pricing discipline is important to us, and we've said time and time again we want to protect that," chief financial officer Mark Kempa said.
"We want to protect the long-term brand equity, so we're going to do it in a thoughtful and rational manner rather than chasing that cheap customer just to gain that point of occupancy."
He said the new ships will also provide greater operating efficiency as a complement to the maintained pricing.
"That inherently provides some tailwind for us as we move forward, and with our growth profile, I think we can there's some tremendous opportunity there."
Plus, Del Rio said cruising always offers a much better value proposition to vacationers than land-based getaways do.
"When you combine the total cost of a vacation ... in any location, cruise vacations value is just off the charts," he said.
Del Rio said Norwegian also plans to hold firm on its 100% vaccination-requirement policy as long as science finds it necessary for human health and safety.
"I think that today that continues to be a competitive advantage to our three brands," he said.
"We're not going to sacrifice the health and safety of anyone for the sake of adding a point or two or three or whatever the number is to load [factor]."
