WEBVTT - Harry Sommer Talks Cruise Industry Outlook

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Harry Summer, president and CEO of Norwegian Cruise Line joining

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<v Speaker 2>us right now. And Harry, there's been so much talk

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<v Speaker 2>here about the bump that we've seen in this industry,

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<v Speaker 2>the bump that we've seen out of Norwegian specifically here.

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<v Speaker 2>Is there any sense here that that's fading now?

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<v Speaker 3>Well, first of all, thanks for having me on. No,

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<v Speaker 3>we do not see any fading. Consumer demand continues to

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<v Speaker 3>be very very robust. You know when we reported our

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<v Speaker 3>Q one earnings and reiterated again in our investor Day

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<v Speaker 3>last month, we see demand at all time highs occupancy

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<v Speaker 3>at all time high, future book positions at all time high,

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<v Speaker 3>all on higher pricing. We are very very encouraged by

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<v Speaker 3>the American consumer.

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<v Speaker 2>When we look at the American consumer and we look

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<v Speaker 2>at their sensitivity to prices and inflation and the like. Here,

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<v Speaker 2>how sticky do you feel the cruise line business is?

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<v Speaker 2>I mean, there's always been these anecdote said the people

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<v Speaker 2>who love cruises will always cruise no matter the economic conditions.

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<v Speaker 2>Is that really true?

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<v Speaker 4>So?

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<v Speaker 3>Certainly, listen, there are two different sets of people. There

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<v Speaker 3>are people that are store cruisers, that are avid cruisers.

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<v Speaker 4>And absolutely we see them coming back.

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<v Speaker 3>Our repeat rate is ad or near high levels compared

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<v Speaker 3>to where we were on a pre COVID basis. But

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<v Speaker 3>at the same time, we are attracting a record number

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<v Speaker 3>of new to cruise as well, especially in the younger demographics,

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<v Speaker 3>which are our.

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<v Speaker 4>Fastest growing segments.

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<v Speaker 3>You cruising at some point the associated with a slightly

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<v Speaker 3>older client out and now we're seeing younger people in

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<v Speaker 3>their thirties and forties coming.

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<v Speaker 4>To cruising and record numbers also, which we're very pleased with.

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<v Speaker 1>Okay, that's really interesting the breakdown of your demographic. When

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<v Speaker 1>we look at the American consumer and demand from them,

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<v Speaker 1>there is a perception among investors that the more indebted

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<v Speaker 1>cruise lines and I look at your debt to asset ratio,

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<v Speaker 1>it is higher than your peers, they are a levered

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<v Speaker 1>consumer discretion name, and that may seem more vulnerable to

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<v Speaker 1>any weakness in middle class spending. Is that view wrong?

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<v Speaker 3>You know, I'm not necessarily sure if that view is wrong,

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<v Speaker 3>but you have to sort of think about where demographic

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<v Speaker 3>is as well. You know, within our portfolio, we have

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<v Speaker 3>three brands in our Reaching cruise line, which is one

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<v Speaker 3>of the more higher end consumer brands, and then we

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<v Speaker 3>have an Oceanic Cruise brand, which is more of an

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<v Speaker 3>upper premium brand, and then Reaching Seven Sea Cruises, which

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<v Speaker 3>is a luxury brand, and of course our portfolio in

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<v Speaker 3>their respective segments, they are the highest price and therefore

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<v Speaker 3>track the highest quality demographic customer.

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<v Speaker 4>You know, we are not looking at low end consumers.

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<v Speaker 3>We're looking at high middle class, lower upper class consumers

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<v Speaker 3>that seem to be doing very very.

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<v Speaker 4>Well in the current consumer market.

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<v Speaker 3>But there is the second piece to it that also

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<v Speaker 3>point out in that the value proposition between us and

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<v Speaker 3>a hotel vocation has never been higher.

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<v Speaker 4>You know, the typical cruise adr average yeald per.

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<v Speaker 3>Night is about thirty to forty percent less than an

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<v Speaker 3>equivalent hotel vocation.

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<v Speaker 4>Despite the fact that cruise is off for.

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<v Speaker 3>More well, not just transportation and macvitality, we also have meals,

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<v Speaker 3>entertainment and other onboard amenities. So good value, upper consumer

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<v Speaker 3>demographic and good value versus the hotel industry.

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<v Speaker 1>All point is in the right direction, right, And they're

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<v Speaker 1>definitely a group of investors who liked that story, who

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<v Speaker 1>buy that thesis and are bullish on cruise line operators.

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<v Speaker 1>Yet when I look at your stock over the past

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<v Speaker 1>twelve months, up about two percent versus up twenty five

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<v Speaker 1>percent for Carnival and sixty eight percent for Royal Caribbean.

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<v Speaker 1>What do you attribute that difference to. Why the underperformance?

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<v Speaker 3>You know, I think about a year ago, we had

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<v Speaker 3>slightly higher aspirations for twenty twenty three that we were

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<v Speaker 3>able to achieve and that closed a little bit of

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<v Speaker 3>disappointment in the financial community. But I think at this

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<v Speaker 3>point we have to sort of put that behind us

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<v Speaker 3>and focus on for twenty twenty four. You know, since

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<v Speaker 3>coming out with our initial guidance for twenty four, we've

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<v Speaker 3>now raised it twice, just a few weeks apart from

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<v Speaker 3>each other, because our top line revenue number continues is

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<v Speaker 3>to overachieve our expectation, and we'll speak consensus. So I

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<v Speaker 3>agree we might have gotten a little bit ahead of

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<v Speaker 3>our skis in twenty three, which didn't do well for

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<v Speaker 3>our stock in the back half of last year. But

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<v Speaker 3>now coming into this year, we are absolutely seeing a

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<v Speaker 3>rebound off of that.

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<v Speaker 4>Our stocks up eight percent in the last month, which

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<v Speaker 4>we're very very happy with.

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<v Speaker 3>We about a month ago we discussed our long term

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<v Speaker 3>goals on our Investor Day for twenty five and twenty six,

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<v Speaker 3>which seems to be resonating very well in the market

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<v Speaker 3>as well.

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<v Speaker 1>All right, good stuff, Harry, really appreciate your joining us today.

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<v Speaker 1>Harry Summer is President and CEO of Norwegian Cruise Line