Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. I'm pleased to say
Speaker 1: that we're joined now by Norwegian Cruise Line CEO Harry Summer. Harry,
Speaker 1: it's great to have you with us again. So you
Speaker 1: stand apart from some of your peers, because we heard
Speaker 1: from Royal Caribbean, we heard from Carnival with pretty upbeat outlooks.
Speaker 1: Talk us through what you specifically see in the year ahead.
Speaker 2: So first soft good morning, and thank you for having
Speaker 2: me on today. Listen.
Speaker 3: We're still seeing very good booking activity for Q four
Speaker 3: and twenty twenty six. I think the softness that we
Speaker 3: talked about just was on one specific product Europe in.
Speaker 2: Twenty twenty three. For Q three. I'm sorry for Q
Speaker 2: three of twenty twenty five.
Speaker 3: Mypologies, but if you looked at our book position on
Speaker 3: a twelve month basis, we're well within our optimal range,
Speaker 3: we're above historical averages, and our twenty twenty six book
Speaker 3: position is actually well ahead of historical averages. So yeah,
Speaker 3: one soft spot in Q three for Europe. For the
Speaker 3: rest of the book curve looks really really good.
Speaker 4: So you cater to a higher income consumer, do you
Speaker 4: think that's the issue or are people with higher incomes
Speaker 4: watching there while it's more closely or are people who
Speaker 4: are new to cruises that really decided to.
Speaker 2: Try it out after the pandemic.
Speaker 4: Is that demand waning or what's going on exactly?
Speaker 3: No, I don't think any of those things are happening.
Speaker 3: I think the higher income consumer is doing well. I
Speaker 3: think the middle income consumer is doing well. We don't
Speaker 3: really cater to the lower income consumer. I think it's
Speaker 3: specific to one ear Europe. In Q three, I think
Speaker 3: Americans are looking to look a little bit closer to home,
Speaker 3: and we're happy because our deployment in Q four and
Speaker 3: Q one even to next year favors those closer to
Speaker 3: home my generaries, which is why we're seeing.
Speaker 2: A good book position for those future periods.
Speaker 5: But even with the closer to home kind of strategy here,
Speaker 5: how many issues are being created because you have a
Speaker 5: few things going on. You have consumers potentially worried about inflation,
Speaker 5: maybe has it in to spend more. Largely, you also
Speaker 5: have a dynamic where a lot of people are seeing
Speaker 5: that international consumers are really slowing down when it comes
Speaker 5: to the United States. How are you grappling with those
Speaker 5: trends that might continue for months.
Speaker 3: You know, I think this is where the cruise industry's
Speaker 3: unique position really acts as as a tailwind, if you will,
Speaker 3: a benefit, because we represent such a good value compared
Speaker 3: to hotels and other vacation alternatives. So I mean you
Speaker 3: think about everything that you get on a cruise, from food, entertainment, spas, casinos,
Speaker 3: the whole nine yards and a great consistent product. It
Speaker 3: really represents a great experienced and value gap versus hotels,
Speaker 3: which is why we tend to do better as an industry.
Speaker 3: I mean, you look at our yields compared to what
Speaker 3: Hilton just announced yesterday, We're still well ahead of them,
Speaker 3: and I think that's going to continue into the future.
Speaker 3: People liked vacation, and if there are going to be
Speaker 3: modern secessionary challenges out there, I think value which cruise
Speaker 3: lines provide in earnest really should win out.
Speaker 1: So there's a lot of uncertainty among consumers, which you
Speaker 1: know well right now, I want to talk about uncertainty
Speaker 1: that you might be feeling. I was listening to Bloomberg
Speaker 1: Surveillance this morning, and I forget who said it, but
Speaker 1: someone made the great point that you have to have
Speaker 1: stable policies to encourage companies across the supply chain to invest.
Speaker 1: And when you think about where you stand right now
Speaker 1: looking at twenty twenty six, for example, how do you
Speaker 1: feel versus at the start of twenty twenty five. Are
Speaker 1: you thinking about things a little bit more conservatively than
Speaker 1: you were maybe at the start of the year.
Speaker 3: Listen, you know clearly we're not immune to macroeconomic conditions.
Speaker 3: We saw the economic news that came out this morning,
Speaker 3: and so we're redoubling our effort not just to maximize
Speaker 3: every dollar of revenue and emphasize the points that I
Speaker 3: mentioned before about cruising being such an incredible.
Speaker 2: Value, but we're also looking at cost control.
Speaker 3: You know, we would be foolish not to see that
Speaker 3: there's a potential for weakness going forward, and we're doubling down.
Speaker 3: We set up a transformation office to sort of reb
Speaker 3: imagine the way we deliver services and buy things, not
Speaker 3: at the expensive consumers. We're super passionate about delivering a
Speaker 3: great onboard product, but we think that we can buy
Speaker 3: things better, and we announced a three hundred million dollars
Speaker 3: cost savings program last year. We're going to accelerate those
Speaker 3: cost savings, but again, never at the expense of the
Speaker 3: guest experience, and we believe that if we can accelerate
Speaker 3: those cost savings initiatives, we'll be able to offset any
Speaker 3: potential challenges on the top line.
Speaker 4: What are the you know, if I look at your
Speaker 4: stock performance versus and Caribbean as well, versus Royal Caribbean,
Speaker 4: I'm sorry, Carnival versus Royal Caribbean, I see real underperformance.
Speaker 4: What is the bigger the biggest competitor in the market,
Speaker 4: Royal Caribbean cruise lines doing that investors love so much,
Speaker 4: Like what can.
Speaker 2: You look at them and learn? You know, I think
Speaker 2: there's really two critical components.
Speaker 3: You know, they started their closer to home and private
Speaker 3: island strategy a little bit before us. It's obviously they
Speaker 3: have first mover advantage and they've had the benefit of
Speaker 3: having that for the last couple of years, where we're
Speaker 3: really just getting into our closer home private island strategy now.
Speaker 3: So they've built up this benefit over a year and
Speaker 3: a half, which we think we can now rapidly catch
Speaker 3: up on during twenty twenty six. I think also it's
Speaker 3: a challenge of leverage, you know, on an enterprise value basis,
Speaker 3: our valuations haven't changed that much, but because we are
Speaker 3: higher leveraged than them, we don't have the same equity return.
Speaker 3: But we're super focused on reducing our leverage. We're going
Speaker 3: to get it down to five times at the end
Speaker 3: of the year and in the mid forest by the
Speaker 3: end of next year, and obviously that will help with
Speaker 3: our equity valuation as well.
Speaker 5: I'm very glad you brought that up. If you pull
Speaker 5: up DDIS on a Bloomberg terminal, you can see your
Speaker 5: kind of entire capital stack here, and how quickly do
Speaker 5: you think you could pay down that debt given the
Speaker 5: focus that the industry really has on doing so.
Speaker 3: So, you know, we already decreased our leverage two turns.
Speaker 3: You know, we went for the mid sevens the mid
Speaker 3: fives last year, which we think two turns of leverage
Speaker 3: is great. We're going to decrease it another turn this
Speaker 3: year to get to around five or close to a turn,
Speaker 3: to get to a round five another apaturn next year.
Speaker 3: I think by the time we get into early twenty
Speaker 3: seven and we're going to be in the four range.
Speaker 3: I think that's a very competitive position and should unlock
Speaker 3: value on the equity side of our evaluation, and.
Speaker 1: Harry, before we let you go, we spoke to you
Speaker 1: at the end of February, and one of the points
Speaker 1: that you made was if we saw relations restored with Russia,
Speaker 1: if Russia opened back up, that would be a major
Speaker 1: tailwind for your company, given that Saint Petersburg, that cruise
Speaker 1: line was very, very profitable for you. Now we're at
Speaker 1: the pretty much the start of May, the end of April.
Speaker 1: Do you think that we're any closer to that point?
Speaker 3: You know, it's really hard to tell, you know, I'm
Speaker 3: not an expert in geopolitics. Listen, we hear some positive noise,
Speaker 3: we hear some constructive commons out of Russia that they're
Speaker 3: willing to start talks, but really difficult to read the
Speaker 3: future on that. I just want to be clear though,
Speaker 3: that could be a tailwind. We're very happy with our deployment,
Speaker 3: you know, where we are in the Caribbean, Alaska. Deployment
Speaker 3: for next year is doing very well as well, So
Speaker 3: we're happy with what we have today. That could just
Speaker 3: seed incremental tailwind to us if things move forward.
Speaker 2: All right, Harry, thanks so much.
Speaker 4: Harry Summer there talking to us from Norwegian Cruise Lines