What the Heck is Happening at NCLH (Norwegian)?

Norwegian Cruise Line Holdings (NCLH) is the parent company of Regent Seven Seas Cruises, Oceania Cruises, and Norwegian Cruise Line; a combination that has combined three independent cruise lines essentially through the tenacity (some – many? – would say I am being kind) of Frank Del Rio.  

It has been a tumultuous history to date with lots of moving parts that, honestly, need not be reviewed for the purposes of this article. Just know that finesse and kindness have not been at the fore…and that may well wind up being relevant at some point.  (Remember, this is coming from me…and that should say something!)

NCLH isn’t doing well. As CNBC stated last week, “soft outlook, wider losses eclipse strong demand,” and MarketWatch stated yesterday NCLH’s “stock underperforms when compared to competitors”.  Why? Because while NCLH claims strong demand it admits the first quarter of 2023 “will be the highest cost quarter,” with losses significantly higher than Wall Street projected.  All this because, as Del Rio asserts, in the long term, its higher base prices and charging for most everything else, will pay off.

According to Del Rio, NCLH’s strategy is focused on filling the ships, offering “deals” without discounting (Huh?), and making consumers feel they are getting a deal by bundling dining, beverages, and shore excursions upfront, so they board the ships with a “fresh wallet“.  In other words, boosting unsuspecting passengers (guests?) spending onboard the ships by being set up during the pre-cruise experience. 

It comes down to the old adage that cruise lines want “Heads in Beds”.  Why? Because, as I have said for years to people who want to purchase the lowest category stateroom possible because they claim they don’t spend any time there:

Do you know why you don’t spend time there? Because your stateroom sucks! And that is exactly what the cruise lines want.  They want you out and about the ship. Buy those extra few cocktails. Hit the shops. Play bingo. That is where the real profits are!

Pause for a moment.  OK. Wait. OK. Now, do you feel like you are valued as a person or a guest? Nope. You feel like a piece of meat. Someone who is only looked at as a sucker with a “fresh wallet”.  But, alas, it gets worse. 

First, how is Del Rio going to motivate travel agents to “fill the ships” with you?  Today NCL (the biggest of the three lines) announced it was changing the way it was calculating travel agent commissions…and to me, it is very telling. His approach is to reward the agent by the number of passengers he/she/they get to board the ship, rather than the cruise fare (rather than onboard) revenue those passengers generate.  

Commissions on cruises are based upon sales; generally, the more dollar volume (revenue), the higher the commission rate. However, Norwegian – retroactive to January 1, 2023 – is basing the commission rate on the number of bookings made minus cancellations.  For someone who books higher-end NCL products (like the Haven) rather than inside cabins, it is bad news. For example, on a seven-day Caribbean cruise, Goldring Travel could sell one Haven Owner’s Suite for $12,098 or one Inside Stateroom for $2,598 and be rated equally even though I have just generated 4.5 times the pre-cruise revenue for NCL. If an agent sells 5 inside staterooms, generating about the same revenue, he/she/they are rated higher. 

Why is that? The logic is simple and, to me, perverse.  Those 10 people in the inside staterooms are expected to generate more onboard revenue for NCL than the 2 people in the Haven. 

But it gets worse for those unassuming “fresh wallets”. Norwegian has engaged in a host of onboard price increases and cutbacks. (The other mainstream lines have done a bit, but nothing like Norwegian.) A basic “Open Bar” beverage package was increased to $109 + 20% service fee per person per day.  Having to shell out $915.60 per person on a cruise that costs $1,295 per person for that inside stateroom (which doesn’t include the $20 per person per day, or $140, service charge) or any other charges, not only will have many pause…but buy by the drink…and then pay even more. (Trust me, it happens!)

NOTE: 20% is an increased service fee; no longer called a gratuity. As NCL admits, while the majority goes to the crew, there is a revenue component.  So basically, whatever you are paying for drinks, etc., with a service charge, doesn’t accurately reflect the cost of the drink, etc. And if there are 10 people in inside staterooms paying rather than only 2 in The Haven, that revenue adds up!

Add to that a $9.95 service charge on room service plus charges like $35 + 20% for a 12-shrimp cocktail, onboard revenue is increasing. Add to that most specialty dining is at an additional cost + 20% service charge. And the list goes on.

Further, NCL has eliminated one of each ship’s production shows and (like Royal Caribbean) eliminated twice-a-day room servicing. (Royal allows a guest to choose day or evening; NCL does not.) So, you paid for more things, are getting less, and are being charged a higher service charge!

But there is more. Norwegian has now engaged in a faux claim of changing itineraries in order to be more environmentally friendly. No, it is changing itineraries so that it burns less fuel and is wrapping itself falsely in a claim of environmental concern. Clearly, to my mind, this is to soften the protests by those passengers who paid for one itinerary and are now stuck with a different one.  In fact, just yesterday, Norwegian claimed it was changing an itinerary calling on Roatan because of “congestion in the port”.  However, it was reported that it was, in fact, a very slow day in the port as there was only one smaller cruise ship present!

I could go on, but the NCL/Del Rio philosophy is troubling at best and deceptive at worst. 

Now, how is this affecting Oceania and Regent Seven Seas cruise lines?  So far, I am not seeing the same sort of philosophy. In fact, I am fortunately seeing exactly the opposite. Nowhere to be found is the NCL/Del Rio “No Discounting”, but rather on Regent overt discounts, single supplement sales, and large onboard credit offers (even on already booked guests).

On Oceania bundled more all-inclusive offerings (Air, Transfers, Shore Excursions, Beverage Packages, AND Shipboard Credits)…making it more akin to its big sister, Regent, but not always at a luxury level. however with – in my opinion – some of the best itineraries around. 

What I have observed in social media posts is that things have suffered on the culinary side of things, especially on Oceania. (I have always rated Oceania higher than Regent, so this is a worry.) Yes, with the recovery from Covid being slower than desired, cutbacks in this area are, honestly, to be expected. But what I am observing is more than that and is concerning. Another area is entertainment, but how much so, at this point, I don’t know. I will, however, keep on top of this.

Fortunately, I have not heard of many complaints about service. And that is very important!

I am not sure how long NCLH is going to be able to continue with its cost-cutting/”fresh wallet” approach. And I don’t know how else the cost-cutting is/will be affecting Regent and Oceania (aside from NCHL recently slashing 9% of its shoreside workforce). 

But with NCLH finances being tight and not terribly optimistic from outside observers, be prepared for changes at Oceania and Regent…but hope for the best.