Harry Sommer Talks Cruise Industry Outlook

Published Jun 11, 2024, 9:39 PM

Norwegian Cruise Line President/CEO Harry Sommer discusses his outlook on the cruise industry. He also talks about the coming summer travel season and the economic impact on the business. Sommer spoke to Bloomberg's Romaine Bostick and Scarlet Fu. 

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Harry Summer, president and CEO of Norwegian Cruise Line joining us right now. And Harry, there's been so much talk here about the bump that we've seen in this industry, the bump that we've seen out of Norwegian specifically here. Is there any sense here that that's fading now?

Well, first of all, thanks for having me on. No, we do not see any fading. Consumer demand continues to be very very robust. You know when we reported our Q one earnings and reiterated again in our investor Day last month, we see demand at all time highs occupancy at all time high, future book positions at all time high, all on higher pricing. We are very very encouraged by the American consumer.

When we look at the American consumer and we look at their sensitivity to prices and inflation and the like. Here, how sticky do you feel the cruise line business is? I mean, there's always been these anecdote said the people who love cruises will always cruise no matter the economic conditions. Is that really true?

So?

Certainly, listen, there are two different sets of people. There are people that are store cruisers, that are avid cruisers.

And absolutely we see them coming back.

Our repeat rate is ad or near high levels compared to where we were on a pre COVID basis. But at the same time, we are attracting a record number of new to cruise as well, especially in the younger demographics, which are our.

Fastest growing segments.

You cruising at some point the associated with a slightly older client out and now we're seeing younger people in their thirties and forties coming.

To cruising and record numbers also, which we're very pleased with.

Okay, that's really interesting the breakdown of your demographic. When we look at the American consumer and demand from them, there is a perception among investors that the more indebted cruise lines and I look at your debt to asset ratio, it is higher than your peers, they are a levered consumer discretion name, and that may seem more vulnerable to any weakness in middle class spending. Is that view wrong?

You know, I'm not necessarily sure if that view is wrong, but you have to sort of think about where demographic is as well. You know, within our portfolio, we have three brands in our Reaching cruise line, which is one of the more higher end consumer brands, and then we have an Oceanic Cruise brand, which is more of an upper premium brand, and then Reaching Seven Sea Cruises, which is a luxury brand, and of course our portfolio in their respective segments, they are the highest price and therefore track the highest quality demographic customer.

You know, we are not looking at low end consumers.

We're looking at high middle class, lower upper class consumers that seem to be doing very very.

Well in the current consumer market.

But there is the second piece to it that also point out in that the value proposition between us and a hotel vocation has never been higher.

You know, the typical cruise adr average yeald per.

Night is about thirty to forty percent less than an equivalent hotel vocation.

Despite the fact that cruise is off for.

More well, not just transportation and macvitality, we also have meals, entertainment and other onboard amenities. So good value, upper consumer demographic and good value versus the hotel industry.

All point is in the right direction, right, And they're definitely a group of investors who liked that story, who buy that thesis and are bullish on cruise line operators. Yet when I look at your stock over the past twelve months, up about two percent versus up twenty five percent for Carnival and sixty eight percent for Royal Caribbean. What do you attribute that difference to. Why the underperformance?

You know, I think about a year ago, we had slightly higher aspirations for twenty twenty three that we were able to achieve and that closed a little bit of disappointment in the financial community. But I think at this point we have to sort of put that behind us and focus on for twenty twenty four. You know, since coming out with our initial guidance for twenty four, we've now raised it twice, just a few weeks apart from each other, because our top line revenue number continues is to overachieve our expectation, and we'll speak consensus. So I agree we might have gotten a little bit ahead of our skis in twenty three, which didn't do well for our stock in the back half of last year. But now coming into this year, we are absolutely seeing a rebound off of that.

Our stocks up eight percent in the last month, which we're very very happy with.

We about a month ago we discussed our long term goals on our Investor Day for twenty five and twenty six, which seems to be resonating very well in the market as well.

All right, good stuff, Harry, really appreciate your joining us today. Harry Summer is President and CEO of Norwegian Cruise Line

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