Del Rio Says Itinerary Diversification Crucial To NCLH Success
Frank Del Rio
Cruise Week recently asked Norwegian Cruise Line
Holdings boss Frank Del Rio if he's as hungry now as back in 2002 when he took
the helm of the newly formed Oceania Cruises.
“I'm more hungry now because there is so much more at stake," he replies. “We
have 21 ships plus 6 more coming vs. just 1 ship in 2002. We are a public
company worth $11 billion vs. a group of private investors who were risking
only $14 million," he says, pointing back to the 1
st year of
Del Rio has come a long way and indeed the stakes are the highest now in his
entire career. But he has the tools and the room to maneuver - all that
capacity makes increased itinerary diversity very possible and that is
something Del Rio sees as crucial for all the brands. “Diversifying itineraries
and deployment is probably the single largest area of opportunity to increase
yields," he told investors.
Itinerary diversification will allow Norwegian to move away from the
price-challenged western Caribbean. That will likely lead to other changes,
including more bookings with an air component linked directly to the cruise
“At Prestige," explained Del Rio during a recent Investor and analyst
conference for NCLH, “just about every booking included air. We marketed
it as free air, but it's felt in the price of the product, whereas... the
participation of our guests buying air from Norwegian to take a cruise is below
“My guess is that as we tinker with the Norwegian itineraries and reposition
vessels away from the Western Caribbean... to perhaps higher yielding
itineraries, the air participation at Norwegian will tend to increase because
customers simply cannot drive to the places that we may put the ships," said
He emphasized that itinerary diversity matters to past passengers. “If
every ship has these milk runs and there's no variety in itineraries, there's
no reason for a past guest to come back as much if there was some itinerary variety."
Hardware is important, but it's not
everything. “New ships are great, I love to build them, I love to go to
inaugurals," said Del Rio. “But every ship that comes gets tougher and tougher
to fill. So if we can find growth another way, I think we'll all be happy."
He used the
as an example. “It is the smallest, oldest ship in
the Regent fleet," said Del Rio. “We took delivery of the vessel in 1998, but
she was really a 1960's era Russian spy ship."
Yet that was the ship in Alaska this summer that garnered $975 per day per
diems. “So this notion that only the biggest shiniest, newest ships with all
the bells and whistles can get double digit premiums on yields is wrong," he
Del Rio showed some “real examples" that indicate how diversifying itineraries
will logically increase per diems, displaying information on one ship per brand
with the highest yield and lowest yield actually achieved in 2014.
For NCL, it was
. “In Alaska she had a sailing of $208 per diem. That was her
high. Her low was $48 in the Bahamas. Same ship, same cost structure, same
crew, same entertainment, different itineraries. The high and low
[differential] is 332%."
Similar high/low per diems provided for the
(88% differential) and RSSC Navigator (10% differential) were miniscule
“The key is seasonality: the right ship the right place, right time, variety,
scarcity, etc. etc.," he summed up. “We're not going to get Norwegian to be
just like Prestige in itineraries, but I think we can significantly walk
towards the Prestige concept of itinerary deployment and see massive
improvement in pricing just by moving the ships to the right place at the right