Norwegian Adopts Some Prestige Strategy


Frank Del Rio

By weaving in Prestige's go-to market strategy with Norwegian's, NCLH president Frank Del Rio is hoping to better compete on value and not sticker price: "We know how to do that, we've been doing it for 10-plus years at the Prestige brands. We're going to test acceptability, if you will, at the Norwegian brand."

Referencing Wave Season promotions, with detailed pricing popping up on TV screens and other marketing mediums, he notes, "So far, so good, we're seeing very, very good results from tiptoeing in that area."

He said the promotions are the start of something different for Norwegian, more along the lines of what propelled Regent's profits. "We introduced a promotion at Norwegian that didn't focus on lower prices but focused instead on more value. And that's something that we have, over time, perfected at the Prestige brands."

Again, nothing subtle here, it boils down to increasing demand by having more effective marketing messages.

"Year-round Prestige brands [Oceania and Regent] are 65-70% sold for the following year. Historically, Norwegian is about 40%."

"One of the go-to market strategies is book early because you get the best price, best inventory, best availability," he says. "Year-round Prestige brands [Oceania and Regent] are 65-70% sold for the following year. Historically, Norwegian is about 40%."

He isn't naive enough to expect that Norwegian is going to match Regent and Oceania, "but if we can move the needle at Norwegian from 40% to 45% ….the confidence that it gives the company to be able to raise prices because there's more business on the books, the visibility that it gives all of us for future forecasts, improved cash flows, it's a win-win situation."

During Norwegian's 2015 Investor & Analyst Conference, Del Rio provided an example of 'the deal versus the price' strategy at Regent and how that applies to Norwegian's long-term success: "We bought Regent in early 2008. Occupancies were sub-80%, which is typical for the luxury space. Per diems were sub-$500."

Today, occupancies at Regent are consistently at 94-95% and the per diems are over $700. "Every time we introduced another component, we saw yields increase," said Del Rio.

In 2009, the company introduced free, unlimited shore excursions. "That was in a time after the great recession, the financial crisis," he recalled. "Everybody was talking prices; we didn't want to drop prices. We said, 'We're going to give people more value, give people a reason to buy our product.' So we introduced free unlimited shore excursions, and yields went up."

In 2011, Regent continued that concept and introduced the pre-cruise hotel stay. "Look what happened: prices went up and all this time occupancies continued to grow," said Del Rio. "So it's not sacrifice one over the other."

Over a five-year period, Regent's average pricing grew 6.8%.

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