Norwegian Cruise Line Holdings touts cost-cutting measures during Q1 call

02.05.2024 - 00:21 / travelweekly.com / Patrick Scholes / Mark Kempa

Norwegian Cruise Line Holdings said it has cut costs to offset the impact of inflation, but stressed it hasn't and won't cut what customers value.

"We're looking at how we can get much more efficient across the entire organization," CFO Mark Kempa said during NCLH's Q1 earnings call Wednesday.

The company had reduced fuel and bunkering costs in recent quarters, which resulted in savings in the "double-digit millions," Kempa said.

NCLH has also made cuts to "a lot of little things across the board," including marketing and "things on the vessel that customers really don't value," Kempa said.

"We're not just cutting to cut. We're looking at what customers care about, improving on those experiences while reducing items that the customer really doesn't care about," Kempa said.

He said the company was "very excited" at the progress it was making. Other cost savings have come from buying food directly instead of from intermediaries and improving its logistics, warehousing and food shipping.

Coming out of the pandemic, Norwegian Cruise Line had cut costs by reducing stateroom cleaning to once a day and halting the production of one of its shows.

Besides reducing costs, NCLH ended Q1 in a record booked position for the next 12 months and raised its full-year earnings guidance. Revenue was $2.2 billion, a 20% increase. Operating income rose nearly 20-fold, to $218.4 million.

NCLH, which operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises, sailed at 104.6% occupancy during the quarter.

Still, NCLH's stock price fell 15% on Wednesday.

The cruise company's Q1 earnings report beat expectations, but only slightly, said Patrick Scholes, a securities analyst with Truist Securities. He added that Royal Caribbean Group has "set a very high bar with several massive beat and raises this year."

While there is "certainly nothing wrong" with NCLH's performance, Scholes said, it was probably "not good enough to jump-start the shares, at least today."