NCLH - PRESTIGE INVESTOR DAY

Takeaway: CEO wants synergies to be implemented quickly - by end of Q3 2015. Possible China opportunity for Norwegian brand in 2018/2019.

CONF CALL

 

Frank Del Rio (President/CEO)

  • Synergies will be done by end of Q3 2015
  • Sold Oceania to Apollo for $475M 
  • Norwegian brand
    • Four 4,200 berth newbuilds on order (Q4 2015, Q2 2017, Q2 2018, Q4 2019)
      • 2018: Breakaway Plus 3 (possibly targeting China)
      • 2019: Breakaway Plus 4 (possibly targeting China)
    • Average age is 51
    • Kids comprise ~12% of passengers
  • Oceania:  new R-Class ship by 2Q 2016
    • Average age: 67
    • Cater to retired/semi-retired seasoned travelers
    • Very high repeat customers
  • Regent Seven Seas
    • Explorer to arrive in mid-2016
    • Most inclusive luxury experience
    • All-suite staterooms, 97% with baloncies
    • High net worth guests comprise 50%+ of volume
    • Average age: 68
  • Oceania: between premium and luxury segments
  • NCLH: has no internal competition within each brand segment (premium, luxury, contemporary) as opposed to RCL and CCL
  • Oceania/Regent: Destination is key
  • Cost per berth
    • Breakaway class: ~$215k
    • Sirena: ~$180k
    • O-Class Oceania: ~$525k (richer cabin mix on O-class)
    • Seven Seas Explorer: ~$600k
  • Jason Montague/Drew Madsen as brand Presidents: primarily responsible for driving occupancy
  • Revenue mgmt department:  focused solely on pricing
  • Oceania/Regent:  have highest per diem in their respective brand segments
  • Cost Synergies in 2015: $25m in the bag
    • $10.4m in consolidation of office operations
  • Revenue Enhancement opportunities
    • Optimize itineraries
    • Shore excursion sales
    • Ticket Price - Deal vs Price marketing message
      • Selling the deal (value) rather than low price
    • Leveraging relationships with Travel Partners catering to affluent travelers (occupancy)
    • Cross-utilization of past guest database (occupancy)
    • Best Practices: maximization of Norwegian's upscale offerings
      • Pride of America
      • The Haven by Norwegian
  • Cost reduction opportunities
    • Sharing of best practices/economics of scale
    • Cost of delivering product
    • Further rationalization of overhead
    • Foster culture of cost consciousness
  • 'FDR's' New Deal
    • Flawless execution of strategy in place
      • Potential of Asia and other new international source markets
    • Drive higher per diems to delivers higher yields
      • Weaving in the Prestige Go to Market Strategy
    • Leverage scale to suppress costs
  • Prestige:  carries 200k passengers/yr; 50% past guest participation on a database of 300k past guest households
  • Norwegian: carries 2.1m passengers/yr; 35% past guest participation on a database of 3.7 million past guest households
  • 'Low hanging fruit' with taking advantage of past guest databases across brands
  • Annualized contribution for Norwegian newbuild: $100m
  • Incremental increase in Norwegian ticket pricing growth necessary to achieve equivalent of newbuild net income: ~3.0% to 4.0%
  • Norwegian waiting for China to mature and waiting to replenish the Norwegian fleet to rightful capacity
  • China:  
    • Looking for China partner
    • Go/No Go decision by Spring 2016
  • Targeting additional $10m for marketing for Wave Season 2015
  • Prestige:  usually 65-75% sold for following year
  • Regent per diem: $700
    • Introduced pre-cruise hotel stay in 2011 which raised pricing
    • 2009-2014 CAGR: +6.8% net ticket yields
  • Top source markets:
    • Oceania:
      • US: 64.7%
      • Canada: 14%
      • UK: 6.2%
      • Australia: 4.0%
    • Regent:
      • US: 67.5%
      • UK: 11.6%
      • Canada: 7.4%
      • Australia: 3.7%
    • Norwegian
      • US: 73.9%
      • Canada: 7.1%
      • UK: 4.2%
      • Germany: 2.2%
    • Norwegian sources 8% in California (vs other brands sourcing 25% in Cali) - sees opportunity there
  • On March 1, 2015,  NCLH will raise bar list by 6.6%, which will generate $10m in onboard revenue with no cost implications
    • More onboard opportunities in medical center. (Norwegian brand loses money in medical center. Want to get to break even)

 

Drew Madsen (President/ COO)

  • The Haven: Oceania/Regent cross-marketing opportunity
  • Pride of America:  highest yielding ship with strong double digit premium to core fleet
  • Dry dock schedule 2015:
    • Norwegian Star (March)
    • Norwegian Gem (September)
    • Norwegian Epic (October)
  • Norwegian Escape (Nov 2015): largest Haven complex in fleet

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