Skift Take

Although Norwegian Cruise Line has benefited enormously from a surge in travel demand, it — like its rivals — continues to be hounded by surging expenses.

Norwegian Cruise Line on Tuesday forecast downbeat third-quarter profit after a strong second quarter, as elevated costs offset gains from robust demand and higher ticket prices, sending the company’s shares tumbling down as much as 16.7%.

While higher costs have hounded most cruise operators, they have also benefited from pent-up demand for leisure travel, with many picking cruises that offer a range of fun activities under one-roof over costlier land-based vacations.

Rival Royal Caribbean last week forecast an upbeat third-quarter profit as well as lifted its annual profit expectations.

Truist Securities analyst Patrick Scholes said Royal Caribbean’s results set the bar very high for Norwegian, and so a slight raise to annual adjusted EBITDA guidance disappointed investors.

Norwegian Cruise forecast its annual adjusted EBITDA, a key measure of profitability, between $1.85 billion and $1.95 billion, up from $1.80 billion to $1.95 billion previously.

It also now expects 2023 adjusted profit of 80 cents per share, up from 75 cents.

But for the third-quarter, its adjusted profit forecast of 70 cents per share came below analysts’ average estimate of 79 cents.

Despite undertaking price hikes on its itineraries, Norwegian Cruise has been bogged down by inflation and higher labor costs.

Rival Carnival has also forecast third-quarter profit below estimates on higher costs.

Shares of Carnival and Royal Caribbean were down about 6% and 3%, respectively.

Norwegian’s total cruise operating expenses in the June quarter jumped 29% to $1.38 billion. To reduce the costs, the company is re-engineering food menu items and optimizing crew movements.

“We’re just maybe in the fourth innings of this cost reduction strategy… we still believe there are more efforts ahead,” CEO Harry Sommer said.

Norwegian’s second-quarter revenue rose to $2.21 billion, above estimates of $2.17 billion, while adjusted profit of 30 cents per share beat expectations of 27 cents, according to Refinitiv.

(Reporting by Granth Vanaik in Bengaluru; Editing by Shinjini Ganguli)

This article was written by Granth Vanaik from Reuters and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].


Ask Skift Is the AI Chatbot for the Travel Industry

Go deeper into the business of travel with Skift’s new AI chatbot.

Ask Skift Your Questions

Tags: earnings, norwegian, norwegian cruise line

Photo credit: Norwegian Cruise Line forecast a reduced third-quarter profit due to raised costs offsetting gains from reduced travel demand. Reuters

Up Next

Loading next stories