NCL stock down on mixed earnings results.

[paluni]

I have often thought of this cruise company as breaking the golden rule, and that's one of the roots of their customer dissatisfaction/loss. The golden rule is, "Do unto others as you would have them do unto you." In the cruise business, they are selling joy/happiness/relaxing time. If room service is free, that is a fun, joyful experience that you don't get anywhere but on a cruise. Start charging for it, the customer experiences disappointment/annoyance/unhappiness/resentment. If a cruise executive went on a cruise as a cruise customer, the cruise executive wouldn't like it either. And cruising sells an experience, not a product, like a TV set or a bicycle. The idea is to pamper the customer, make him or her feel like they were well treated for the money they paid. Not chiseled here and there.

I also think of that for the crew. Is staff reduced, working the remaining crew to the bone? Try to keep them happy too.

If everybody's happy, won't customers want to come back?

[abe3]

First -- A CPA (Del Rio) can distort the numbers to make them look good.

 

 

 

The booking numbers may be up, but it is obvious that NCL is chopping prices and adding "giveaways" to keep the numbers up, and it appears that they will need to continue doing this.

 

 

 

The tricks such as adding "service charges" are not setting very well with some people and that leads to word of mouth adverse publicity. Those tactics work for a while, but eventually they may come back to bite the company that does it.

 

 

Lol. Yeah right. Obviously not hurting their ship occupancy. They are doing just fine and I have future cruises booked with them. Look forward to more fantastic vacations with NCL.

 

 

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[Warm Breezes]

First -- A CPA (Del Rio) can distort the numbers to make them look good.

 

The booking numbers may be up, but it is obvious that NCL is chopping prices and adding "giveaways" to keep the numbers up, and it appears that they will need to continue doing this.

 

The tricks such as adding "service charges" are not setting very well with some people and that leads to word of mouth adverse publicity. Those tactics work for a while, but eventually they may come back to bite the company that does it.

 

Funny but the actual numbers don't seem to be supporting your claims. Keep trying though.

[fshagan]

First -- A CPA (Del Rio) can distort the numbers to make them look good.

 

While it is possible to have "bad numbers" that are distorted and the inevitable criminal prosecutions, these results analyzed by RDC1 are audited numbers. The accounting firm responsible for compiling them will be listed in the report.

 

I'm impressed by RDC1's analysis and suspect he is a broker dealer (series 6 & 7), financial advisor (series 65) or very well educated investor who knows how to read the results without prejudice.

[Fido Chuckwagon]

Stock down to a new low today. Everything is fine, nothing to see here, rah rah NCL!

[NLH Arizona]

Lol. Yeah right. Obviously not hurting their ship occupancy. They are doing just fine and I have future cruises booked with them. Look forward to more fantastic vacations with NCL.

 

 

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I'm looking forward to my 3 booked NCL cruises, the next one is 106 days away. I've always had a great time on every cruise I've ever take, whether it be on NCL, Celebrity, Crystal or any of the other lines I cruised on in the past. NCL has a great product and gives me the choice to choose how I want to spend my money, other than making me (1) pay for things I don't want or (2) making be subsidize items for others. All three of the lines I cruise on has their pluses and minuses, but all offer great value for the experience that they offer. Edited August 26, 2016 by NLH Arizona

[SteveH2508]

to RDC1

 

The only discernible effect of Brexit at the moment is the drop in the value of Sterling. Every other economic indicator is positive over here (despite what the Remainers tried to have us believe).

 

Us Brits are a cynical bunch, and we can see through NCL's (or Del Rio's) dodgy business practices and we are not prepared to spend our (currently less valuable) pounds on his ever-changing, chiselling business model.

 

There is much better value to be had over here from Princess; P&O; Royal Caribbean et al. NCL are not very competitive when you take everything into consideration (I am Platinum on NCL BTW) and I have enjoyed every cruise with them, but their itineraries do not attract me any more and - as for their drinks/UBP pricing and exclusions - they are not even in the ball park.

 

Quoting stock market figures/ratios/percentages is all well and good but - bottom line - a cruise line with half empty ships; loss-leader pricing and a poor customer reputation will not generate revenue.

[swedish weave]

These figures paint a picture of the investors confidence in NCLH.

 

Rose colored glasses won't change the numbers.

 

NCLH - Norwegian Cruise Line Holdings Ltd (NASDAQ)

35.88 -0.31 (0.84%)

Aug 26, 3:46 PM EDT - Disclaimer

+ ()

Open: 36.15

High: 36.37

Low: 35.68

Volume: 1,671,250

Avg Vol: 2,536,207

Mkt Cap: 8.00B

[RDC1]

I have often thought of this cruise company as breaking the golden rule, and that's one of the roots of their customer dissatisfaction/loss. The golden rule is, "Do unto others as you would have them do unto you." In the cruise business, they are selling joy/happiness/relaxing time. If room service is free, that is a fun, joyful experience that you don't get anywhere but on a cruise. Start charging for it, the customer experiences disappointment/annoyance/unhappiness/resentment. If a cruise executive went on a cruise as a cruise customer, the cruise executive wouldn't like it either. And cruising sells an experience, not a product, like a TV set or a bicycle. The idea is to pamper the customer, make him or her feel like they were well treated for the money they paid. Not chiseled here and there.

I also think of that for the crew. Is staff reduced, working the remaining crew to the bone? Try to keep them happy too.

If everybody's happy, won't customers want to come back?

 

Keep in mind that NCL has tended to break the normal cruise rules for a long time. They were the first to go totally any time dining, they filled the ship with additional fee dining, etc. They have succeeded so far by being the non-traditional cruise line. What makes you think that they won't continue to do that? Their demographics is for families and relatively young cruisers. Those that are not as locked into what cruising has been and are instead going to more of cruising as a moving hotel model with more items be ala carte pricing, not all inclusive pricing. The ironic thing is that their competition is tending to follow them to some degree.

Edited August 26, 2016 by RDC1

[RDC1]

to RDC1

 

The only discernible effect of Brexit at the moment is the drop in the value of Sterling. Every other economic indicator is positive over here (despite what the Remainers tried to have us believe).

 

Us Brits are a cynical bunch, and we can see through NCL's (or Del Rio's) dodgy business practices and we are not prepared to spend our (currently less valuable) pounds on his ever-changing, chiselling business model.

 

There is much better value to be had over here from Princess; P&O; Royal Caribbean et al. NCL are not very competitive when you take everything into consideration (I am Platinum on NCL BTW) and I have enjoyed every cruise with them, but their itineraries do not attract me any more and - as for their drinks/UBP pricing and exclusions - they are not even in the ball park.

 

Quoting stock market figures/ratios/percentages is all well and good but - bottom line - a cruise line with half empty ships; loss-leader pricing and a poor customer reputation will not generate revenue.

 

Yes and no as far as Brexit. The biggest impact from Brexit is uncertainty. An impact far more then the current drop in currency. There is uncertainty about what it will mean for housing prices, jobs, european paid subsidies, access to other EU countries, etc. When there is uncertainty the normal reaction is to slow down or stop spending, especially on non-essentials.

 

However as the stats show, NCLH is not sailing with half empty ships, and their revenue level is the highest in the industry on a per passenger day level.

 

The interesting thing is once you get away from cruise critic there is very little noise (as in none) about NCL customer service. Do a search and see what you can find other then CC postings. Even here you can find more complaints about customer service on the Celebrity board. CC is a relatively small segment of the cruising population. Most people here don't seem to realize that all cruise lines change and that in some cases they are very happy to lose some customers when they make such changes. So far the biggest complaint here seem to be related to not allowing water/other drinks to be brought on board and that they charge for room service. Maybe NCLH feels for anyone that puts those at the top of their list, it might be better for them to go away, instead of continuing to come on board and complain about things.

 

Companies like Apple and Harley Davidson were major followers of that approach. They had a core that followed them totally and many that did not like them at all. Jobs was well known for having no interest in complaints from customers with the view that Apple knew best about what their products needed and if customers did not like it they could go away. Attract the customers that like what you offer, get rid of those that use the product but complain. By complain I don't mean a breakdown in process like a problem with a room and some other error, but complaints about policy or practice. Such as the fact that they charge for room service or do not allow water to be brough on board.

Edited August 26, 2016 by RDC1

[SteveH2508]

Let's not get bogged down in Brexit - suffice to say, at the moment, UK consumer spending is up; unemployment is generally down and an adjustment in house prices is long overdue (Brexit or not).

 

My main point is that the cruise industry is very competitive at the moment (supply exceeding demand) and - particularly in Europe - NCL are not as attractive as they once were.

 

NCL have chosen their business model (you eloquently describe Apple and Harley Davidson as examples). Time will tell whether it is a successful business model for cruise line - I am not convinced.

 

I certainly do not think that their current way of doing things sits square with FDR's wish to move NCL to a 'premium' line. It seems to be heading down not up IMHO.

[my3sonsnj]

So how low will it go? Any predictions?

 

Hoping it turns around soon because I could've cruised :eek: on what I've lost on this stock, sigh!

[RDC1]

Let's not get bogged down in Brexit - suffice to say, at the moment, UK consumer spending is up; unemployment is generally down and an adjustment in house prices is long overdue (Brexit or not).

 

My main point is that the cruise industry is very competitive at the moment (supply exceeding demand) and - particularly in Europe - NCL are not as attractive as they once were.

 

NCL have chosen their business model (you eloquently describe Apple and Harley Davidson as examples). Time will tell whether it is a successful business model for cruise line - I am not convinced.

 

I certainly do not think that their current way of doing things sits square with FDR's wish to move NCL to a 'premium' line. It seems to be heading down not up IMHO.

 

NCL is not a premium line. What it is being positioned for is to be a multiclass line, aiming at a younger demographic, with a range of fares. I use the term multi class (I could have also used the term split ship model) to distinguish between the premium areas on the ship (Haven) and the more mass market categories. An approach being copied by Celebrity to some degree, as will as MSC. There is no way that NCLH will position NCL to compete with their premium lines of Oceania and Regent.

 

They seem happy enough to push the truly cost focused to Carnival. RCCL also seems to be copying some features, though have not adopted the class model as much as Celebrity.

 

In general CCL seems happy enough to collect the traditional cruisers compared to RCL and NCL going after the younger demographic with RCL split between Celebrity with younger adults and a similar class system, while RCCL is going after the family business.

[RDC1]

So how low will it go? Any predictions?

 

Hoping it turns around soon because I could've cruised :eek: on what I've lost on this stock, sigh!

 

When you have a change in direction and a return to a less growth oriented P/E you will tend to over shoot. Currently the P/E is close to CCL which I would consider to be the ending point. However, it still needs to get through the over shoot period.

 

From the chart I expect support around 32 with stronger support around 30. Unless some new crisis hits the cruise industry I would expect it to hold somewhere around that level before coming back up to around the current price.

[swedish weave]

The funny thing is, if as you say they are chopping prices, then how come they have the highest revenue per passenger day of any of the cruise lines. A $100 more then CCL and $70 more then Celebrity.

 

So if they are chopping prices, it certainly was not impacting their revenue in the most recent quarter filings. I would put it more that they have made some shifts in their revenue models. From the balance of ticket vs onboard revenue percentages one can see that NCLH gets the highest percentage from on board. It would appear that they might have been willing to give more discounts in ticket prices, but make up for it on the back end. However, I am not convinced that NCLH is doing any more specials and deals then their competition is doing as well. The cruise industry is very well known to depend upon discounts, sales and other specials to fill ships.

 

Now one reason why NCLH is more exposed to current events is the concentration in North America and Europe. Very little Asian presence compared to RCL and CCL. The other two have a number of ships in China, NCL will put their first there next year. This concentration makes it more impacted by Brexit and other events such as Zika. It also might be more prone to being impacted by Zika due to its younger age demographics.

 

2015 Market Share

CCL 48.1% passengers 42.2% revenue

RCL 23.1% passengers 22.1% revenue

NCLH 10.4% passengers 12.4% revenue

 

Note that NCLH is the one that gets a higher percentage of revenue, compared to the percentage of passengers. Now part of that is because of the Oceania and Regent. If you look at a comparison of the largest mass market component of each of the companies you get

 

Carnival 21.3% passengers 8.0% revenue

Royal Caribbean 16.7% passengers 14.2% revenue

Norwegian 9.5% passengers 8.7% revenue

 

So in 2015 NCL carried less then half of the passengers of Carnival, while getting more revenue. NCL out of the three main mass market lines has the best revenue to passenger ratio (.91), better than RCCL (.85) and certainly better than Carnival (.37). Now while the latest market share data is 2015, the data seems consistent with the 10Q's filed in 2016.

 

The current revenue statistics mean very little in the overall picture since they must be paid at least 90 days in advance of the travel.

 

It will be at least three months before the revenue figures show the impact of the recent changes.

 

One more troubling thing about the statistics. If NCLH is generating revenue and profits, why are they not dispensing any of it to the shareholders ?

Edited August 26, 2016 by swedish weave

[kathybelcher2433]

I have often thought of this cruise company as breaking the golden rule, and that's one of the roots of their customer dissatisfaction/loss. The golden rule is, "Do unto others as you would have them do unto you." In the cruise business, they are selling joy/happiness/relaxing time. If room service is free, that is a fun, joyful experience that you don't get anywhere but on a cruise. Start charging for it, the customer experiences disappointment/annoyance/unhappiness/resentment. If a cruise executive went on a cruise as a cruise customer, the cruise executive wouldn't like it either. And cruising sells an experience, not a product, like a TV set or a bicycle. The idea is to pamper the customer, make him or her feel like they were well treated for the money they paid. Not chiseled here and there.

I also think of that for the crew. Is staff reduced, working the remaining crew to the bone? Try to keep them happy too.

If everybody's happy, won't customers want to come back?

 

 

This is why these arguments don't hold up for long. You mention free room service as a vital part of the cruise experience "joy". But whether it's free or pay, room service doesn't matter one bit to me. Never used it, never will. So in that regard NCL at least has me pretty well pegged.

 

 

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[NLH Arizona]

This is why these arguments don't hold up for long. You mention free room service as a vital part of the cruise experience "joy". But whether it's free or pay, room service doesn't matter one bit to me. Never used it, never will. So in that regard NCL at least has me pretty well pegged.

 

 

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Kathy, I agree. Free room service is not a vital part of my cruise experience "joy". In over 40 cruises, I've never once ordered room service. It might be a part of some passengers' "joy", but definitely not an integral part of everyone's cruise.

[LMaxwell]

If NCLH is generating revenue and profits, why are they not dispensing any of it to the shareholders ?

 

Generally speaking any company that doesn't pay dividends is in need of the cash and believes it can better invest in itself and / or does not trust its investors to reinvest dividends to grow the company.

[txagfan]

Generally speaking any company that doesn't pay dividends is in need of the cash and believes it can better invest in itself and / or does not trust its investors to reinvest dividends to grow the company.

 

 

 

I think that's a pretty big leap FWIW.

 

 

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[LMaxwell]

I think that's a pretty big leap FWIW.

 

 

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Either a company rewards shareholders with a slice of profits, a dividend, or it reinvests the money in itself believing it can go further by capitalizing, but it is also a sign that it does not think the shareholders will reinvest the dividends in to company growth. They think they can do better with the money than the shareholder can. The shareholder basically agrees, with the potential benefit being that if the company does better by reinvesting in itself the share price makes more gains. When the shareholder cashes out they realize the gain then. This is investing 101 and I did couch my statement by saying "generally"

[RDC1]

Either a company rewards shareholders with a slice of profits, a dividend, or it reinvests the money in itself believing it can go further by capitalizing, but it is also a sign that it does not think the shareholders will reinvest the dividends in to company growth. They think they can do better with the money than the shareholder can. The shareholder basically agrees, with the potential benefit being that if the company does better by reinvesting in itself the share price makes more gains. When the shareholder cashes out they realize the gain then. This is investing 101 and I did couch my statement by saying "generally"

 

Yes, companies that are in growth mode tend to not pay dividends because they have a better use of cash. Considering the number of ships being purchased by NCLH compared to the size of the company it makes far more sense to use that money for debt reduction and for capital investment then it does to pay dividends.

 

What is surprising with the cruise lines is not that NCLH does not pay dividends at this time, but instead that RCL is paying dividends, considering their current debt load and ongoing capital investment. CCL on the other does not have much debt and its capital invest is a much smaller percentage on its fleet so it can easily afford to pay a dividend.

Edited August 27, 2016 by RDC1

[sfaaa]

Some lenders restrict a borrower to pay dividend to shareholders until the outstanding loan is paid down. The suggestion that NCL doesn't care about its shareholders is just that - an assumption.

[mianmike]

There is no way that NCLH will position NCL to compete with their premium lines of Oceania and Regent.

 

They seem happy enough to push the truly cost focused to Carnival. RCCL also seems to be copying some features, though have not adopted the class model as much as Celebrity.

 

NCL also seems happy enough to push longtime loyal customers to RCCL and Princess. If not for Frank Del Rio we wouldn't have cruised anyone but NCL. We were comfortable and didn't see a need to go to other cruise lines. We are platinum and enjoyed the benefits. But thanks to FDR we will be trying new cruise lines. FDR pushed us out of our comfort zone and that could be a good thing. I may owe FDR a debt of gratitude. LOL

 

I know NCLH doesn't quantify the loss of longtime loyal NCL'ers in the earnings statements, but I would be interested to see the numbers. Just curious.

[sparks1093]

This is why these arguments don't hold up for long. You mention free room service as a vital part of the cruise experience "joy". But whether it's free or pay, room service doesn't matter one bit to me. Never used it, never will. So in that regard NCL at least has me pretty well pegged.

 

 

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Kathy, I agree. Free room service is not a vital part of my cruise experience "joy". In over 40 cruises, I've never once ordered room service. It might be a part of some passengers' "joy", but definitely not an integral part of everyone's cruise.

 

I don't follow stocks as a rule and have only been loosely following along with this thread (most stock market talk is way above my head:o), but as to the above it's not a matter of "room service doesn't matter to me" as much as charging for room service is a major shift in the way that the company perceives and treats its customers (and for the record I am neutral on room service, I have made use of it but not extensively and am just as happy to go to the buffet and get my own food).

 

The last time I looked at my poll about the onboard experience the majority felt that the onboard experience has declined since Del Rio took over and that more than anything is the most worrisome number to me because if NCL can't provide the same or better onboard experience they soon will be in trouble because they will have a hard time attracting new customers.

[sparks1093]

NCL is not a premium line. What it is being positioned for is to be a multiclass line, aiming at a younger demographic, with a range of fares. I use the term multi class (I could have also used the term split ship model) to distinguish between the premium areas on the ship (Haven) and the more mass market categories. An approach being copied by Celebrity to some degree, as will as MSC. There is no way that NCLH will position NCL to compete with their premium lines of Oceania and Regent.

 

They seem happy enough to push the truly cost focused to Carnival. RCCL also seems to be copying some features, though have not adopted the class model as much as Celebrity.

 

In general CCL seems happy enough to collect the traditional cruisers compared to RCL and NCL going after the younger demographic with RCL split between Celebrity with younger adults and a similar class system, while RCCL is going after the family business.

 

And I am perfectly happy going there, but I do miss having another affordable option. Given the fares I've seen lately with NCL if I wanted to spend that much money on a cruise (not quite there, yet) then I'd be more inclined to give another line a try (one cruise I priced was $300 more than Celebrity, so if I wanted to spend that much that would be the cruise I would pick).