Cost Cutting Confirmed

[CJANDH]

Norwegian's quarterly report confirmed that cost savings have been a major focus, as we have all experienced on cruises since reopening after the pandemic. The following quotes from an analyst and the CFO say it all:

 

"The top line wasn't really an area of focus for most people," said Ken Kuhrt, Ariel Investments Portfolio Manager. "It was the cost side of the equation and they came out with numbers that look fantastic."

 

"Cruise-related costs in 2023, excluding fuel, were 21% lower from a year earlier", Norwegian Cruise CFO Mark Kempa said. 

[Pcardad]

17 minutes ago, CJANDH said:

Norwegian's quarterly report confirmed that cost savings have been a major focus, as we have all experienced on cruises since reopening after the pandemic. The following quotes from an analyst and the CFO say it all:

 

"The top line wasn't really an area of focus for most people," said Ken Kuhrt, Ariel Investments Portfolio Manager. "It was the cost side of the equation and they came out with numbers that look fantastic."

 

"Cruise-related costs in 2023, excluding fuel, were 21% lower from a year earlier", Norwegian Cruise CFO Mark Kempa said. 

They confirmed this in an SEC filing last year - the target was 15% reduction in non-fuel costs. They were totally upfront about it. 

From February 28, 2023.

 

• The Company is undertaking a broad and ongoing margin enhancement initiative and took several steps in recent months to improve operating efficiencies, reduce costs, and maximize revenue generation opportunities while continuing to provide value to its guests. As part of this initiative, operating efficiency and cost reduction efforts are expected to result in a decrease of nearly 15% in Adjusted Net Cruise Costs excluding Fuel per Capacity Day for full year 2023 as compared to the second half of 2022.

 

https://www.nclhltd.com/investors/news-events/press-releases/detail/534/norwegian-cruise-line-holdings-reports-fourth-quarter-and

Edited February 27 by Pcardad

[eroller]

The same is true of pretty much every single cruise line.  I sail on a lot of different lines.  The message is the same ... pay more and get less.  Thankfully Regent is a far cry less than the more mainstream lines, where it is very noticeable.  All the lines are still trying to recoup revenue from all the losses during COVID.  It's only very recent they have returned to profitability. 

[Whinenowine]

Same for every travel business (hotels, airlines, etc)....and actually all non-travel businesses too.  All my local restaurants are charging more while simultaneously offering smaller portions and lower quality food/ingredients.  And while food and energy are cyclical and prices will actually drop (not just increase at a slower rate), I wouldn't expect the Fed beating back inflation to change any of these recent trends.  All these businesses will continue to charge more and offer less until something breaks--i.e. until people en masse just stop consuming that product.  And since all businesses are doing it...what are our options?  Grin and bear it....or be miserable....

 

[Gpilon]

Very positive earnings report today from NCL. 

[PhD-iva]

3 hours ago, Gpilon said:

Very positive earnings report today from NCL. 

Yes, the loss was better than forecast. Stock jumped abt 20% today.

[wcsdkqh]

Unfortunately, they still owe the banks billions due to Covid shutdown. They will be digging out for years to come.

[pappy1022]

Let’s hope they improve the product and services as they start to dig out of their financial woes. It would be interesting to see where they got their cost reductions. I bet one area is staffing and another area is the quality of food. 

[Gpilon]

22 minutes ago, wcsdkqh said:

Unfortunately, they still owe the banks billions due to Covid shutdown. They will be digging out for years to come.

Loss was actually a profit. And yes, mired in debt but have to start somewhere to alleviate that. 

[Whinenowine]

Was a quarterly loss (Q4) but a full-year gain for 2023. Three numbers stand out to me:  capacity was 102% for the full year (that's quite a feat), revenue per passenger per day was 17% higher than 2019, and they paid back $1.9bn in debt in 2023. If this rate of debt repayment (plus debt-to-equity conversion) continues, they'll be out of their pandemic hole in a few years. 

 

But what all these companies have learned over the past two years is that people are willing to pay a LOT more for the same thing (or a lesser thing) now then ever before.  I thought it was just a year of revenge travel...but it's been two years and counting thus far. So there is NO incentive for NCL or any of the travel companies to reduce fares until/unless consumer demand drops off (due to a recession or something of that sort).  Higher prices are here to stay, I fear.

[mnocket]

It seems all of the cruise lines have discovered that they can cut back on their offerings and still sail with ships at full capacity. I'm a bit surprised that this seems to be the case for the luxury lines too, but I suspect the trend will continue until customers "jump ship".

[GOARMY]

Whinenowine:  

 

My head is spinning.

 

Economics 101 (Paul Samuelson, circa 1950); OR is it Adam Smith, circa 1776?

 

SUPPLY and DEMAND turned on its head.

 

Trying to reconcile why it is that consumer demand--us guests--for high-end cruising, which should DECREASE as the price of cruising increases, seems not to.

 

Quite the contrary.  

 

And, as prices rise, producers, in this scenario cruise companies, build MORE ships to gain more profits.  Now, that reality (or conundrum) is more Samuelson than Smith. 

 

Eh ghads. 

 

In the meantime, just-gave Regent more of my scarce money for two MORE cruises!  Guess I am part of the drama.    

 

GOARMY!

 

 

[Pcardad]

27 minutes ago, GOARMY said:

Whinenowine:  

 

My head is spinning.

 

Economics 101 (Paul Samuelson, circa 1950); OR is it Adam Smith, circa 1776?

 

SUPPLY and DEMAND turned on its head.

 

Trying to reconcile why it is that consumer demand--us guests--for high-end cruising, which should DECREASE as the price of cruising increases, seems not to.

 

Quite the contrary.  

 

And, as prices rise, producers, in this scenario cruise companies, build MORE ships to gain more profits.  Now, that reality (or conundrum) is more Samuelson than Smith. 

 

Eh ghads. 

 

In the meantime, just-gave Regent more of my scarce money for two MORE cruises!  Guess I am part of the drama.    

 

GOARMY!

 

 

Part is pent up demand. Part is limited time left to cruise. Part is this age-bracket has a lot of money right now.

[pappy1022]

4 hours ago, Whinenowine said:

Was a quarterly loss (Q4) but a full-year gain for 2023. Three numbers stand out to me:  capacity was 102% for the full year (that's quite a feat), revenue per passenger per day was 17% higher than 2019, and they paid back $1.9bn in debt in 2023. If this rate of debt repayment (plus debt-to-equity conversion) continues, they'll be out of their pandemic hole in a few years. 

 

But what all these companies have learned over the past two years is that people are willing to pay a LOT more for the same thing (or a lesser thing) now then ever before.  I thought it was just a year of revenge travel...but it's been two years and counting thus far. So there is NO incentive for NCL or any of the travel companies to reduce fares until/unless consumer demand drops off (due to a recession or something of that sort).  Higher prices are here to stay, I fear.

$12.6 billion still in long term debt so there is still a long road to go and the cost of building their ships in the future have gone up substantially in cost. Not saying they can’t do it, they just need the full capacity situation to continue over several years. The other thing I read is the use of the term new normal for cruise lines and the travel industry in entirety. In general, it is getting very difficult to staff this industry and the turnover is greater than ever before, so people should expect an impact on service. Another example, and this is just for the lower cabins on NCL ships, they intend not to service those cabins every day. I must admit that I have seen examples of the new normal on Regent this past cruise. Staffing shortages, slower than normal service and inconsistent food was evident. The staff onboard for the most part tried to please but it was obvious that the staffing levels aren’t enough to bring that 5 star service consistently. Regent is not alone with this challenge. It is everywhere including airlines, restaurants, hotels, etc. Maybe, just maybe, our expectations are too high for the new normal experience. 

[SWFLAOK]

Why are is there so much demand from people booking cruises that are almost certainly to have significantly changed itineraries before their cruise embarks? We have 2 cruises that we booked long ago, and would not be surprised to have changes to the one in April.

For the cruise early next year, we expect that it will not be the cruise we wanted because of the problems in the middle east, and we don't expect to learn that until its too late to get our large deposit back, and definitely not long before we actually embark. This cruise was fully booked a very long time ago, but there have been many cabins available lately. But there are people booking it as fast as people canceling it.

We only like small ships, and have been willing to pay for good food and service for an itinerary that we like. But at this point, we're reluctant to book any future cruises.

[GOARMY]

As usual, Pcardad's Post #13 cuts to the chase as to why Demand continues to chase Supply.  

 

Post-WWII economic theory presupposes actors--us customers/consumers--make rational decisions as to allocation of a "scarce" resource (US or Canadian dollars, Pounds, Yen, Deutsch Marks, whatever)  to chase, and secure a tangible product or service.

 

But, of course, that is where advertising comes in.  Convince a consumer he/she really, really wants and NEEDS a good or service that they really, really DO NOT NEED to survive. 

 

Hence, deluge of cruise lines brochures, emails, and "limited time" promotions.    

 

Guilty as I charge myself by paying for two additional 2024 and 2025 Regent cruises.  Trying to be rational.   Realize my cruising days are more in the past than future.  So, while continuing to SKI (Spend the Kids Inheritance), accept this inevitable reality. 

 

Time, health issues, political turmoil, wars, let-alone volcano eruptions and hurricanes/cyclones will probably change many itineraries from what was advertised, and paid-for by many of our fellow CCers. 

 

The future cruise segments we picked have itineraries which, hopefully, will limit exposure to these vagaries.  But, one never knows.  

 

In the meantime:  Await Splendor at London (Southampton) this June.  

 

GOARMY!

 

 

[mnocket]

15 hours ago, GOARMY said:

As usual, Pcardad's Post #13 cuts to the chase as to why Demand continues to chase Supply.  

 

Post-WWII economic theory presupposes actors--us customers/consumers--make rational decisions as to allocation of a "scarce" resource (US or Canadian dollars, Pounds, Yen, Deutsch Marks, whatever)  to chase, and secure a tangible product or service.

 

But, of course, that is where advertising comes in.  Convince a consumer he/she really, really wants and NEEDS a good or service that they really, really DO NOT NEED to survive. 

 

Hence, deluge of cruise lines brochures, emails, and "limited time" promotions.    

 

Guilty as I charge myself by paying for two additional 2024 and 2025 Regent cruises.  Trying to be rational.   Realize my cruising days are more in the past than future.  So, while continuing to SKI (Spend the Kids Inheritance), accept this inevitable reality. 

 

Time, health issues, political turmoil, wars, let-alone volcano eruptions and hurricanes/cyclones will probably change many itineraries from what was advertised, and paid-for by many of our fellow CCers. 

 

The future cruise segments we picked have itineraries which, hopefully, will limit exposure to these vagaries.  But, one never knows.  

 

In the meantime:  Await Splendor at London (Southampton) this June.  

 

GOARMY!

 

 

I hadn't really given it much thought, but I think you and @Pcardad made an excellent point about we old folks realizing that time is running out and if we don't tick off our bucket list now, we're never going to.  Waiting for the value proposition to return to pre-covid levels may never happen, and even if it eventually does - we don't have the luxury of waiting.  So yeah, the cruise lines can get away with raising prices and lowering offerings, and we're still going to book.

[GOARMY]

All:

 

As I am want to do, and bear with me as I wander again off the path of a Thread to offer an analogy from myth, literature, and film with some application to our present situation. 

 

Bearing in mind, as Saint Thomas Aquinas opined--All Analogies Limp: 

 

Anyone else from my (our Baby Boomer generation) recall Stanley Kramer's 1965 movie--"Ship of Fools"?  

 

Do a Google.  Sort-of a cult film based on an earlier best-selling novel.  So-many Stars both well-set in the Hollywood and European firmament; and the up-and-comers.  My favorites:  Lee Marvin and Jose Ferrer.  And, of course, Elizabeth Ashley.  

 

Why did those people get on a passenger ship in the late 1930s from a South American Port with one-way tickets to Hitler's Germany?  

 

Because they felt they needed to; had the means; and were searching for something--or someone to make sense of a World already spinning out of control.  

 

Well, enough heavy lifting and musing.  We are not fools; we have made "rational" prior economic and life decisions--more or less--putting us in a place allowing participating in high-end cruise experience(s). 

 

And as to my Post #16 as to vagaries affecting itinerary changes: continue to track recent volcanic activity on Iceland which may, or may not, "impact" our upcoming Splendor cruise.  

 

We now return to our regularly scheduled programming.  

 

Stay safe.  

 

GOARMY!

 

 

 

[commodoredave]

On 2/27/2024 at 4:25 PM, Whinenowine said:

Same for every travel business (hotels, airlines, etc)....and actually all non-travel businesses too.  All my local restaurants are charging more while simultaneously offering smaller portions and lower quality food/ingredients.  And while food and energy are cyclical and prices will actually drop (not just increase at a slower rate), I wouldn't expect the Fed beating back inflation to change any of these recent trends.  All these businesses will continue to charge more and offer less until something breaks--i.e. until people en masse just stop consuming that product.  And since all businesses are doing it...what are our options?  Grin and bear it....or be miserable....

 

Not everyone is doing it, but most are. There are some new entries such as Scenic, Emerald, Ritz Carlton, etc. who are delivering more but charging a lot more for it. 

[SWFLAOK]

1 hour ago, commodoredave said:

Not everyone is doing it, but most are. There are some new entries such as Scenic, Emerald, Ritz Carlton, etc. who are delivering more but charging a lot more for it. 

 

1 hour ago, commodoredave said:

Not everyone is doing it, but most are. There are some new entries such as Scenic, Emerald, Ritz Carlton, etc. who are delivering more but charging a lot more for it. 

We tried booking Scenic a few times in the past, but our first booking was what we thought would  be a trip was a Myanmar River cruise, and we were able to book a wonderful cabin at the front of the ship. After making a substantial down payment, the president of Myanmar was arrested. I then read that China was sending mining companies to Myanmar to mine minerals and that they were polluting the rivers that we would be traveling on.

We rebooked our Scenic cruise to Europe, starting with 3 nights in Paris, and an included fast train ride to Bordeaux to board a river cruise boat north and south from there, followed by a train back to Paris for our return home. As we came closer to our travel date, Scenic notified us that our cruise would only include the River cruise, and not 3 nights in Paris, and transportation there and back. And there was almost no decrease in cost. We cancelled and actually got our deposit back. We would not trust them again.

I've never looked at Emerald, and Ritz Carlton is too new to trust.

While everyone is charging more, that doesn't mean that everyone accepts that. We used to eat at our local restaurants once or twice a week, with most being upscale with good food and great service. We stopped doing that during Covid, and we don't miss it. We enjoy cooking, and it's much cheaper. We won't return to restaurants we used to frequent because of poor service, and food that is no longer up to what we expect.

For us, cruising in the future might end if we have to pay more for poor service and food. We really haven't missed eating at local restaurants at all. There are alternatives in travel, just as we have found alternatives to local restaurants.

[KenzSailing]

 

I have one rock solid belief about human nature, based on experience:  everyone, and I mean everyone, is convinced that the way they handle their finances is rational, and everyone else is doing it wrong.

[GOARMY]

SWFLAOK:

 

While anecdotal, hope helpful.  Of course, what follows for your consideration is worth what you are paying for it. 

 

River Cruises.  Consider Uniworld.  Did two of these, pre-COVID, in France.  Top Class, to include pre or post-stays at Paris in wonderful hotels.  Traversed the major rivers throughout France; back-and-forth on trains to and from Paris to link-up with segments; and opportunities to visit the American Army's "D-Day" Utah and Omaha landing beaches; city of Caen; town of Sainte-Mere-Eglise, DZ (Drop Zone) for the 82nd Airborne Division; Military Museums; and, most-important--the Military Museum and Cemetery above Omaha Beach. 

 

Rows, and rows, of Crosses and Stars of David.     

 

In late 2019, booked a third Uniworld series to incorporate Normandy, Fall, 2020. This would have included a day-long tour to the British and Canadian (and Polish) "D-Day" landing Beaches at Gold, Juno, and Sword.  But, course, canceled due to Covid. 

 

No issues in retrieving funds from that booking. 

 

Based on the above, recommend checking-out Uniworld.  No doubt, CCers with more recent experiences will chime in.  

 

As to Ritz Carlton (RC):  This "brand" is long, long-established.  Have had the good fortune to experience past bookings at RC's associated Hotels, to include the one at Kuala Lumpur, Malaysia. Again, in conjunction with a Regent cruise. 

 

Our most-recent RC stay was last month.  Arranged by Regent.  We were at RC's San Francisco Hotel for (unfortunately) only one night.  This was prior to our joining Mariner on January 24th for an interesting World Cruise segment--San Francisco-via Hawaii, to French Polynesia.  

 

Absolutely great service at RC.  Very-caring Staff, from check-in; to restaurants; to check-out and getting on that bus for transit to the Pier. 

 

BTW:  This 'Frisco RC site was utilized for several segments within, and without.  That was when filming "Pal Joey".  That's Frank Sinatra and Rita Hayworth.  Do a Google. 

 

There I go, again, in nostalgic musings. 

 

Anyways--

 

Safe Travels.  Hope to see some of you at London in June prior to Regent's transport to Southampton.  Then:  Splendor. 

 

GOARMY!

 

 

 

 

 

 

 

 

  

 

   

[commodoredave]

11 hours ago, SWFLAOK said:

 

We tried booking Scenic a few times in the past, but our first booking was what we thought would  be a trip was a Myanmar River cruise, and we were able to book a wonderful cabin at the front of the ship. After making a substantial down payment, the president of Myanmar was arrested. I then read that China was sending mining companies to Myanmar to mine minerals and that they were polluting the rivers that we would be traveling on.

We rebooked our Scenic cruise to Europe, starting with 3 nights in Paris, and an included fast train ride to Bordeaux to board a river cruise boat north and south from there, followed by a train back to Paris for our return home. As we came closer to our travel date, Scenic notified us that our cruise would only include the River cruise, and not 3 nights in Paris, and transportation there and back. And there was almost no decrease in cost. We cancelled and actually got our deposit back. We would not trust them again.

I've never looked at Emerald, and Ritz Carlton is too new to trust.

While everyone is charging more, that doesn't mean that everyone accepts that. We used to eat at our local restaurants once or twice a week, with most being upscale with good food and great service. We stopped doing that during Covid, and we don't miss it. We enjoy cooking, and it's much cheaper. We won't return to restaurants we used to frequent because of poor service, and food that is no longer up to what we expect.

For us, cruising in the future might end if we have to pay more for poor service and food. We really haven't missed eating at local restaurants at all. There are alternatives in travel, just as we have found alternatives to local restaurants.

Well said. However, young people who take their first cruise now will not notice what is no longer provided. They may also have lower expectations. So the cruise lines cutting back may actually suffer little loss of business while boosting their profits.

[pappy1022]

41 minutes ago, commodoredave said:

Well said. However, young people who take their first cruise now will not notice what is no longer provided. They may also have lower expectations. So the cruise lines cutting back may actually suffer little loss of business while boosting their profits.

“The definition of disappointment in life is expectations minus reality equals disappointment. The only two solutions you have to get over disappointment is to either alter your reality or alter your expectations.” Maybe you are correct Commodore.

[pappy1022]

Regent is in the midst of cost cutting in part to help pay the interest on the huge loans they took out during the COVID shutdown. I went through this process with my former company multiple times and back then we called it re-engineering. Regent calls it the Transformation Office. This process is an inevitable one and all cruise lines are doing it to get back to profitability. Regent says that they cut food cost by 30%, shoreside staff by 9%, halted broadway style production shows and reduced daily turndown service on some of their ships, resulting in a 21% overall cost reduction (excluding fuel) in 2023. They say they have no plans to ratchet down marketing although they did say that they will do more targeting and electronic marketing. They also said that they are reducing upcoming dry dock times by 9 days. They said they did a complete assessment of all dry dock projects and implied that they cut some of the projects out. In their words, they are on a relentless mission to enhance margins and reduce costs.

 

They have to make significant changes to be profitable and pay down debt. All cruise lines have to do that. Some changes can be for the better and some are just leveraging scale and opportunities. Not every cost cutting initiative equates to a poorer customer experience. But we will definitely see changes (and I already have) that will be apparent to customers. Articles that I have read about the travel industry tell the story of the new normal and it will require our expectations to change. As I said in my previous response, Disappointment = expectations minus reality. As a lifelong Buffalo Bills fan, I know that equation is real. Regent has created very high expectations and I used to cringe when people on this board would reply to criticism by saying our expectations were too high. I felt they were putting the blame on us, the customer. In hindsight, maybe those folks are correct, we need to change our expectations.