Customer Spending on Breakaway Improves Norwegian Cruise Line Earnings

July 29, 2013
(1:22 p.m., EDT) -- Fueled in part by the April launch of Norwegian Breakaway, Norwegian Cruise Line increased second quarter revenue, although the company's expenses also went up.

In an interview with Cruise Critic, President and CEO Kevin Sheehan expressed satisfaction with the results, “especially when you take into account the noise that has been in the industry.”

In a press release, the company attributed the bump to the line's increased number of berths – again, thanks to Breakaway, which has 4,028 passengers – as well as increased spending onboard the ship.

The ship's New York City location has attracted customers who have money to spend, especially in the specialty restaurants, Sheehan said during the quarterly earnings call. Seats at Iron Chef Geoffrey Zakarian's restaurant, Ocean Blue (which comes with a $49 surcharge), are often sold out well before cruise begins, he said. “In the New York market, people work hard. They want to enjoy themselves,” he said.

Not all is rosy, however. Sheehan noted that the company did not receive the same bookings bump after Breakaway launched that it experienced when Norwegian Epic came into service in 2010. “We expected that same kind of halo effect. We didn't see it.”

Also, while response to Breakaway has been mostly positive, there have been complaints about lines in the dining rooms, particularly at peak times. Because Norwegian pioneered “freestyle” dining, “we need to deliver on the premise of people being able to get in,” he said.

Sheehan said he wasn't worried that competitors, such as Royal Caribbean International, will be bringing new builds such as Quantum of the Seas into the NYC market. “It isn't in New York, it's in New Jersey,” he said. “Other players have recognized our success. The market is so large that we believe that if the other player does their job, it will be positive for all of us.”

Elsewhere in the world, the line is still seeing fallout from difficult economic times. In particular the company has noted reduced onboard spending among Europeans, especially on itineraries that are relatively close to home for them. They are less likely to take shore excursions or pay for extras such as spa treatments, Sheehan said, and are also booking later. “We'd love to bring Americans over to our European ships,” he admitted on the call.

Norwegian has yet to put a ship in Asia, and right now there are no plans to change that, although Sheehan noted that the line does have a partnership with Hong Kong-based Star Cruises. “It's always a possibility,” he said. “Right now, we're content with what we have and what we know.”

--By Chris Gray Faust, Destinations Editor