During a luxury travel advisor session on Seven Seas Splendor on Saturday, Frank Del Rio, president and CEO, Norwegian Cruise Line Holdings, and Jason Montague, president and CEO, Regent Seven Seas Cruises, briefed agents about a variety of issues. Here's Del Rio's perspective on the Asia coronavirus situation.
Del Rio's Perspective
In talking to advisors about coronavirus and impact on travel, Del Rio summed it up this way: "This too shall pass. Just don’t know when. Typically when we see some event that occurs, it takes the broad marketplace six to eight weeks from when the news cycle peaks for consumers to return to their behavior. The news cycle has not yet peaked."
Getting a report each morning from the company's health advisor, Del Rio also said "the new Ground Zero is South Korea," noting that the country is doubling its number of coronavirus cases every 24 hours.
"At the current pace, it will surpass China in seven days," he said. "Hopefully that math is only in theory and not in practice."
Perception Versus Reality
Del Rio stressed that perception in daily life is more powerful than reality. "The reality is that the coronavirus is not as much a killer threat as some others have been but it spreads more easily and that’s why at this point you have 10 times more coronavirus cases than we had SARS cases back in 2003," he said. "But in any event, it is impacting our business."
Asking travel advisors for a show of hands in terms of how many had seen business improve over the past few weeks, Del Rio wasn't surprised when the vast majority of audience members did not raise their hand.
He laid out what's to come, and what trend the line is seeing booking-wise.
First, "as your business partner we’re going to support you, because I know you’re going to support us and we’re in this together," he said. "We’re going to do what we have to to motivate the marketplace to get business back to normal. But that’s not going to happen anytime soon. We have to be patient."
That said, right now isn't the time for all-out promotion he emphasized. He told the advisors that he'd asked the brand presidents to cut back on their marketing. Why? "Right now you’ll be wasting your money as it will be falling on deaf ears. But there will be a time, hopefully in the not too distant future that things will get back to normal."
Business Drops, Then an Uptick
Trend-wise, he said that NCLH saw "business drop at an increasing rate beginning in late January through Friday February 14, Valentine’s Day – down, and down and further down."
But the good news, he said, is that this past week that ended on February 21 showed an uptick from the previous week. "We're still down from where we typically are, down from where we need to be to fill our ships but at least that precipitous drop has stopped."
He told the advisors that there is always a leveling off, a healing time frame, before things pick up, "so I’m hoping that what we saw this past week is the beginning of the recovery."
In the line's recent earnings call with financial experts, NCLH said it would cancel or modify 40 sailings -- 10 on Oceania Cruises, five on Regent Seven Seas Cruises and 23 on Norwegian Cruise Line.
The impact on sailings in and to Asia through the end of third quarter 2020? "That's going to cost us roughly $150 million or $.75 a share --sailings that are outright cancelled or modified so extremely that we won’t be able to generate the kind of revenue [that we expected]," Del Rio said.
However, he also said that, so far, people are continuing to book Asia for the fourth quarter of this year and 2021.
"The good news is that cruisers are still cruising and they’re booking further out than ever before," Del Rio noted. Some of those people who were booked on cruises that were cancelled in Asia are now jumping to a similar cruise in 2021.
This Too Shall Pass
He again stressed: "As I said, earlier, this too shall pass. We’ll beat this together. We’ve got to keep our chins up. It’s a fun business so we will keep our chins up. On Tuesday when you’re down I’ll pick you up, and on Wednesday when I’m down, you’ll pick me up. We’ll get through this."
Del Rio also said advisors and cruise lines have been through worse times. "The industry is in better shape than it’s ever been," he said, noting that from a balance sheet perspective, the lines are stronger than ever.
"We have more global sourcing, we have more diverse itineraries, we’re not as dependent in one area as we were in the past," he told the advisors.
Finally, he said, "And thank God it was Asia and not anywhere else because I think Asia is a relatively small part of our business," noting that it wasn't the Caribbean, Alaska or Europe.
That said, over the weekend, coronavirus in northern Italy and Venice because a concern. So, Travel Agent asked NCLH for any update today, but we were told the company's online statement is its latest response.
Fortunately, most lines including Regent Seven Seas Cruises, for example, are not in Venice at this time of year, so no voyages right now are impacted. Most cruise lines are still sailing Caribbean voyages or elsewhere in the world and don't arrive in the Mediterranean until late April, May or early June for the summer season.