Demand for Norwegian's Cruise Offering Remains Robust, Pointing to Record Pricing in 2023

Changes to consumer behavior surrounding travel as a result of the coronavirus have altered the economic performance of Norwegian Cruise Line Holdings, affecting its ability to generate excess economic rents over an extended horizon. As consumers returned to cruising after the 15-month sailing halt that ended in July 2021, cruise operators added COVID-19-related protocols, which have proven successful (as evidenced by lower positivity rates than on land) to reassure passengers of the safety of cruising in addition to the value proposition the holiday provides. Still, we expect Norwegian could intermittently see pricing competition as global supply shifts to focus disproportionately on the North American consumer, limiting near-term yield upside (also impacted by the redemption of future cruise credits through December 2022). On the cost side, inflated spending on the procurement of goods and higher oil prices could keep costs elevated in 2023. However, we expect both pricing and costs to normalize over time, rising at a low-single-digit rate longer term.