Norwegian's Pricing Indicates Appetite for Cruising Remains Intact Ahead of Summer Sailing Season

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 until the end of the current decade. As consumers returned to cruising after the 15-month sailing halt that ended in July 2021, cruise operators added COVID-19-related protocols, which proved 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, containing yield upside. 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.