Norwegian Cruise Line Holdings Working to Rightsize Cost Base

Harry Sommer, president and CEO of Norwegian Cruise Line Holdings, said on the company’s second quarter earnings call it was working to rightsize its cost base through margin enhancement initiatives.

“The reality is we are operating against the different backdrop today than we were in 2019 requiring an even keener focus on balancing the top line with the cost structure that supports our unique business model and allows us to accelerate our margin recovery and help build resilience to vary external and macroeconomic environments,” Sommer said.

Mark Kempa, CEO, said cost reductions in the second quarter were driven by lower food costs and what he said were crew optimization efforts.

He said that when compared to 2019, the company did not have the benefit of the disposal of older and less efficient tonnage like some of its peers.

“And we have also added capacity at our high-end Oceania Regent brands, which while accretive to margins do have higher operating costs,” Kempa said.

“Another thing to keep in mind is that the timing of expenses such as drydocks can cause variability in these metrics when comparing different periods. For example, in 2023, we have limited drydocks as we took the opportunity during the pandemic to optimize the schedule while ships were already out of service,” he continued, noting the company has engaged a third-party consultant to benchmark best practices across sectors and identify incremental areas of opportunity.

One area for savings has been optimizing crew movements, Kempa explained, which will save the company millions of dollars.

“To put this into context, each year, we have approximately 90,000 crew movements including 6,000 or so between ships. This is just one example, but it demonstrates how incremental changes can add up to a larger impact on the bottom line.”