Norwegian Cruise Line CEO Harry Sommer Talks Good Booking Trends Ahead
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Bloomberg Audio Studios. Podcasts, radio, news. I'm pleased to say that we're joined now by Norwegian Cruise Line CEO Harry Sommer. Harry, it's great to have you with us again. So you stand apart from some of your peers because we heard from Royal Caribbean. We heard from Carnival with pretty upbeat outlooks. Talk us through what you specifically see in the year ahead.

So first off, good morning and thank you for having me on today. Listen, we're still seeing very good booking activity for Q4 and 2026. I think the softness that we talked about just was on one specific product, Europe, in 2023 for Q3 of 2025. My apologies.

But if you looked at our book position on a 12-month basis, we're well within our optimal range. We're above historical averages. And our 2026 book position is actually well ahead of historical averages. So, yeah, one soft spot in Q3 for Europe, but the rest of the booking curve looks really, really good.

So you cater to a higher income consumer. Do you think that's the issue or are people with higher incomes watching their wallets more closely or are people who are new to cruises that really decided to try it out after the pandemic? Is that demand waning or what's going on exactly?

I don't think any of those things are happening. I think the higher income consumer is doing well. I think the middle income consumer is doing well. We don't really cater to the lower income consumer. I think it's specific to one area, Europe in Q3. I think Americans are looking to look a little bit closer to home. And we're happy because our deployment in Q4 and Q1, even to next year, favors those closer to home itineraries, which is why we're seeing a good position for those future periods. But even with the closer to home kind of strategy here, I

How many issues are being created? Because you have a few things going on. You have consumers potentially worried about inflation, maybe hesitant to spend more largely. You also have a dynamic where a lot of people are seeing that international consumers are really slowing down when it comes to the United States. How are you grappling with those trends that might continue for months?

You know, I think this is where the cruise industry's unique position really acts as a tailwind, if you will, a benefit because we represent such a good value compared to hotels and other vacation alternatives. So when you think about everything that you get on a cruise from food, entertainment, spas, casinos, the whole nine yards and a great consistent product.

It really represents a great experience and value gap versus hotels, which is why we tend to do better as an industry. I mean, you look at our yields compared to what Hilton just announced yesterday. We're still well ahead of them.

And I think that's going to continue into the future. People like to vacation. And if there are going to be moderate, recessionary challenges out there, I think value, which cruise lines provide in earnest, really should win out. So there's a lot of uncertainty among consumers, which you know well right now. I want to talk about uncertainty that you might be feeling. I was listening to Bloomberg surveillance this morning.

and I forget who said it, but someone made the great point that you have to have stable policies to encourage companies across the supply chain to invest. And when you think about where you stand right now, looking at 2026, for example, how do you feel versus at the start of 2025? Are you thinking about things a little bit more conservatively than you were maybe at the start of the year?

Listen, you know, clearly we're not immune to macroeconomic conditions. We saw the economic news that came out this morning. And so we're redoubling our effort, not just to maximize every dollar of revenue and emphasize the points that I mentioned before about cruising being such an incredible value, but we're

also looking at cost control. You know, we would be foolish not to see that there's a potential for weakness going forward. And we're doubling down. We set up a transformation office to sort of reimagine the way we deliver services and buy things not at the expense of consumers. We're super passionate about delivering a great on board product. But we think that we can buy things better. And we announced a 300 million dollar

cost savings program last year. We're going to accelerate those cost savings, but again, never at the expense of the guest experience. And we believe that if we can accelerate those cost savings initiatives, we'll be able to offset any potential challenges on the top line.

If I look at your stock performance versus, and Caribbean as well, versus Royal Caribbean, I'm sorry, Carnival versus Royal Caribbean, I see real underperformance. What is the biggest competitor in the market, Royal Caribbean Cruise Lines, doing that investors love so much? What can you look at them and learn?

You know, I think there's really two critical components. You know, they started their closer to home and private island strategy a little bit before us. So obviously they have first mover advantage and they've had the benefit of having that for the last couple of years where we're really just getting into our closer home private island strategy now.

So they've built up this benefit over a year and a half, which we think we can now rapidly catch up on during 2026. I think also it's a challenge of leverage. You know, on an enterprise value basis, our valuations haven't changed that much. But because we are higher levered than them, we don't have the same equity return. But we're super focused on reducing our leverage. We're going to get it down to five times by the end of the year and in the mid-fours by the end of next year. And obviously that will help with our equity valuation as well.

I'm very glad you brought that up. If you pull up DDIS on a Bloomberg terminal, you can see your kind of entire capital stack here. And how quickly do you think you could pay down that debt, given the focus that the industry really has on doing so?

So, you know, we already decreased our leverage two turns. You know, we went from the mid-sevens to the mid-fives last year, which we think two turns of leverage is great. We're going to decrease it another turn this year to get to around five or close to a turn to get to around five, another half a turn next year. I think by the time we get into early 27 and we're going to be in the four range, I think that's a very competitive position and should unlock value on the equity side of our valuation.

And Harry, before we let you go, we spoke to you at the end of February and one of the points that you made was if we saw relations restored with Russia, if Russia opened back up, that would be a major tailwind for your company given that St. Petersburg, that cruise line, was very, very profitable for you. Now we're at pretty much the start of May, the end of April. Do you think that we're any closer to that point?

You know, it's really hard to tell. You know, I'm not an expert in geopolitics. Listen, we hear some positive noise. We hear some constructive comments out of Russia that they're willing to start talks, but really difficult to read the future on that. I just want to be clear, although that could be a tailwind, we're very happy with our deployment, you know, where we are in the Caribbean, Alaska.

Deployment for Europe for next year is doing very well as well. So we're happy with what we have today. That could just be an incremental tailwind to us if things move forward. All right, Harry, thanks so much. Harry Sommer there talking to us from Norwegian Cruise Lines. Switch to Verizon Business and get more from your internet without paying more for your internet. Get LTE Business Internet starting at $39 a month when paired with select business mobile plans. That's unlimited data.

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