The Economic Crisis Has Americans Booking Cruises but Staying Closer at Home

Key Takeaways

• Norwegian Cruise Line Holdings reported Wednesday that bookings for cruises in the Caribbean were strong, but reservations for trips to Europe had been choppy.
• Executives say that consumers are more likely to stay at home in times of economic uncertainty.
• Royal Caribbean Group executives said that they also envisioned Americans booking trips nearer to home.

Americans aren’t giving up on vacations, but cruise operators say they're sticking closer to home.

Norwegian Cruise Line Holdings executives revealed on a conference call to discuss earnings that bookings in the Caribbean remained strong, while trips to Europe were weak. The executives attributed these shifts to consumers’ uncertainty about the economy and the changing domestic trade policies.

Royal Caribbean Group (RCL), said CEO Jason Liberty on a conference called Tuesday, also expects consumers looking for value when planning vacations closer home.

Americans "seem to be a little bit more comfortable staying closer to home, given what’s going on in the macroeconomic environment,” Norwegian CFO Mark Kemba said, according to a transcript made available by AlphaSense.

According to Harry Sommer, CEO of Cruises Europe, the choppy bookings in Europe seem to have ceased in the last week of April. The  “short-lived weakness” suggested “some hesitancy for Americans to do long-haul trips in this environment,” Sommer said, according to the transcript.

Norwegian missed analyst estimates in its first quarter earnings, but maintained an optimistic outlook for the future. The company predicts that it will have $1billion in adjusted net income by 2025, an increase of 11% from the previous year.

Liberty said the consumer’s behavior hasn’t changed except that it is “more focused on the short term.”

“Travel is not the first place consumers indicate they will pull back,” he said on Tuesday's call. He said Royal Caribbean is well-positioned to provide “value through a variety of itinerary options ranging from 3 to ten days, from Florida to Texas, California, the Northeast and Northwest.” 

The company envisions net yield—revenue minus certain costs per available passenger cruise day—increasing 2.6% to 4.6% year-over-year in 2025.

Norwegian Cruise Line shares fell by nearly 8% on Wednesday, while Royal Caribbean Cruises’ shares were down by less than 1%.