Norwegian Cruise Line May Make Waves In Luxury Travel

Call it the little cruise line that could.

Norwegian Cruise Line Holdings (NASDAQ:NCLH) has built as big or bigger ships than rivals two to four times its size, and with bells and whistles second to none.

The most recent: its 4,000-passenger Getaway that set off from Miami in January, less than a year after the 4,000-berth Breakaway left on its maiden voyage from New York to Bermuda, replete with three Broadway shows, the Rockettes and a send-off by Cardinal Timothy Dolan.

The Norwegian Getaway carries 3,969 passengers. A recent acquisition also brings Norwegian Cruise Lines smaller ships for high-end travelers. View Enlarged Image

Next November, the 4,200-berth Escape will start cruising out of Miami year-round, the first of four in the “Breakaway Plus” class.

‘Upper-Premium’ Travelers

Now Norwegian is going smaller — and more exclusive.

With eight new niche ships under two new cruise brands acquired last month from Prestige Cruises, it’s dipping into the high-end luxury cruise market.

As part of the $3 billion deal that closed last month, Norwegian took over five small to midsize “upper-premium” vessels under Prestige’s Oceania Cruises brand and three all-suite ships under the Regent Seven Seas brand, aimed at luxury travelers.

The eight ships together have just 6,442 berths, but attract an older demographic of loyal, seasoned cruisers who pay higher prices for highly personalized services.

With Norwegian’s existing 13 ships, that makes for a fleet of 21.

Even with the new Escape entering service next year and two more vessels in 2016, Norwegian will still be a distant third in size to the big two cruise companies Carnival (NYSE:CCL) and No. 2 Royal Caribbean (NYSE:RCL) . All three are based in Miami and have a heavy focus on the Caribbean cruising market.

Stocks of the three Miami-based cruise operators jumped on Wednesday after the U.S. and Cuba announced they would begin normalizing diplomatic relations and lift some business, financial and travel restrictions.

Cruising To Cuba?

If restrictions on all travel to Cuba — including tourism — eventually were lifted, it would open up a new cruise destination to what is the largest island in the Caribbean, unseen by most Americans for decades. But lifting all restrictions on travel and tourism would require congressional action.

Norwegian estimates its share of the 2015 cruise market at 9.5%, up from 8% without the Prestige ships. Carnival’s share, in contrast, is seen at 48.7% and Royal Caribbean’s at nearly 23%.

Norwegian has just about zero chance of moving into the No. 2 spot, let alone the No. 1 spot, says CEO Kevin Sheehan. The only way that would happen, he says, is if it buys one of its two larger rivals. That’s unlikely.