On November 4, Norwegian Cruise Line Holdings announced that it expects lower profits for the fourth quarter than previously anticipated. This news, driven by rising costs and a decrease in consumer interest in cruises, caused its shares to drop by 11%.
Consumers are now being more cautious with their spending on high-cost cruise vacations due to ongoing inflation and uncertainties related to tariffs in the United States. This comes after a surge in demand for cruises following the end of the pandemic.
The recent U.S. government shutdown is affecting port operations and travel plans for American consumers, especially with the important holiday season approaching, which adds to the uncertainty in demand.
Fluctuations in fuel prices, worsened by increasing geopolitical tensions, particularly in the Middle East, are putting additional pressure on cruise operators. They are also facing rising costs associated with dry-docking, new ship deliveries, and maintenance.
Currently, Norwegian Cruise Line projects an adjusted profit per share of 27 cents for the quarter, which is below analysts' expectations of 30 cents, according to data from LSEG.
Quarterly revenue increased by 4.7% to $2.94 billion, falling short of analysts’ forecasts for a 7.5% rise to $3.02 billion. Revenue had previously risen by 10.7% in the same quarter last year.
The company noted that a decrease in participation in its air program, which helps coordinate flights for cruises, had a negative impact on revenue.
Analysts believe that investments to upgrade Great Stirrup Cay, one of Norwegian's two island destinations, will attract more customers.
Starting in early 2026, Norwegian plans to adjust its marketing strategy to better target family audiences.
Occupancy rates dropped to 106.4% from 108.1% last year, and the price of fuel per metric ton, after accounting for hedges, increased to $744 from $699 a year ago.
Despite these challenges, the company did raise its adjusted profit forecast to $2.10 per share, up from the previous forecast of $2.05. For the third quarter, it reported an adjusted profit per share of $1.20, slightly above the anticipated $1.16.
Similarly, Royal Caribbean recently updated its annual profit forecast but also projected lower profits for the current quarter due to rising costs.