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It’s been a tough two years — no, brutal two years — for the ailing cruise industry, but Norwegian has done a better job of surviving the deluge than most. When will it get better?

File image courtesy of NCL

Published March 25, 2022 21:37 by

Tony Munoz








(Article originally published in January/February 2022 issue.)




“Look, Humpty Dumpty broke. There are thousands of pieces on the floor and it will take time and all the king’s horses and all the king’s men to put Humpty Dumpty back together. But I’m confident we can do it,” says Frank Del Rio, President and CEO of Norwegian Cruise Line Holdings, adamantly.


Del Rio has faced the COVID crisis since early 2020, when the virus hampered human activity on a global scale. He demanded that his employees be vaccinated and that passengers who board his ships provide proof of vaccinations, which Florida Gov. Ron DeSantis challenged in court. A state appeal is pending.


To ensure liquidity, the company initiated a series of capital market transactions totaling over $8 billion starting in March 2020. The Norwegian management team also initiated SailSAFE, a guest and crew health and safety program, and introduced Dr. Scott Gottlieb, former commissioner of the U.S. Food and Drug Administration, to oversee the company’s Global Health and Wellness Council.


They have made it clear that the company will spare no expense to protect the welfare of its guests and crew. “Given the past two years, we continue to expect the unexpected and adjust accordingly,” said Del Rio. Gottlieb adds that the cruise industry can tightly control the environment on ships, noting that NCLH has invested heavily in onboard therapeutics and testing protocols to enhance safety.


way up


After graduating from the University of Florida, Del Rio joined an accounting firm in Miami, a job he found boring. “I was a lousy accountant,” he likes to say, so he jumped at the opportunity to work with Ed Rudner, one of the founders of Alamo Rent a Car, on Certified Vacations, which made personal vacation dreams come true for Delta Airlines customers. The company was a great success.


Rudner left Certified to buy a small, bankrupt cruise line in Norway called Renaissance Cruises. Del Rio soon followed as CFO and learned about the finances of a cruise line. He was promoted to sales and marketing director and the line was successful, ordering eight new ships.


But Renaissance grew too fast and started losing money. The board ousted Rudner and Del Rio became co-CEO. The French investment group that had funded the new ships then also fired Del Rio in April 2001. A few months later, the chaos of 9/11 struck, crippling global travel and bankrupting Renaissance once more. The French seized the eight ships and anchored them in Marseille.


Del Rio was just forty-seven and unemployed. After the dust settled, one of the French bankers began calling him to see if he would be interested in coming up with a business plan for a new cruise line (dubbed Oceania) to charter some of the ships. After a lengthy due diligence process, Del Rio was awarded the contract to charter three of the ships. But it was 2002 – right after 9/11 – and a difficult time to raise capital on Wall Street.


So he cobbled together the $7 million seed funding for Oceania by pawning his house and borrowing money from family, friends, and anyone else who would listen. Not a single bank or financial institution was interested.


In January 2003, Oceania Cruises opened its doors with twenty people and nothing else — no computers, not even a paper clip, Del Rio recalls. The new cruise line announced that its first cruise would take place six months later on July 5, and it did. He remembers the busiest and happiest period of his career.


At the end of 2005, Oceania was profitable. The French investment group contacted Del Rio in mid-2006 and said it wanted to end the charter. He was confused and asked how to raise $350 million to buy the ships. “I don’t know, but I’ll try,” was the reply.


Wall Street is a jungle of high-roller investors and international interests, but for Del Rio it’s been a world of opportunity. He admits he was a bit wide-eyed when he first met the former Lehman Brothers company. He presented the business plan and said he needed $375 million to buy three ships. Lehman said, well, no problem, and offered 100 percent financing at LIBOR plus a few points. Del Rio had to remind them that Oceania was a startup without much capital or profits, but the results were the same at Bear Stearns and UBS. So he went to Lehman while UBS took a secondary position.


Along the way, he also met with Apollo Management, a private equity group founded by Leon Black. Unknown to them, Apollo was looking for an entry point into the fast-growing cruise industry. Two years later, in 2007, at the height of easy money, Apollo swooped in and made Del Rio an offer he couldn’t refuse.


Apollo and Oceania joined forces and soon bought Regent Seven Seas Cruises – a luxury brand – from the Carlson Companies and formed Prestige Cruise Holdings to run the two companies with Del Rio as CEO.


Seven years later, Apollo sold Prestige to Norwegian for $3.3 billion, and Del Rio thought he was done. “In general, when it comes to acquisitions, the CEO who buys is a genius and the CEO who sells is an idiot,” he says. “So I played the idiot and the Norwegian CEO knew everything and that was fine with me.” He was sixty years old and had just received another big paycheck.


Then, on New Year’s Day 2015, about six weeks after his retirement, a Norwegian board member called Del Rio’s home with some urgency. His wife teased him that the company urgently needed him back. He soon learned that not only would he be stepping back, but as President and CEO of the entire company — not just the two brands he had previously sold.


Crack a perfect game


Since taking the helm in 2015, Del Rio and his team have more than grown in revenue from $3.1 billion in 2014 to $6.4 billion in 2019, the last full year before the pandemic hit doubled. The company’s three distinct cruise offerings – Contemporary (Norwegian), Premium (Oceania) and Luxury (Regent Seven Seas) – were in full swing.


“We put together a perfect game,” said Del Rio. “I remember watching Sandy Koufax play his perfect game in 1965 and I always thought that was the epitome of flawless execution — setting up a perfect game in baseball — and that’s where we were on March 13, 2020, when the virus was everything changed. So my goal is to go back to where we were back then.”


With 28 ships, a further nine ships on order and a focus on upscale cruises, the company is in a strong position to do so. Unlike its peers, Norwegian hasn’t sold or scrapped ships during the pandemic. Its fleet is the youngest of the “Big Three” of cruise lines – Carnival, Royal Caribbean and Norwegian. And while it’s the smallest, it’s number one in most of the important categories — Net Return, Onboard Earnings Return, Customer Satisfaction, and Repeat Business.


“Do I want to be the greatest?” he asks. “Not really. With us, quality comes before quantity.”


He describes his management team as the best in the business: “I wouldn’t trade my top people for the top people of others. You know, mano a mano, we win every time. We’re winning all the important areas and we’ve been together for a long time. You are like family to me.”


That team includes Harry Sommer, a 30-year cruise industry veteran who runs the modern Norwegian brand. Project Leonardo’s newbuild program is expected to add six new ships to Norwegian’s existing fleet of 16 ships from 2022 through 2027.


Howard Sherman runs premium operator Oceania Cruises, which he co-founded with Del Rio in 2003. Its six ships will be joined by two new Allura-class ships by 2025.


Regent Seven Seas, marketed as “the perfect luxury,” will be helmed by President & CEO Jason Montague, another veteran of the Oceania days. In 2016, Montague oversaw the delivery of Regent’s first new ship in 13 years, the Seven Seas Explorer. Consisting of all suites and balconies, Seven Seas Splendor was delivered in 2020. Reflecting her position as the epitome of luxury cruising, Regent’s 2023 143-night world cruise sold out in one day. The Regent brand will add a new ship to its Explorer class in 2023.


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It’s all part of Del Rio’s “secret ingredient” — the youngest fleet in the industry, three incredibly strong brands, and a management team that walks in the same direction and trusts one another.


Echoing Ronald Reagan’s famous question, “Are you better off now than you were four years ago?” Del Rio’s answer is no. “Are we better off today than we were a year ago?” He adds: “Yes, because at least we’re starting to work. We have half the fleet operational. A year ago we had zero.”


He knows it’s going to be a marathon, not a sprint. All of that pent-up customer demand keeps getting kicked out onto the streets by cruise-hesitating passengers. But Del Rio and his team have been through tough times before. And although it won’t be over tomorrow, it will be over soon. “And then we’ll win again,” he says, “and set up a perfect game again.”


Tony Munoz is the Founder, Publisher and Editor-in-Chief of The Maritime Executive.



The opinions expressed herein are those of the author and not necessarily those of The Maritime Executive.



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