Agents Optimistic About Norwegian Following Move Into Upscale Market

Is bigger always better? In the case of Norwegian’s recently announced acquisition of Oceania and Regent Seven Seas, the answer may well be yes, even in the eyes of travel agents.

For Norwegian Cruise Line, the $3 billion purchase from Prestige Cruise Holdings represents a major step toward becoming a more powerful player in the cruise industry.

When the acquisition is complete, the company will control 46% of the luxury cruise marketplace, in addition to its already-strong standing in the midrange cruise market.

The deal seems to make sense for all three brands, travel sellers told Travel Market Report. And it could help bolster the cruise industry overall, especially if the lines avoid past mistakes.

“This is a positive move for both parties since the brands can diversify their portfolios, while still maintaining each cruise line’s unique brand personality,” said Michelle Fee, president and CEO of Cruise Planners.

Good for agents
Retailers said Norwegian’s purchase will likely be good for agents too – provided Norwegian sticks to its promise of keeping keep the brands separate and distinct from one another. 
 
And agents are excited about the possibility of Norwegian extending its agent-centric Partners First program across its new brands.

“Norwegian has proven they are committed to Partners First, and Oceania and Regent are very trade-friendly as well,” said David Crooks, senior vice president of products and operations for World Travel Holdings.

“Norwegian didn’t spend more than $3 billion to fix something that isn’t broken, so I would be surprised to see any major guest- or trade-facing changes,” Crooks added.

Big competitive boost
Norwegian’s acquisition also serves the purpose of making the cruise line a more prominent foil to the largest cruise companies.

“The deal definitely makes [Norwegian] a stronger competitor with Carnival Corp. and Royal Caribbean International, since both of them already have upscale lines within their family of brands,” said Leslie Richardson, MCC, a Cruise Planners franchise owner in Missouri City, Texas.

Avoiding past mistakes
The consensus among agents was that the fewer changes Norwegian makes to Oceania and Regent Seven Seas, the better.

“When Holland America was bought by Carnival Corp. several years ago, it had a negative impact on the product and loyal passengers,” said Richardson. “Hopefully, Norwegian will look at previous acquisitions and learn from those mistakes.”

From a business perspective, it makes little sense for Norwegian to dilute the core value of Oceania and Regent.

Oceania and Regent have some of the highest average daily rates in the industry, “and Norwegian can’t afford to have that and the subsequent ROI eroded in any way,” said Mary Ann Ramsey, president and owner of Betty Maclean Travel, a Virtuoso agency in Naples, Fla.

Behind the scenes
Agents said they expect that any changes made by Norwegian will take place largely behind the scenes.

“Most of the changes will be invisible to the consumer,” said Ramsey. “They will be able to negotiate better supplier contracts, docking agreements, insurance rates, crew training and fuel purchases.”

As Mara Hargarather, a CruiseOne franchise owner in Ponte Vedra Beach, Fla., said: “This is all about economies of scale and cross-marketing of brands.”

Ramsey said she sees that economy of scale benefiting both the consumer and the agent.

Luxury view
Luxury agents said they don’t anticipate Norwegian’s leadership making any changes to the quality of Oceania or Regent’s cruise products.

Norwegian CEO Kevin Sheehan has the skills as a businessman and leader to ensure the continuity of the new brands, said Eric Goldring, owner of Goldring Travel in Colts Neck, N.J.
 
Sheehan will go one step better, Goldring predicted. “I believe Kevin Sheehan will actually clean up the Regent marketing by eventually eliminating the misleading ‘free, free, free’ marketing of things the guests will [actually] be paying for.”

Competing against themselves?
One potential snag for Norwegian will be differentiating the various upscale and luxury products it will offer.

“I think Norwegian’s The Haven will be more competition for Regent than for Oceania,” said Goldring. “Regent has a history of selling a premium product as a luxury one, and at very high prices.”

It’s a good bet that Norwegian will revamp its agent education to get the word out on differences between the brands in order to facilitate and encourage cross-selling.
 
With its new bevy of brands, Norwegian can offer something to a more diverse swath of vacationers.

“Over time, with the robust baby boomer market coming on line, I can see where some Norwegian passengers will graduate to Oceania and then to the Regent experience,” said Ramsey.