Norwegian Cruise Line Taking The First Step Into Buying Prestige Cruises International

Norwegian Cruise Line Taking The First Step Into Buying Prestige Cruises International

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It’s smooth sailing for the third largest cruise company in the world, Norwegian Cruise Line with the company announcing its latest news of jumping ships (figuratively speaking) and moving into the tony segment with a new $3bil agreement to buy Prestige Cruises International, the parent company of Oceania Cruises and Regent Seven Seas Cruises.

While most businesses are mostly concerned with having a high-end product (and who can blame them), Norwegian feels like it’s bought exactly that with its latest acquisition. This purchase will help Norwegian garner more revenue from locations outside the Caribbean, where the company currently receives over 50% of its total sales usually. Due to a flood of new cruise lines in the area, revenue has been hampered down and Norwegian was quick to try and think up alternative solutions to bring the cruise giant back at the forefront where it belongs.

News of the latest acquisition was enough to pique investors’ interest, with an 11% increase in share prices. Analysts reckon the sudden interest is due to the fact that this acquisition could steer the cruise line away from being known as the go-to place for “cruises on a budget”. Prestige Cruises International receives $400 / day from its comfortable guests while Norwegian averages around $170 at the moment, according to an analyst at SunTrust Robinson Humphrey. That’s a staggering difference and can make a huge impact on the company’s bottom line.

According to CEO of Prestige Cruises International, Frank Del Rio, the cruise line has been able to get away with charging more thanks to boasting one of the largest space-to-guest ratios and enjoying a very loyal and wealthy customer base that aren’t affected by the recession or any economic fluctuations. After the acquisition goes through, it is reported that Del Rio will hold his position as CEO of Prestige, which is 80% owned by Apollo Global Management, a private equity firm that also hold a 25% stake in Norwegian. Analysts believe Apollo Global made more from selling Prestige to Norwegian than it would have made had they taken Prestige public.

Norweigan’s main competitors already have brands that target the upscale market, so this is a good move for the cruise line which up until this point lacked in this area. The biggest cruise line company, Carnival, is already operating Seabourn Cruise Line and Royal Caribbean Cruises, both of which offer wealthy guests luxury cruises through its Azamara Club Cruises. The newly acquired Oceania and Regent have an impressive eight ships combined, 6500 berths; that’s more than Seabourn and Azmara together. Regent has a new ship coming out as well, scheduled to be operating in 2015.

This latest deal doesn’t come as a great surprise either, with Norwegian CEO, Kevin Sheehan, stating in an interview earlier this year to Businessweek that the company’s immediate goals were to increase revenue an acquisitions weren’t out of the question. Till date, the cruise line was targeting upscale customers through its existing ships in a section known as “the Haven” but has not been able to attract large numbers to make the venture profitable. However, Sheehan announced that their latest acquisitions of the luxury cruise lines will be able to better position them in the market and make them a real threat to competitors