Oceania Cruises and Regent Seven Seas Cruises have been sold. After being rumored for weeks, the deal to acquire Prestige Holdings, the owners of both Oceania and Regent Seven Seas cruises lines, has been formally announced by Norwegian Cruise line’s CEO Kevin Sheehan, The deal cost NCL $3.03 billion and Norwegian will soon be issuing 20 million shares to help them finance the purchase.
For cruisers, this means a larger brand umbrella at each of the three major pricing and quality levels. NCL has been a major competitor of Carnival and Royal Caribbean in the mass market, economy segment. But now, Norwegian will be able to graduate” its clients to a unique premium product in Oceania as well as a Five-Star luxury brand in Regent Seven Seas. NCL is already pointing out to investment analysts the inherent savings in crewing, berthing, and construction costs as a result of the placement of Oceania and Regent into the NCL fold.
NCL promises that the synergies will all be “behind the scenes” and that guests will not see any of the changes. Generally speaking, this has been true of previous mega-purchases in the industry and Carnival continues to operate Seabourn as very much a stand-alone brand. In the same way, Royal Caribbean seems, by all measures, to have allowed Azamara Cruises, its upscale division, along with Celebrity Cruises, to stand as a totally independent product in the consumer’s mind while instituting purchase, financial, and personnel savings behind the scenes.
The Apollo Global Management Group which owns Prestige Holdings, which in turn, owns Oceania and Regent Seven Seas, has a 20% ownership in NCL but they have exercised their right to nominate a majority of NCL’s Board of Directors.
The timing of this announcement coincides with a ramping up of pre-launch news from Regent Seven Seas new, 54,000 Gross Tons, Explorer of the Seas due to sail in the summer of 2016.
While most large purchases of this initially promise that the brands acquired will remain separated, NCL’s Sheehan has already pointed out that Prestige Holdings and NCL’s Corporate headquarters are less than five miles from one another in Miami. Count on a rather swift merging of operations.
Prestige has been known for the quality of its on-board products. Given the company’s relatively small size, it has not been known for producing huge savings in terms of marketing, sales, or on-board operations.
Travel agents have had a mixed reaction to the news of this purchase. Many more travel agents and online booking sites work with NCL, which has per diems in the $150 range, than work with Regent whose ships currently have average per diems of about $500.
Commenting on the purchase, Churchill & Turen CEO Richard Turen predicted that “some initial panic and the inevitable rumors of quality slippage, will begin over the course of the next several months. But if you look at the history of this sort of purchase, particularly Seabourn and Celebrity, along with the development of Azamara, and the brand names Princess and Holland America, there is very little cause for panic among cruisers who have come to love both Oceania and Regent Seven Seas. The folks in NCL’s boardroom are some of the brightest on the block, they will be extremely conscious of doing anything to damage the excellent reputations and top-of-class leadership exhibited by the brands they have purchased.
The New Norwegian results in further consolidation of brands with the big three, Carnival (100 vessels), Royal Caribbean (42 vessels) and Norwegian (21 ships) control the vast majority of cruise berth inventory worldwide.
Even with these acquisitions, NCL will remain a distant third in terms of overall berths. The line has recently launched two new megaships and has four more on order for delivery between now and 2019. Regent will take delivery of one of the most expensive new builds in history in 2016.
Carnival and Royal Caribbean have been fairly transparent in their desire to move quickly to tap into the vast potential for cruises catering to the Chinese cruise market. This acquisition by NCL may free ships within its fleet to be dedicated to the Asian market.
The strength of the dollar versus the Euro and the relatively low-cost of bunker-type fuel have added to the optimism shared by most cruise executives regarding new order bookings and their ability to negotiate favorable build contracts.;
The mega-ship designs are extremely possible because they enable lines to offer many more optional cost amenities which increase on-board spend and per guest yields. So called “inclusive” luxury lines have far fewer opportunities to increase on-board spending.
A trusted source at NCL emphasized that the line went ahead with this purchase “in part due to the truly excellent on-board services and reputation of the brands.” It is highly unlikely that professional evaluations of the product, once they are under the corporate umbrella of NCL, will show any diminution of quality. But as past consolidation has indicated, the crowd-sourced sites will abound with stories by cruisers who sense a decrease in service levels which laying the blame on NCL management. Frank del Rio, the Chairman of Prestige Holdings, and the man who actually runs the Oceania and Regent brands in a rather hands-on manner, will remain as Chairman.
