Why Norwegian Cruise Line is leaning into integration deals
The cruise market is, well, cruising—and that's leading third-ranked Norwegian Cruise Line to chart a newer course.
According to industry trade group the Cruise Lines International Association, 30 million people will take to the seas this year, up from 28.2 million people in 2018. And Cruise Industry News reports that between now and 2027, there are 120 new ships on order. Capitalizing on what the publication's Managing Editor Monty Mathisen calls “unprecedented” growth, Ritz-Carlton and Virgin are coming into the category with their own luxury entries.
All these challengers are sailing into a market controlled by industry leaders Carnival, which posted $4.7 billion in revenue for the first quarter of this year; Royal Caribbean, which had $2.4 billion in first-quarter revenue; and NCL, which reported $1.4 billion in revenue during the quarter, according to company reports.
Now, though, a recession is potentially looming, which historically has curbed consumers’ discretionary income, particularly for big-ticket purchases. Still, NCL President-CEO Andy Stuart remains optimistic, even as new challengers enter the space. “The industry is consistently growing. If you build it, they will come," he says.
To that end, NCL, which operates the upscale Oceania and Regent Seven Seas brands, in November will unveil a new ship, Encore, under its more mainstream Norwegian line. The ship, consistent with the many can-you-top-this new vessels in the category, has a full complement of bells and whistles, including a 1,100 foot race track that extends 13 feet off the ship and and a laser-tag arena.
To promote the ship and also stand out against the competition, the company has tapped singer-turned-talk-show-host Kelly Clarkson to become Encore's “godmother.” The three-year deal includes performances by Clarkson, who will christen the ship in Miami on Nov. 21, as well as free cruise giveaways and other integrations into her new NBCUniversal syndicated talk show.
Stuart says that the idea of doing deeper celebrity integrations came up "organically" after Z-100 radio host Elvis Duran’s on-air team began spontaneously talking about their Norwegian cruises. “We weren’t giving them talking points,” he claims. Since then, the cruise line has been a promotional partner with a recurring feature on the show, which “became part of the family and brand experience,” he says.
It was Duran, in fact, who suggested Clarkson to NCL. Stuart himself appeared on “The Kelly Clarkson Show” to announce the alliance, which includes naming a reading room on the Encore after her daughter.
The move toward product integration and promotional opportunities beyond media advertising is part of a larger trend in the industry. According to the Ad Age Datacenter estimates, Carnival spent $322 million in overall marketing last year, with only $88 million of that in media. Royal Caribbean spent $237 million, with $75 million dedicated to media. Norwegian laid out $252 million in overall marketing during that time, of which $113 million was spent on media, Ad Age's Datacenter estimates.
But Stuart says media advertising is still an important marketing component. “We carry over 2 million passengers a year,” he says. “We’ve got to reach a lot of people.”