Norwegian Cruise Line CEO shares outlook on U.S.-built ships
Could cruise shipbuilding move from Europe to the U.S. as the Trump administration pushes for a rebirth of American manufacturing?
President Donald Trump wants his new tariff policy to revive U.S. manufacturing, resulting in better-paying American jobs making American-made cars, appliances, and other goods.
Could American-made cruise ships become a reality as a result of the new trade agenda?
Related: Norwegian Cruise Line ship leaving fleet, cruises cancelled
As Norwegian Cruise Line launches a brand-new ship built in Italy, the company's CEO, Harry Sommer, was asked for his thoughts on the possibility of U.S.-built cruise ships during an interview at the Seatrade Cruise Global conference in Miami.
Norwegian Cruise Line has a long-established relationship with Italian shipbuilding giant Fincantieri, and all major cruise lines currently partner with premier European shipbuilders to construct their ships.
Noting that shipbuilding in Italy is kept in Italy because the country finances the shipbuilding, CNBC’s Contessa Brewer asked Sommer whether that’s something that could work for the U.S.
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U.S. could get into cruise shipbuilding, but not anytime soon
“You know, really, it's an entire ecosystem. Italy, and also Germany, France, Finland — there are four countries in Europe that build ships; all four of them have developed this comprehensive infrastructure," Sommer explained. "So yes, financing is definitely a piece of it. The Italian government supports the construction of ships for export, if you will, for use in international waters.”
Sommer pointed out the financing terms provided by the Italian government are appealing too, and help the cruise line to offer strong returns for shareholders.
“They give us very favorable terms. We have 3, 4, 5 percent interest rates, fixed over a 12-year period. It's great terms for us. It allows us to have good returns to our shareholders, our stakeholders in financing the ships.”
Related: Norwegian Cruise Line ships are floating artwork
Financing is only one piece of the shipbuilding puzzle, however.
“But it's not just the financing. They've created an entire infrastructure — engine manufacturing, cabin manufacturing, theater manufacturing,” Sommer noted.
Developing the necessary shipbuilding infrastructure would be a years-long process for the U.S.
“The United States can get into these things, but I want to be clear, it takes years to develop that type of talented infrastructure,” Sommer explained. “So, it's possible that we need to embark on a multi-year, perhaps multi-decade path.”
Tariff-driven recession concerns not a huge worry for cruise industry
When asked about how he’s feeling about consumer sentiment amid the new tariffs, Sommer noted that the value that cruising offers to vacationers helps the industry to be more resilient to volatility.
“We think at the forefront that cruising represents a fantastic value,” Sommer said. “You know, when we study it, the average cruise is priced about 30 percent better than the average hotel vacation. And we're such a small percentage of the industry. About two percent of the overall global vacation market is cruising.”
Related: Norwegian Cruise Line passengers reveal why they’re loyal to NCL
Many people still prioritize vacations during uncertain economic times and Sommer believes that the value offered by cruises adds to their appeal, especially as people seek to stretch their dollars further.
“So, when you look at our low penetration, our great value gap with hotels, I wouldn't say that we're recession-proof; but I think when there are bad times, people still want to go on vacations,” Sommer explained. “Cruising represents a tremendous value.”
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