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What recession? Consumers are spending thousands on lavish cruise vacations

Brian Sozzi

For two titans of the cruise line industry, talk of a U.S. recession in 2020 is mere folly. Nothing in their board room number-crunching or chats with passengers on board hulking ships suggests doom and gloom is on the horizon.

In other words, pipe down, Wall Street doomsayers.

“I hear there are signs of recession and slowdowns in pockets of the economy. The coal miners might be having a bad year or some in industrial machinery, but the consumer is alive and well,” longtime Norwegian Cruise Line (NCLH) CEO Frank Del Rio said on Yahoo Finance’s “The First Trade.” Del Rio says consumers are spending freely on his ships and bookings for 2020 are off to a strong start.

On Nov. 7 Norwegian Cruise Line reported third-quarter adjusted earnings of $2.23 a share, beating estimates for $2.16 a share. Earnings were hit by 6 cents a share due to voyage cancellations, itinerary modifications and relief efforts stemming from Hurricane Dorian. Net yields — a key metric for cruise lines — rose 3.9%, ahead of Norwegian’s guidance back in August by 215 basis points.

The company narrowed its full-year earnings outlook to $5.05 a share from $5.00 to $5.10 previously.

The giant cruise line operator said its gross yields rose an impressive 6.4% in the quarter, powered by strong demand for cruises across Europe and the Caribbean. Total sales clocked in at $3.22 billion vs. projections for $3.18 billion.

The "Norwegian Encore" as the newest cruise giant of the Meyer shipyard in Papenburg is being transported slowly backwards, pulled by tugs, on the Ems into the North Sea. The ship has room for 4,000 passengers. (Photo by Martin Remmers/picture alliance via Getty Images)

Norwegian is betting on consumer strength continuing. It has 10 new cruise ships on order to be built and is expanding aggressively into Alaska.

In 2019, 30 million passengers are expected to travel on cruises, compared with 28.2 million in 2018, according to Cruise Lines International Association.

The upbeat tone on consumer spending was also on display at one of Norwegian’s rivals.

Royal Caribbean’s (RCL) net yields rose an impressive 6.4% in the third quarter. Revenue improved to $3.1 billion from $2.8 billion a year ago.

Royal Caribbean Chairman and CEO Richard Fain told Yahoo Finance that consumers continue to spend strongly on trips on his ships. He sees no signs of the U.S. consumer going into retrenchment.

“I hear what people are saying about the economy, but so far certainly we haven’t seen any sign of anything other than very positive demand looking forward,” Fain said.

Fain said bookings for 2020 have already started off “outstanding” for U.S. travelers. Trips are being booked at higher rates year-over-year. 

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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