Is Too Much Ever Enough? NCL to Gouge Customers Again

Travel Weekly and Cruise Critic are reporting that Norwegian Cruise Line (NCL) is raising gratuities on April 1st from $13.50 per person, per day, to $13.99, on all ships except the Norwegian Sky. Daily gratuities for standard cabins on the Norwegian Sky will increase to $18.99 (an increase over 40%). 

Travel Weekly says that NCL will increase daily gratuities for suites from $15.50 to $16.99 on all of its ships except for the Sky where it will charge $21.99. 

It seems that there is no limit to the greed of cruise executives. NCL CEO Frank Del Rio just spoke at Seatrade Global about how the stock market was at all time high and fewer regulations and President Trump's pro-business tax cuts were good for his business. Del Rio collected nearly $32 million in Miami Cruise Ship Capital of the World2015

Del Rio's NCL has gouged its customers before, with extra charges, including increased room services charges, automatic gratuities and restaurant cover charges. He made this statement at an earning conference in 2015: "... we have looked across the fleet to identify areas where marginal changes ... can be implemented to improve performance. A few examples include a 6.7% average increase in beverage prices, the introduction of a nominal room service fee and lower costs from renegotiated shore excursion agreements. To put into perspective how these small changes can add up quickly, every dollar increase in yield translates to approximately $15 million to the bottom line."

Of course, all the major cruise lines nickel-and-dime their customers. Royal Caribbean just began charging for room service and, in the past, increased its gratuities while attempting to create the appearance that the increases were for its hard-working crew members (Read: Loyal to Royal? Expect to Pay Higher Gratuities! And the Money's Not for the Crew). Carnival Corp. did exactly the same thing while it also pocketed the increased gratuities (Read: Carnival Hikes Pre-Paid Gratuities But Will Passengers Secretly Remove Tips?)

Today, I read an article by David Grace Author titled When Greed Is Thought To Be A Virtue - When More Is Never Enough. He discusses what he calls the "more-more-more-until-it-all-blows-up" business phenomenon. The cruise executives, Del Rio in particular, put on quite a demonstration of unbridled greed at the Seatrade Cruise conference last week. The CEO's have an unhealthy, unchecked pursuit of profits in an industry which has always overreached into the American public's pockets.  The cruise industry pays virtually no taxes, exploits their workers from around the world, and still nickle-and-dimes their tax-paying customers whenever they have a chance. 

When is enough, enough? 

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Photo credit: Marc Averette - CC BY-SA 1.0, commons / wikimedia.

Royal Caribbean to Charge Room Service Fee

Royal CaribbeanTwo popular cruise blogs, the Royal Caribbean Blog and Cruise Fever, are reporting that Royal Caribbean will soon begin to charge its guests a fee of $7.95 for room service from the All Day Menu and the American Section of the breakfast menu.

Cruise guests reportedly will still be able to order complimentary continental breakfast without incurring additional fees. Guests in suites will not be charged service fees.

The service fee will begin on sailings after March 27, 2017.

Royal Caribbean announced the change on its Twitter feed, much to the disappointment of its followers.

Royal Caribbean follows other cruise lines, like NCL (Read: NCL Gouges Guests with New Charges), which also charges a $7.95 room service charge. Carnival also announced a similar fee several years ago.

Most of the major cruise lines have been accused of nickel-and-diming passengers. Many cruise passengers have complained that room service should be included in the traditional inclusive-cruise fares. 

Don't think for a second that the new room service charges are for the hard working crew members.

Marginal increases in services like room service puts big bucks into the cruise executives' pockets.

NCL's CEO Frank Del Rio said in May 2015: "... we have looked across the fleet to identify areas where marginal changes that are commensurate with market conditions can be implemented to improve performance. A few examples include a 6.7% average increase in beverage prices, the introduction of a nominal room service fee and lower costs from renegotiated shore excursion agreements. To put into perspective how these small changes can add up quickly, every dollar increase in yield translates to approximately $15 million to the bottom line."

Del Rio collected nearly $32 million in compensation that year (2015). 

In June of 2015, Royal Caribbean hiked the automatic daily gratuity on its cruise ships by nearly 8% to $12.95 per person. USA Today wrote at the time that with this increase, a family of four will pay more than $350 in service charges on a typical seven-night cruise -- one of the highest levies in the cruise business.

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Photo credit: Jim Walker

Update: We are receiving a number of humorous comments to the article on our Facebook discussion, including this one: "Next thing you know they'll put coin operated toilets in all the cabins." 

CEO Del Rio Buys $3,000,000 Worth of NCLH Stock

The Securities and Exchange Exchange Commission reported this past week that the president & CEO of Norwegian Cruise Line Holdings Ltd ("NCLH"), Frank Del Rio, bought 83,498 shares of NCLH at an average price of $35.94 a share. (Photo below, right, during interview on CNBC).

The transaction took place on on August 31, 2016.  The total cost of cruise stock purchased was $3 million. 

The price of the stock decreased to $35.61 by the end of the week. It is at a 52 week low. 

It was widely reported earlier last month that NCL had slashed its earnings forecast for this year and announced that it would miss its profit target for next year, because of "continued weak demand" for European travel, Brexit's impact on the pound, and some U.S. consumers reconsidering Frank Del Rio NCLMediterranean cruises following ISIS-inspired violence worldwide.

Analysts say that its been a "choppy year" for the cruise industry in general, and for shares of Norwegian Cruise Line in particular. NCLH stock reportedly "retreated to levels last seen in mid-2014." Frank Del Rio's $3 million cruise stock purchase, according to Wolfe Research analyst Jared Shojaian, is "the largest open market purchase by a cruise-line executive in history."

Bloomberg says that Del Rio is attempting to demonstrate confidence in NCL to "sail through choppy waters."

It is a move similar to Royal Caribbean's Chairman Richard Fain who bought 29,190 shares of RCL stock, in a series of trades for an average of $68.5161 per share, worth nearly $2,000,000. Cruise executive Fain made the transaction shortly after his cruise line's stock price dropped substantially following the release of Royal Caribbean's second quarter earnings. But in Fain's case, unlike Del Rio's, the cruise stock quickly bounced back over 6.5 %, earning the cruise executive a one-day profit of around $140,000. 

Del Rio certainly has boatloads of money to buy stock. In 2015, he received almost $32,000,000 in total executive compensation.

The SEC states that he directly and indirectly holds 919,173 worth of his cruise line stock. The SEC forms reveal he owns 451,171 shares directly. He indirectly owns 27,875 shares through a family trust and the SEC forms state that he indirectly holds 304,373 and 135,754 shares through investment limited liability corporations.  The total shares are worth over $34,000,000 at the current depressed stock prices. The Norwegian Cruise Line stock price hit a high last year of $64.27 a share which, at that price, would be worth a total of nearly $60,000,000 to Del Rio.

It's no wonder that cruise passengers freak out when NCL nickel and dimes them with room service charges, increased gratuties and high-end restaurant cover charges.

Yes, cruise executives pocket an obscene anount of money. It's funny money, I say, at a time when crew members are working harder and longer than ever before for less and have no job security.  

Interested in "fat cat" cruise executives? Read Andy Stuart - No Wonder He's Smiling (NCL), Micky Arison Sells $433,700,000 Worth of Carnival Stock (CCL), and Cruise Executive Richard Fain Hits the Jackpot Again (RCL). 

Photo Credit: CNBC

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The Rich Get Richer - Ex NCL CEO Collects $13,400,000 in Golden Parachute

A couple of days ago, Cruise industry News reported that, according to NCL's 2015 Annual Report, Kevin Sheehan received a severance package from NCL last year totaling $13,400,000 (million). 

Mr. Sheehan resigned unexpectedly in January last year amidst some controversy.   

The annual report in question, which you can see here, specified a "a total severance expense of $13.4 million of which $8.2 million was due to the acceleration of the equity-based awards which was Kevin Sheehanrecorded in January 2015." 

In an industry which includes cruise CEO's who make the big bucks like multi-billionaire Micky Arison and multi-millionaire Richard Fain, perhaps this is just business as usual.

But it must be hard to swallow for some crew members who work around the clock for peanuts, and without any real benefits. Crew members can be fired without cause. There is a saying that a cruise line can fire a crew member for any reason - good reason, bad reason or no reason - without legal consequence.     

NCL has suffered over the year from the perception even amongst cruise fans of being the king of "nickel and diming" its customers. But when it's time to make a deal with a CEO to move him out of the way without a fuss, NCL will not hesitate to pay millions. 

Photo credit: @CruiseNorwegian via CruiseInd 

March 17, 2016 Update: Proxy statement explaning, among other thing, what Mr. Sheehan's financial benefits he was entitled to if he was terminated with cause versus without cause. 

March 18, 2016 Update:  Many crew members seemed to like Mr. Sheehan and not the CEO who replaced him, Frank Del Rio, who many describe as an arrogant and cost-cutting boss. Here's one of many comments sent to me on Facebook:

"It doesnt matter how much Mr Sheehans got. He is such a nice and approchable person. I had the chance to meet his 3 years ago in the NCL Sun,h e came to my side stand to greet and thank us for our hard work. Unlike Mr Del Rio, who comes to NCL changing evwrything, all our benefits. The company is going down for the crew. Del Rio came to NCL PEARL when i was there, stood therw for 2 hours and put the ship up side down. So arrogant and unpolite to the crew, didnt even smile at us. Not even a "well done guys, thank you for your hard work." NOTHING. I've been with NCL for the past 3 years. I will appreciate if you keep my name private. I may lose my job if anything comes to public."