If you spend any time with executives in the cruise industry, you will have heard about the Harvard case study several times by now. It was released in August of last year. Superlatives are not given lightly by former Harvard Business School dean Nitin Nohria. When he stated in print that he had never in 35 years witnessed a business “come out of a crisis and completely lap the competition in such a way,” he was referring to Royal Caribbean and, consequently, to a financing decision that continues to subtly spark boardroom discussions throughout the leisure industry.
The name of the option sounded almost official. Notes with guaranteed priority. In the summer of 2020, when Royal Caribbean was losing money, its ships were anchored off Caribbean coasts like ghost towns, and every way forward seemed to involve diluting shareholders into oblivion, Morgan Stanley presented the structure to the company. Convertibles? Later on, it was too harsh. At the bottom, new equity? Almost suicidal. Rather, the bankers suggested adding a new layer to the capital stack that would sit between secured and unsecured creditors. This layer would be unsecured on paper, but it would have a priority claim that would allow investors to write checks. By using that method alone, Royal Caribbean raised $6 billion. By the fourth quarter, the stock had risen from less than $20 in March to about $70, at which point a more traditional equity raise made sense.
CFOs at casinos, theme parks, hotels, and airlines still consult that playbook for a reason. Notes with priority guarantees did more than just keep the lights on. The hardest trick in distressed finance is buying time without giving up the company. Like the weather, convertibles hover over a stock. Every current share is made cheaper by secondary offerings. Neither did the priority notes. The bankers themselves appeared to be taken aback by the structure’s elegance as they watched it unfold; this is the kind of move that is only created when common tools run out.
What the company decided not to do is what gives the Royal Caribbean story an advantage over Norwegian’s. Restarts took weeks rather than quarters because ships remained in “warm lay-up,” where crews kept the systems operating rather than mothballing the fleet. Every spot at Meyer Werft and Chantiers de l’Atlantique was reserved for newbuild options. During the downtime, Celebrity Beyond’s design was subtly improved, saving $100 million without noticeably sacrificing the visitor experience.
99.6% of the zero-interest “Pay it Forward” loans given to travel advisors were repaid, which is significantly higher than the 70% that the business had internally calculated. Little actions, big trust. Richard Fain used to refer to this way of thinking as “our north star”—not what makes it through the week, but rather the company’s post-storm shape.
Norwegian Cruise Line Holdings, on the other hand, managed a larger load while navigating the same storm. It became more cautious after entering the pandemic with greater leverage. By April 2025, CFO Mark Kempa was publicly discussing a decline in reservations for European itineraries and a trend toward shorter travel. In an attempt to preserve the premium yield that NCLH most needs, the company’s Q1 revenue projections were missed, shares fell 9% on the print, and the luxury brands, Oceania and Regent Seven Seas, were reorganized under a newly appointed Chief Luxury Officer, Jason Montague. Guidance for net yield declined.
Although there has been a real recovery, the margin gap still exists. The comparison was straightforward in Fitch’s February 2026 note on Royal Caribbean’s BBB unsecured rating: RCL’s EBITDA margins of 36–37% compared to Norwegian’s 25–26% and Carnival’s 25–27%.
It’s not just an operational margin gap. It is directly related to how each business funded the crisis. Flexibility compounds, and Royal Caribbean’s priority notes maintained flexibility that NCLH fell short of. In this industry, it’s difficult to ignore how frequently the decisions made on the balance sheet during the worst week determine the course of the following ten years.
From this point on, none of it simplifies the cruise industry. Tariffs are hindering discretionary spending, consumer caution is returning, and fuel is once again erratic following Hormuz. However, the message of those 2020 decisions is almost uncomfortable for a leisure CFO watching this from a hotel chain or a theme park—anywhere capital is lumpy and demand is fragile. Make sure the fleet is prepared. Safeguard the pipeline for new construction. Instead of taking the offered instrument, create the one you require. That lesson might be the actual case study.
