The country’s three cruise line stocks rose lower on Monday, despite the general market moving higher. Actions of Carnival, (NYSE: CCL) (NYSE: CUK), Norwegian Cruise Line (NASDAQ: NCLH)and Royal Caribbean (NYSE: RCL) it didn’t slide much. We are talking about a drop from 1% to 3% among the three sailors. However, it remains a notable negative performance across the board on a day that was highlighted by promising news about another candidate for the COVID-19 vaccine.
It was not so long ago that the stocks of the cruise lines would be united by the simple smell of a possible treatment to eliminate the coronavirus. It happened last week. What if a vaccine will not be enough? What if Carnival, Royal Caribbean and Norwegian Cruise Line will need more than a solution to what has delayed their departures for more than four months? A cure for the global pandemic is not the only thing that has to go well for the industry to return to normal.
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Love ship
A bullish reaction to positive vaccination news makes sense. The cruisers were hit by some of the first COVID-19 cases. The new coronavirus spread rapidly, and the contagion did not end after the passengers left the ships. Crew members were trapped in floating Petri dishes for months awaiting repatriation, and not all of them made it home.
COVID-19 was particularly fierce on cruise ships. The combination of thousands of crews and passengers in confined spaces and the vastly larger clientele that has the time and means for luxury travel made it a hotbed of grim headlines.
Cruise passengers have become younger in recent years with the increasing popularity of the familiar characteristics of ships. The average age of a passenger according to the International Association of Cruise Lines of the industry trade group is 47, but that is reduced due to summer breaks when children don’t go to school. This will be a lost summer for the industry. We are facing a resumption of fall or winter, and that means we need a healthy scene for vulnerable older passengers. A vaccine that is safe for older people will be essential, but, again, it will not be enough.
The negative pressure will weigh on attracting potential passengers, and it will take a lot of money to attract the frustrated crew members again. Cruise lines have also been loaded with debt and equity financing to stay afloat, and that is going to weigh on earnings per share. A vaccine, even a less than perfect one, will lift the CDC’s “Don’t Navigate” order, but it’s not the only barrier to the industry. We are in a recession right now, and cruises are not cheap.
Even after the pandemic has been licked, it will take some time before the travel industry has a legitimate chance of recovery. Potential passengers will eventually be encouraged to fly to the boarding point, but will they really feel comfortable jumping on a cruise ship for a week or more when the threat of a new virus may arise? Instead, will they choose to fly directly to destinations so they don’t get caught in an outbreak on board? Carnival, Royal Caribbean and Norwegian Cruise Line are in the works, but it will be difficult to sell in more ways than one.
