The actions of the cruise operators were affected on Friday by the extension of the order of prohibition of navigation on the part of the Centers for the Control and the Prevention of Diseases, as a result of the recent increase in the cases of COVID-19.
The CDC said passenger operations on cruise ships with a capacity of at least 250 passengers in US waters must now be suspended until September 30, 2020. The previous order not to sail expired on July 24.
The government’s action follows the decision of the International Association of Cruise Lines announced in mid-June to extend the voluntary suspension of cruise travel operations until September 15.
Norwegian Cruise Line Holdings Ltd. NCLH Shares,
fell 1.0% in midday trade, Royal Caribbean Cruise Ltd. RCL,
lost 0.4% and Carnival Corp. CCL,
slipped 0.1%. The moves weighed on gains in the broader stock market as the S&P 500 SPX index,
up 0.1%.
Given that cruise stocks were among the first to be affected when the coronavirus outbreak began to trigger blocking measures, Friday’s decline may act as an early warning for other travel-related companies, such as airlines and hotel operators, as new cases of COVID-19 have been reported increasing at a record rate.
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Although the CDC’s move was not a shock, investors cannot be faulted for being disappointed, after Carnival announced last week that its German-based cruise line AIDA Cruises will begin resuming operations in August. And some analysts worry that this delay was just the first of many.
SunTrust Robinson Humphrey’s Patrick Scholes said he believes departures will not resume in North America until the second quarter of 2021, at the earliest. He said that while there are signs of a cumulative cruise demand, CDC remains the determining factor in the US.
“While the companies had indicated that the cruise could resume in September or October in North America, our industry sources believed this was unrealistic, at least significantly,” Scholes wrote in a note to clients. “Subsequently, we reiterate our belief that there will be continued investor disappointment as more delays are announced at the start date.”
The delay in cruise resale comes as the latest data from the US Transportation Security Administration showed a pullback in the number of travelers passing through TSA checkpoints and demand for hotels during the last week.
The average daily commuter for the weeks ending Sunday has increased for each week since it hit a post-COVID-19 bottom of 97,799 for the week ending April 19, according to MarketWatch analysis of TSA data. The daily average for the week ending July 12 was 694,489, but the daily average for this week through Thursday fell to 633,426.
The percentage decline in daily commuters from a year ago will also increase this week, triggering a 12-week streak of falls. After peaking at a 95.8% annual decline during the week ending April 19, the percentage has decreased each week to reach 73.1% for the week ending July 12. So far this week, the decrease is 75.4%.
Raymond James analyst William Crow said data from lodging industry analysis company STR showed that US industry-wide hotel revenue per available room (RevPAR) fell 54.6% for the week ended July 11, compared with a decrease of 44.8% the prior week.
“While we had enjoyed a slow and steady recovery in demand (almost all leisure time), the 11-week sequential earnings streak was reversed with last week’s data as an increase in COVID-19 cases caused a pause, or a reversal, in state and local reopening efforts, “Crow wrote in a research note.
Among some airlines, the shares of American Airlines Group Inc. AAL,
fell 2.8% on Friday, United Airlines Holdings Inc. UAL,
yielded 0.9% and Delta Air Lines Inc. DAL,
slipped 0.2%.
Among hotel operators, the shares of Marriott International Inc. MAR,
they dropped 2.8% and Hilton Worldwide Holdings Inc. HLT,
slipped 2.7%.
Meanwhile, the wild card for cruise bookings, as well as for the actions of other travel companies, is news of a possible vaccine for COVID-19. On Wednesday, Norwegian shares soared 20.7%, Royal soared 21.2%, and Carnival jumped 16% after MRNA of Moderna Inc.,
The vaccine candidate produced a “robust” response from the immune system, and after an ITV report that positive news about the Oxford University vaccine candidate endorsed by AstraZeneca PLC AZN,
AZN
may soon be released
“Of course, the game changer is still a vaccine, and we continue to believe that stocks will be volatile on the news / rumors of that,” Scholes said.
To date, Norwegian shares have fallen 73.9%, Royal Caribbean has fallen 60.3% and Carnival has fallen 69.4%, while the S&P 500 is down 0.3%.
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