The biggest health crisis in world history has left a massive impact on the global cruise market, the fastest-growing sector of the travel industry. If we look back, the demand for cruise travel had consistently risen for five consecutive years until coronavirus halted all operations globally. In response to the pandemic, countries across the globe closed their borders, and passengers were kept at sea for months before being repatriated. Countries banned all foreign ships from docking in their ports, resulting in massive chaos and disappointment. Some of the troubling coronavirus cases emerging from cruise ships even led to further reputational damage to the cruise industry. In addition to the inconvenience faced, the cruise sector had to undergo a massive financial fallout. In 2018, the industry fared at approx $150 billion, and two years after, it came down to its nascent stages.
The pandemic hit the borders in mid-January and it wasn’t too long before cruise stock prices plummeted by 70 to 80% from the prices observed before the crisis. The cruise liners, therefore, had to rely on huge loans to stay afloat. All hopes for its revival had almost vanished but surprisingly, the cruise loyalty and popularity didn’t seem to have drowned like its profits. Recent events prove how customer loyalty have become investors’ only beacon of hope in recent times. Let’s take a closer look!
The revival of the Cruise Industry
After manning the ships for months due to stern cross border regulations, the cruise industry is finally bouncing back. Apparently, against all odds, cruise liners are finally reporting an uptick in travel sales for 2021. The sector has certainly incurred heavy losses but instead of giving a complete refund for advance cruise bookings, the operators are offering extra credit points for future travel. The ‘extra’ here goes as high as 125 percent over the booked amount. In addition to this, cruise companies have also made several iterations to their cancellation policies to ensure that they aren’t locked into the next trips. Travelers are given the flexibility to reschedule their bookings. The extra credit points is another factor that has encouraged travelers to rebook for 2021 instead of asking for a cash refund.
The American cruise travel company, Cruise Planners, reported fairly good numbers of rebooking along with brand new reservations in May. In fact, by the end of March, around 76% of the travelers whose cruise bookings were canceled due to the pandemic chose cruise credits over a cash refund (USB bank report). According to a survey conducted by CLIA (Cruise Line International Association), 82% of cruisers will any day choose cruise travel over anything. Multiple cruise lines have also reported an increase in the bookings for 2021 as compared to the year before. This shows that cruise travelers are still loyal to their first travel choice.
Performance of cruise stocks during the breakout of the pandemic
Royal Caribbean, Carnival, and Norwegian are the top cruise liners that make 70% of the industry’s ships. The cruise kings may have survived many outbreaks in the past such as Sars and Mers but they suffered a crippling blow at the onset of deadly coronavirus. Between February and mid-March, Royal Caribbean and Norwegian lost more than 70% of their value while Carnival Cruises Lines stock dropped by approx. 60%. The fall in share prices put pressure on the entire cruise industry which was eventually forced to secure revolving loans worth millions of dollars.
But after months of suffering, we saw some respite after the industry decided to resume operations in adherence to the global health advisories. Shares of the biggest cruise operators are finally making gains. Speaking of the stock performance, The Royal Caribbean Group saw a sharp fall from $105 (December) to $32 in March but has once again risen to $71.19 (September) as the industry prepares to resume sailings. Shares of the world’s largest cruise operator Carnival also fell from $58 (December) to a straight $13 in March. The current month is the best of all six months for Carnival with a steady rise to $18. The Norwegian Cruise Line Holdings (NCLH) stock was also seen making gains from $10 in March to $18.59 in September.
What’s next?
Cruise trips are finally back. The MSC Grandiosa was the first cruise liner to return to the Mediterranean sea since the global shut down. In August, the ship welcomed 3000 cruisers for a seven-day voyage with new rules and regulations. While American cruise liners are still bound by a no-sail order, this voyage restored hope for the top cruise lines and passengers across the world. The rules were more stringent than basic protocols and some passengers were even denied boarding on account of leniency. To get a boarding approval, passengers were asked to pass both primary antigen and molecular COVID test. Temperature screening and health questionnaires were mandatory. The ships were held to 70% capacity to ensure social distancing and all cruise activities were planned for smaller groups. Everything was pre-planned and anyone found breaking the rules was not allowed to re-board.
The recent events have proven that the stakes for the cruise industry are incredibly high. Cruising experienced a major boom in the past decade and it will soon emerge from its darkest times. After making big gains, the world’s largest cruise operator, Carnival, will soon resume operations out of Italy. Royal Caribbean says that it will start sailing from November. We haven’t heard anything from Norwegian yet but the success stories of the new COVID-proof ships will change a lot in the coming years. The good news is, the world’s biggest cruise lines are safe and floating, even through the darkest times in world history. It’s tough but like every other industry, they’ve made their way into the new normal.
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