what happened
Cruise line shares, which appeared on Thursday over no specific news, closed the week on a lower note Friday afternoon. From 14:50 EST, shares of Carnival (NYSE: CCL) (NYSE: CUK) and Royal Caribbean (NYSE: RCL) are both 5.5% lower, and Norwegian Cruise Line Holdings (NYSE: NCLH) performs the worst of all – by 6.4%.
And you guessed it: the coronavirus is to blame.
Image Source: Getty Images.
Approximately
Everyone already knows all about COVID-19 and what it has done to the shipping industry. You have probably also heard of the British variant of the coronavirus, a more virulent and possibly more deadly mutation of the disease. But there is also a third mutation to worry about, B.1351, which was first identified in South Africa. As The Washington Post reported today, it is this last variant that convinces governments in Canada, Britain and Germany to impose new travel bans in addition to the restrictions that already apply.
For a while, Europe was actually one of the few places on earth where cruise companies seemed willing to give the resumes of cruise activity a chance, but as new travel restrictions fall into place, it now seems increasingly unlikely. As for that, even when no direct ban is considered, travel becomes more difficult. In Canada, for example, there are discussions about mandatory tests and quarantine for all returning travelers. Here in the US, dr. Anthony Fauci that B.1351 is a “wake-up call” that makes the acceleration of the vaccination rate even more important.
Now what
How does this affect investors, especially in cruise line equities? Well, new travel bans are obviously not good news for any business in the shipping industry. But even restrictions short of a ban can pose a problem.
Just last week, Saga Cruises, based in the UK, announced that even when sailing resumes, it requires all passengers to show proof of vaccination before boarding. “The majority of our guests fall into the risk age group,” Saga explained, “and our priority is their safety and well-being.”
Now Saga is just a small operator – two ships in its fleet – so wherever he sails, other, larger crossovers may not follow. Last month, however, larger Norwegian Cruise trusted that it was also considering requiring passengers to provide proof of vaccination. The Post also reports that Carnival and Royal Caribbean are following a wait-and-see approach – not yet requiring mandatory vaccination, but also not excluding.
On the one hand, it seems prudent to require vaccinations to limit the spread of the pandemic and to assure customers that it is safe to sail again. On the other hand, it takes time to get everyone vaccinated. And the longer it takes, the longer cruise companies will have to wait to sail again – and the more cash they will burn while waiting.