What happened
The shares of cruise lines, which generally burst on Thursday with no particular news, are closing the week with a drop on Friday afternoon. From 14h50 EST, shares of Carnival (NYSE: CCL) (NYSE: CUK) and Royal Caribbean (NYSE: RCL) fell 5.5% and Norwegian Cruise Line Holdings (NYSE: NCLH) is doing worse than anything – dropping 6.4%.
And you guessed it: coronavirus is to blame.
Image source: Getty Images.
And
Everyone already knows everything about COVID-19 and what it did for the cruise 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. The Washington Post reports today, it is this latter variant that is convincing the governments of Canada, Britain and Germany to introduce new travel bans beyond the restrictions that already existed.
For a time, Europe was actually one of the few places in the world where cruise companies seemed willing to give cruise lines a chance to resume, but as new travel restrictions are applied, this seems increasingly unlikely now. Speaking of which, even where definitive prohibitions are not being contemplated, traveling is increasingly difficult. In Canada, for example, there are discussions about mandatory testing and quarantine for all returning travelers. Here in the USA, Dr. Anthony Fauci says that B.1351 is a “warning” that makes accelerating the vaccination rate even more important.
What now
How does this affect cruise stock investors in particular? Well, new travel bans are obviously not good news for any cruise company. But even restrictions that do not reach a ban can pose a problem.
Last week, Saga Cruises, based in the United Kingdom, announced that even when the cruise resumes, it will be necessary for all passengers to present proof of vaccination before being allowed to board. “Most of our guests fall into the age group at risk,” explained Saga, “and our priority is their safety and well-being.”
Now, Saga is just a small operator – two ships in its fleet – so where it sails, other larger cruise lines may not follow. But last month, the largest Norwegian Cruise confided that it is also considering requiring passengers to provide proof of inoculation. The Post it also reports that Carnival and Royal Caribbean are taking a wait-and-see approach – not yet requiring mandatory vaccination, but also not discarding it.
On the one hand, requiring vaccines seems prudent both to contain the spread of the pandemic and to reassure customers that it is safe to travel again. On the other hand, vaccinating everyone will take time. And the longer it takes, the longer cruise lines will have to wait to resume cruises – and the more money they will spend while they wait.