Royal Caribbean’s disclosure this week of a loss of $ 1 billion for the fourth consecutive quarter marked the end of a grim year since a Covid outbreak aboard the Diamond princess cruise ship has crippled the industry.
But investors have finally found reason to cheer, pushing the company’s share price up nearly 12%, revealing a surge in bookings spurred by new confidence around vaccines and an easing of the lockdown.
“Despite the lack of marketing spend, we’ve seen a 30% increase in new bookings since the start of the year compared to November and December,” Jason Liberty, chief financial officer of Royal Caribbean, told analysts. “We are very optimistic about the future.”
Another leading cruise line said its UK bookings jumped 300% after the government announced it would reopen hospitality and travel reopening dates this week, though at from a weak base.
With virtually all ocean cruises still on hold and monthly expenses piling up, no improvement can come soon enough for the struggling industry. In the third quarter alone, the three largest cruise lines reported combined net losses of nearly $ 5 billion.
A day after Royal Caribbean announced its results, rival operator Carnival, whose brands represent around 40% of the industry, said it was undertaking a billion dollar share issue to raise more funds.
During the initial lockdown period, cruise lines hoped to sail by the end of 2020. The largest companies have poured hundreds of thousands of dollars into protocols to limit the spread of the virus on a few rare cruises to the United States. last fall, but more virulent strains once again forced their vessels to anchor.
Greek Minister of Tourism Harry theocharis told the Financial Times he was “100%” sure the cruise could restart in Greek waters from May. US officials, who make up more than half of cruise passengers, are more timid – with requests including onboard laboratory testing facilities – although there is some hope the Biden administration will speed up the regulatory process. .
“The CDC [Centers for Disease Control and Prevention] make it very difficult and place many demands on cruise lines to operate outside of the United States, ”said Nigel Thomas, president and marine partner of the law firm Watson Farley & Williams. “For Carnival and Royal Caribbean [cruising] out of US ports is by far their largest market. . . There is frustration, but they know they have to do it right.
Vaccines for guests are seen by some operators as an element facilitating a restart. Saga Cruises in the UK and US, the Queen Steamboat and Victory Cruise in the US have stipulated that their passengers must be fully vaccinated before boarding.
But larger companies, which have a much larger customer population, are more wary.
“I think it’s possible that if you and I were going on a cruise, I would probably feel better if you were vaccinated,” said Bill Burke, chief of maritime affairs at Carnival. “[But] could we put in place a policy that says everyone should be vaccinated? Maybe but not tomorrow.
Norwegian Cruise Lines, the third-largest operator, said last month that it plans to require vaccinations for its crew, while Richard Fain, managing director of Royal Caribbean, said vaccines were “the ultimate weapon But added that it was too early to demand them. board.
In the meantime, operators are hoping that a broad set of measures, including multiple tests for passengers on board ships and before travel, UV air filtration, additional medical facilities, capacity reductions and Contactless apps for ordering food will be enough to convince authorities that cruises are safe.
On Tui Cruises, which have continued to operate around the Baltic and Canary Islands since July of last year, entertainment now includes only solo acts and the buffet has been canceled.
“It can be amazing to many people that we sail,” said Wybcke Meier, Managing Director of Tui Cruises. But, she added, “We have a lot of repeat customers. We have people who have been on board for five weeks because they prefer to be in the Canary Islands rather than in a German town in the winter. “
But even with a constant flow of customers, the ships are only operating at 30-50% of their usual capacity, which means the trips are just plain profitable, Meier said.
For large operators, a period of limited capacity and low income poses another challenge as cruising opens up. The three largest publicly traded operators have raised nearly $ 40 billion in debt and equity since March, leaving them with heavy deficits to repay.
Morgan Stanley analyst Jamie Rollo noted that he expected the industry to return to 2019 profit levels in 2023, but even that was “optimistic” given that it took seven years for income yields recover after the global financial crisis.
Pierfrancesco Vago, president of the CLIA sectoral body, is more optimistic: “I think that the level of 2019 will be seen in 2022. After each major economic slowdown or collapse or pandemic, the consequences and the reaction of the population are bullish. , to enjoy and to spend. “