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 on board the Diamond princess cruise ship has crippled the industry.
But investors have finally found reason to rejoice, pushing the company’s share price up nearly 12%, revealing an increase in reservations, boosted 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, CFO 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, although 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 passengers hoped to sail by the end of 2020. The biggest companies poured hundreds of thousands of dollars into protocols to limit the spread of the virus on a few rare cruises 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 resume 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 – though 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 impose a lot of requirements on cruise lines to operate outside the United States, ”said Nigel Thomas, president and marine partner of the law firm Watson Farley & Williams. “For Carnival and Royal Caribbean [cruising] of US ports is by far their largest market. . . There is frustration but they know they have to get it right.
Vaccinations for guests are seen by some operators as a restart factor. 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 naval officer 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 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 hope that a broad set of measures, including multiple tests for customers on board ships and before travel, UV air filtration, additional medical facilities, capacity reductions and Contactless apps for ordering food will be enough to persuade authorities that cruises are safe.
On Tui Cruises, which have continued to operate around the Baltic and the Canary Islands since July of last year, entertainment now only includes solo acts and the buffet has been canceled.
“It can be amazing to many people that we are sailing,” 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 Canaries rather than in a German city in 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.
Jamie Rollo, analyst at Morgan Stanley, 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 are recovering after the global financial crisis.
Pierfrancesco Vago, president of the CLIA sectoral body, is more optimistic: “I think that the 2019 level will be seen in 2022. After each major economic slowdown or collapse or pandemic, the consequences and the reaction of the population will be bullish. , to enjoy and to spend.