Rough sailing for cruise lines in the age of coronavirus

Carnival Horizon cruise ship (Credit: Shared photo)

The coronavirus outbreak has cost U.S. cruise lines nearly $750 million since January, according to company financial reports. A State Department travel warning to Americans this past weekend could further rock their boats.

Shares of Carnival, Norwegian and Royal Caribbean have dropped 60% to 70% since January as passengers have canceled trips and cruise lines have suspended voyages to Asia. Hundreds of passengers have been stuck on quarantined ships while others have questioned the coronavirus quarantine protocols while onboard.

The U.S. State Department weighed in Sunday with a statement advising Americans to avoid cruise ships because of an “increased risk of infection of COVID-19 in a cruise ship environment.”

“While the U.S. government has evacuated some cruise ship passengers in recent weeks, repatriation flights should not be relied upon as an option for U.S. citizens under the potential risk of quarantine by local authorities,” the State Department said on its website.

The cruise industry’s largest trade group avoided addressing the State Department travel advisory, saying in a statement to CBS MoneyWatch on Monday that “we are staying focused on development of an aggressive, responsive plan as agreed to during the meeting [last week] with Vice President Mike Pence.”

Industry analysts and executives from the nation’s three biggest cruise lines have said it’s too early to determine how much coronavirus will impact 2020 profits, but total revenue losses so far this year have already reached about $750 million.

Royal Caribbean canceled 18 trips to Asia, a move that has already cost the company about $130 million, officials said last month. Canceling all scheduled cruises would mean another $100 million loss, they said.

Norwegian, which canceled or changed 40 Asia trips last month, said it will not offer cruises to Asia until late 2020. The 40 trips will likely create a $160 million loss, the company said. Carnival officials estimate the company could lose almost $440 million in earnings if staff has to halt all operations in Asia between now and April.

Cruise lines were enjoying record numbers of bookings at the highest prices seen before coronavirus arrived, analysts said. Demand for cruises, which had been growing steadily for the past decade, have now plunged 60% since January, said Harry Curtis of Nomura Securities.

The drop in demand accelerated once coronavirus cases surfaced in Italy, Curtis noted. “What that showed was that it was global and it could spread to the cruise line industries’ primary markets, where they have great financial success — Europe in the summer,” he said.

Cruise lines are a $53 billion industry that employs more than 420,000 in the U.S. alone, the industry reports. The companies have spent heavily in recent years adding new ships with better amenities and marketing to millennials. Those moves have helped build enough cash reserves that cruise lines should be able to weather the coronavirus impact, analysts said. For now, cruise lines can offset losses by holding off renovations and slashing marketing budgets, Curtis said.

Cruise ships are just one slice of the larger travel and tourism industry that is facing pains as the coronavirus disease spreads. Major hotel chains have closed locations in Asia and the global airline industry could lose more than $100 billion this year from lower demands for air travel.

“If you’re a person with an underlying condition and you are particularly an elderly person with an underlying condition, you need to think twice about getting on a plane, on a long trip,” National Institute of Allergy and Infectious Diseases Director Anthony Fauci said Sunday. “And not only think twice — just don’t get on a cruise ship.”

First published on March 9, 2020 / 5:35 PM

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