Why Carnival, Royal Caribbean, and Norwegian Cruise Stocks Popped

what happened

As trading begins to close for Tuesday, August 16, shares of cruise line stock are making a comeback. As of 3:35 PM ET, Norwegian Cruise Line Holdings (NCLH 2.83%) Shares are up 3.2%, followed by Royal Caribbean (RCL 3.99%), which is growing by 3.7%. While leading the pack above is industry Carnival (CCL 4.48%)with an increase of 4.6%.

And indeed, it turns out that Carnival is the source of today’s good news — because Carnival has announced that it will sail in the wake of Norwegian Cruise Line and change its COVID-19 policies to attract more many customers.

And what

Last week, Norwegian announced that it is revising its SailSAFE health and safety protocols to “further align the Company with the wider travel, leisure and hospitality industry worldwide”. From now on, guests under the age of 12 can board Norwegian ships without even proving vaccination or negative COVID-19 test results. Guests over 12 who have been vaccinated will not need to present a negative test for COVID-19 in order to board — and unvaccinated guests WILL be able to board if they present a negative test. (Undressing may be another question, however, as local regulations at Norwegian ports of call will vary.)

Taking a cue from its rival, Carnival announced on Friday that it is adopting a similar policy, with the main differences being that Carnival is setting the age limit at five – meaning five-year-olds and under are not required to provide proof of age. vaccination or negative test results — and exemptions from the vaccination and testing requirements apply only to passengers sailing on cruises of 15 days or less. Otherwise, Carnival is basically on board with the schedule set by Norway. (Which means Royal Caribbean’s analogous announcement is probably just over the horizon.)

And now here’s the best news for investors in cruise stocks: Carnival announced today that on the first day of trading after lifting its COVID-19 restrictions, booking activity was “nearly double the level for the equivalent day in 2019.”

Now what

Is this an auspicious sign for the carnival’s return to profitability? Three days after Carnival makes sailing easier, Carnaval’s booking numbers suddenly increase? Maybe.

Then again, the “equivalent day in 2019” would have fallen six months in the middle of a global pandemic and the shutdown of the cruise industry. So while Carnival didn’t give investors a specific number for Monday’s bookings, I can’t imagine that its August 15, 2019 bookings were particularly strong — or that double whatever number it was a year ago was much bigger. the number yesterday.

However, Carnival also insisted in its press release that its bookings through the end of this year already look “very solid.” Management appears to be of the opinion that by further easing the COVID-19 protocols, it can maintain this momentum through 2023, arguing that “the pent-up demand for Carnival has not been satisfied and guests are responding very favorably to our updated”.

All of this sounds logical, but it leaves open the question of whether bookings will grow fast enough and whether cruise fares will also rise enough to overcome the huge debt burden that Carnival (and Royal Caribbean and Norwegian, too) have taken on. during the pandemic, so that each of these three companies can pay the interest on their debts and become profitable again at any time.

For what it’s worth, analysts polled by S&P Global Market Intelligence see an outside chance that Royal Caribbean will turn a profit as early as next quarter — but then lose money again in the fourth quarter. On the other hand, Norwegian and Carnival investors will have to wait at least until the second quarter of 2023 until they see their companies return to profitability again.

No matter how bullish you are about cruise stocks, it’s hard to imagine one-day booking numbers changing that bleak outlook.