Bon Voyage; Let’s Talk Cruise Ships
Cruise ships made headlines for all the wrong reasons in the early days of the novel coronavirus. As the world watched from afar, cruise ship passengers lined their balconies, awaiting a return to a land quite changed from the one they left.
The 2020s were meant to be a boom decade for cruises. Nineteen new ships worth an estimated $9bn were set to start touring the world this year alone. Many of the major cruise liner company stock prices were at (or near) all-time highs. The demand for cruising reached new heights with 32 million passengers expected to sail in 2020, set to generate $71bn. Ports around the world were being developed to accommodate cruise ships and the passengers that flood off them.
Alas, this optimism was quickly reversed.
Coronavirus has put the cruise industry on hold, and the 338 ships that make up the industry’s global fleet are all docked. These 32 million passengers that were projected to sail this year are stuck at home. The three largest companies, Norwegian Cruise Line Holdings, Carnival, and Royal Caribbean, that account for 75% of the market, have taken out loans to keep afloat. The “No Sail” edict issued by governments have kept these ghostly ships marooned in harbours in what is known as “warm lay-up”, where the ships’ systems are kept running to make sure that they don’t seize up. Carnival alone is hemorrhaging $1bn a month to maintain its fleet, and raised $6.4bn through equity and debt in April.
The Centers for Disease Control and Prevention (CDC) announced in July the extension of a No Sail order for cruise ships through September 30, 2020. Even with this uncertainty, many companies in the industry are taking bookings but don’t yet know when they will be able to restart. After the financial crisis in 2008, the cruise industry took three years to recover. This time, it is expected to take far longer, because people’s reason for not traveling is not purely financial.
All eyes are now on how the cruise industry responds to lure consumers back on their vessels, for what will presumedly be a radically different cruise experience. Even though cruise ship companies have an extremely loyal customer base, the risks of catching coronavirus and the added strain of social distancing rules at sea place an unusual burden on operators and don’t promise for a relaxing experience for travelers.
However, the cruise industry is not alone. Travel, tourism, and hospitality businesses are under immense pressure. How companies rebuild public trust with new health and sanitation measures will be a critical part of their existence. Additionally, given the significant environmental footprint these cruise ships leave, this could be their chance to re-design, innovate and make for a cleaner, safer, healthier industry overall.
Hamish Baillieu, Investment Associate
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The first cruise ship to return to the ocean since March, the MS Roald Amundsen, is moored at a quay in Tromso, Norway. At least 36 crew members from the ship have tested positive for coronavirus, with the Hurtigruten CEO, Daniel Skjeldam, conceding “We have made mistakes”.
Loyal cruise sailor? Sorry to hear. Look at these countries trying to lure people in through introducing remote work visas as another option!
Want to get insight into what it’s like working on a cruise ship? Read Cruise Confidential by Brian David Bruns. Brian spent a year working for Carnival Cruise Lines and gives great insight.
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