Cruise Industry

Has cruising turned corner on COVID?

With Cunard Line reporting its strongest bookings in more than a decade, and Royal Caribbean reporting low COVID infections numbers at sea and imminent profitability, the future looks increasingly bright for the cruise industry.

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The COVID-19 pandemic presented the cruise industry with the greatest existential crisis in its history. For the first time ever, all cruises globally were shut down, with cruise lines haemorrhaging money as they struggled to stay afloat.

Several cruise lines didn’t survive, and dozens of cruise ships were scrapped as companies tried to cut costs. The Spanish cruise line Pullmantur was the first to declare bankruptcy, followed by the British line Cruise & Maritime Voyages.

Then Genting Hong Kong, the parent company of Star Cruises, Dream Cruises and Crystal Cruises, indicated that it was in dire financial distress, later declaring itself bankrupt.

When cruises did resume, it was with limited capacity and only a handful of ships, because of strict health and safety protocols intended to prevent the spread of coronavirus onboard.

Cruise lines were cautiously optimistic, but massive risks remained, underscored by regular reports of COVID infections aboard cruise ships that had returned to service.

Low COVID-19 infection rates

Now, however, Royal Caribbean Cruises, the parent company of Royal Caribbean International, Celebrity Cruises and TUI, has revealed that just 0.19 percent of the 1.3-million passengers its carried since June 2020 have caught coronavirus on its ships.

Those numbers were shared by President and CEO Jason Liberty on the company’s year end and fourth quarter earnings call on Friday.

“This positivity rate is still a small fraction of what it is in society at large, and nearly all cases onboard were asymptomatic or had mild symptoms,” Liberty said.

“Our rigorous health and safety protocols with 100% percent vaccination rate among our crew and close to 100 percent vaccination rate among our guests provide a safe environment where we can fulfill our mission of delivering amazing vacations. And our guests are responding by providing record Net Promoter Scores for us, exceeding their expectations,” he added.

Michael Bayley, president and CEO of the Royal Caribbean International brand, also said that while the Omicron variant did impact crew aboard, most crew had no symptoms.

“99 percent of the crew positivity was asymptomatic and the 1 percent was extremely mild symptoms. I mean, it really was remarkable in many ways. But the impact on the crew was effectively 0, except to take them out of operation for the period of their quarantine,” Bayley said.

Fewer health and safety protocols

This had led Royal Caribbean executives to speculate that some health and safety protocols on the ships may be eased, especially since the CDC in the United States has made the Conditional Sale Order (CSO) voluntary.

“Our own protocols continue to go above and beyond anything the framework provided and what consumers will find in any hospitality setting,” Liberty said. “We continue to engage with the CDC and other public health agencies as we look to adjust our COVID-19 risk mitigation measures in response to the changing nature of the virus.”

Michael Bayley, President & CEO of Royal Caribbean International also added that he feels the CDC Level 4 will be downgraded to Level 3 in the near future, based on cruise line’s proven ability to limit COVID-19 infections aboard cruise ships to small groups comprising less than 1% of passengers in most instances.

More ships in service and a return to profitability

For this reason, Jason Liberty sees 2022 as a transitional year during which the cruise company will bring the rest of its fleet into operation and see historical occupancy levels.

“In fact, in the last week of January, bookings returned to pre-Omicron levels, and we expect demand recovery to accelerate as the variant subsides,” said Liberty.

Michael Bayley added that bookings were exceeding 2019 numbers. “And as we moved into the fourth quarter of last year, our bookings started to exceed 2019 levels, both in volume and rate, and it was clear that everybody was in a vacation mode,” he said.

Royal Caribbean plans to have the full fleet back in service for the 2022 summer, with the emergence of the Omicron variant having had only a minor impact on its resumption plans.

Liberty said that Omicron had created some short-term challenges and will likely delay the company’s return to profitability by a few months.

“We remain confident that we will have a strong spring and summer season with great demand for cruising, both domestically and internationally,” he said. “The robust secular trends of experiences over things that has propelled our business in the past few years is now recovering towards pre-COVID levels.”

Naftali Holtz, the Chief Financial Officer, said the company expected load factors of 60 percent on core itineraries in the first quarter, which would improve into the third quarter.

“We expect our load factors to continue to steadily increase month-over-month and approach historical levels in the third quarter,” he said.

Royal Caribbean isn’t alone

Other cruise lines have also reported a return to strong demand for cruises. Cunard has announced that its summer 2023 itineraries have seen a “record-breaking” first two days of trading, with demand especially strong for Grills Suites.

“We are delighted by the overwhelming response to summer 2023 itineraries going on sale, which has even surpassed Cunard’s record-breaking days in 2021 when Queen Elizabeth’s summer at sea sailings went on sale,” said Cunard Vice President of Sales and Marketing, Angus Struthers.

“Cunard’s two strongest booking periods in more than a decade have happened in the past 12 months and is testament to the global appeal of a holiday with Cunard – signifying guests’ desire to step back onboard and travel in style and luxury,” Struthers added.

Carnival Cruise Line has also indicated that it expects to return to profit in the second half of 2022, and when Norwegian Cruise Line debuted the first ship in its new Prima-class, Norwegian Prima, demand for bookings surpassed any other ship in the cruise line’s history. Even smaller boutique cruise lines, such as the UK’s Fred Olsen Cruise Line, have reported a return to pre-pandemic demand.

“The New Year has brought with it a fresh wave of optimism for overseas travel. The success of our cruise sale shows that people are looking ahead to their next holiday now more than ever – there is real confidence in the market again, and this is being reflected in our bookings,” said Peter Deer, Managing Director at Fred. Olsen Cruise Lines.

Omicron and other potential variant of the coronavirus remain a threat, but the sense of existential dread that hung over the industry during much of 2020 and early 2021 certainly seems to have dissipated, and might even suggest the industry has finally turned a corner.

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