By CHRIS ILLING
Downtown Nassau and its cruise port have seen some signs of life during recent months. The berths are full, and the tourists were roaming the streets and supporting the local economy once more.
Prior to 2020, no other market in the travel sector had grown as fast as cruises. Year after year, the industry reported increasing passenger numbers. Between 2009 and 2019 alone, the annual number of travellers shot up from 17.8m to 30m. But then COVID-19 came. Virtually overnight, the pandemic and the travel restrictions brought the global cruise market to a standstill.
We still remember downtown Nassau just a few months ago with all the closed shops and not a tourist in sight. Now, however, the industry is bursting with hope. During the ongoing vaccination campaigns, the containment of COVID-19 seems to be gradually getting closer. Accordingly, the cruise lines are reporting an enormous increase in bookings for the 2021 second half, and especially for the whole of 2022.
But demand for vacations could weaken. High rates of inflation, the still ongoing pandemic and a slowing economy are impacting consumer purchasing decisions. Royal Caribbean, Norwegian Cruise Line and Carnival all saw lower sequential ticket prices from May through June, according to new data from Bank of America Global Research. Price decreases ranged from 1 percent to 3 percent compared to May, with Carnival seeing the largest decrease (2.6 percent).
Price softness is likely to extend into 2023 and 2024, as ticket prices for the three cruise lines fell an average of 2.6 percent in the most recent survey for 2024. This is more specific to the cruise industry than a larger read from leisure consumers given more COVID strains (testing still needed), ever-increasing cruise capacity and, perhaps, some difficulty in attracting ‘newbies to cruises’ among consumers.
Bank of America has neutral ratings for Carnival and Norwegian stocks, and a low-performance rating for Royal Caribbean. And cruise vacations should also get more expensive as companies try to outpace their own inflation in areas such as labour and fuel for travellers. Based on this data, the share prices of the major cruise lines took a big hit late last week.
Norwegian Cruise Line’s share price is currently down 2.94 percent. It is down $0.40 from the previous day’s closing price, and now costs just $13.35 as at Friday, 10 June. Despite the loss, Norwegian Cruise Line (NCLH) shares are still a long way from their all-time low. On March 18, 2020, the stock closed at $7.03, down approximately 50 percent from the current price.
Carnival Cruise Lines (CCL) share price dropped almost 18 percent during the previous week and is trading at $11.20. The same with Royal Caribbean Cruises (RCCL), whose shares went down to $46.60 or a drop of 18.30 percent during the last five trading days.
The three major cruise line stocks are down 30 percent since the start of the year. Traders are sceptical about the industry’s recovery from the pandemic. The savvy investor must decide now if this is a good entry point for cruise industry shares or if the travel industry still has some choppy waters in front of the its keel.