Checking in on the Cruise Industry

Testing the Waters

Cruise ships around the world have been docked since mid-March due to COVID-19. The CDC has a no-sail order in place until September 30 in the US. However, the cruise industry is slowly beginning to come back to life in Europe and Asia.

Carnival, (CCL) the largest cruise line in the world, has plans to restart trips out of Germany on August 5. Several other cruise companies have already set sail with new safety measures in place. These include TUI Cruises, a German company partially owned by Royal Caribbean Cruises (RCL), Hurtigruten, a Norwegian company, and Genting Cruise Lines, a company based in Hong Kong. Most of the boats in operation at the moment are much smaller than typical giant ships owned by Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings (NCLH).

New Safety Protocols

Cruise lines are coming up with creative ways to keep passengers and workers safe. Sanitation protocols have been ramped up and crew members are regularly tested for COVID-19. Ships in operation now are only carrying 50-60% of their normal passenger loads to make social distancing measures possible. This is likely to continue if and when larger ships resume operations.

Large buffets, a hallmark of some cruise lines, will be replaced with table service. This will present a significant increase in labor costs for cruise companies. Activities on cruise ships like shows and meals will also be staggered to avoid large numbers of people gathering in the same place.

Looking Ahead

Some cruise industry leaders feel optimistic about recent developments. However, others see rough waters ahead. Before the pandemic, analysts projected that in 2020, the cruise industry would make $71 billion and carry 32 million passengers. Now these numbers are expected to be down by about 50%.

It took three years for the cruise industry to recover from the 2008 financial crisis. Now cruise lines are not only dealing with economic downturn—they also need to find ways to help their customer base feel safe on cruise ships again. Investors will be carefully watching to see if these first cruises are successful, and what that could mean for the industry going forward.

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