Inside look at how Wall Street sees Royal Caribbean's future

In:
20Apr2020
By: 
Matt Hochberg

The global uncertainties we face today leads many to contemplate what the future of cruising may look like in the coming weeks, months and even years. To find those answers, I turned to Wall Street for a different perspective.

While cruise fans and industry followers look at cruising one way, the people that work and follow the activity of the stock markets look through a completely different lens.

Dan Kline is a Motley Fool contributing partner and podcast/on-air personality, and a lot of his work recently has been focused on the cruise industry as the cruise line stocks have been riding a roller coaster lately, with primarily more drops than hills.

I posed a few of the major questions and concerns so many RoyalCaribbeanBlog readers have been curious about, in order to get a different perspective on the matter.

What sort of hurdles do you see Royal Caribbean facing in getting back to service?

Legally, the pandemic has to no longer be a health crisis -- that's the easiest way.

Being able to test people would help a lot. I've heard people talk about lower customer counts. Maybe a few trips just to get going, but hard to make money that way.

The hardest part after getting permission to operate is convincing people to go. I've seen how much effort Royal Caribbean puts into cleanliness -- the floating petri dish line makes me mad as people on cruises already faced social pressures on hand washing and the crews clean extensively.

I'm happy to get back on a ship (can't wait) but I'm 46. I'm not sure older passengers will feel that any risk is worth it.

The floating petri dish line makes me mad as people on cruises already faced social pressures on hand washing and the crews clean extensively.

What are your thoughts on cruise fare pricing when cruises do resume, and if discounts should be expected?

I expect very heavy discounts and have seen very low prices.

I'm a casino gambler and generally get comp offers. I've been able to get better rooms (a balcony) and comp play on 5-night cruises (booked for August and October). I would say that booking now while there is uncertainty (maybe for a fall trip) is the best way to get a deal.

What is your advice for someone looking to buy Royal Caribbean stock right now?

Be very careful. The company was profitable and, I believe will be again, but strategic bankruptcy is not out the question. Shareholders generally get wiped out in a bankruptcy.

What are some positive or negative signs from Royal Caribbean that you will be on the lookout for over the next few months?

I'd like to see them be able to raise more money. Carnival raised $4 billion in a bond sales but had to pay 11.5% interest to get there. That's very expensive debt. Royal has tapped its credit but has been very quiet.

Some readers are concerned about the long-term health of the cruise line, specifically as it relates to some form of bankruptcy. How realistic is it to be concerned about this?

I think a Chapter 11 may make sense if this extends into the summer. Creditors don't want to end up owning cruise ships or operating cruise lines, so I would expect, in the case of a bankruptcy, they would restructure. That's very bad if you own stock. It's probably not an issue if you planned a cruise.

Expect new ships to slower to come and all capital projects (like making Labadee more like Coco Cay) to take a backseat for a while.

You can follow Dan Kline on Twitter, and check out some of his recent articles on The Motley Fool.