Interesting Article ... Thought You Guys Might Be Interested ...

[princevaliantus]

The cruise industry won’t return to pre-pandemic levels until 2030: analyst

Alexis Christoforous

·Anchor

Tue, December 22, 2020, 6:37 AM EST·4 min read

 

The arrival of COVID-19 vaccines could give the beleaguered travel industry a much-needed shot in the arm in 2021. But analysts caution there’s still a long way to go before it’s smooth sailing for the cruise lines.

“The vaccine may not be a panacea for the cruise line industry versus airlines or leisure hotels, where the outlook is a little bit better,” Jason Ader, CEO of SpringOwl Asset Management tells Yahoo Finance Live. “The perception of the cruise industry is that it's a floating petri dish. And that's a bad perception.”

Previous coronavirus outbreaks on cruise ships left thousands of passengers stranded, and that’s affected sentiment for people who have never cruised before. A recent SpringOwl Asset Management survey found that 80% of respondents who have never cruised say they would avoid getting on a ship.

“I don't think you'll see a return to peak profitability in the cruise industry until 2030,” says Ader. “And that's just not a function of demand coming back, because I do think the cruise industry will see people want to go on cruises. But the prices will be a challenge. People aren't going to pay a premium for it right away.”

A woman looks out from the balcony of her cabin onboard the Quantum of the Seas cruise ship docked at the Marina Bay Cruise Center Wednesday, Dec. 9, 2020 in Singapore. Royal Caribbean said in a statement that a guest on the Quantum of the Seas “tested positive for coronavirus after checking in with our medical team." The ship returned to port in accordance with government protocols. (AP Photo/Danial Hakim)

 

Cruise passengers tend to be a loyal group. Research from the cruising agency Mundy Cruising found that 81% of luxury cruise passengers plan on taking a cruise next year, although the majority will wait until they have been vaccinated first.

Ader says there are currently a lot of great deals to be had in the leisure travel market, so the price benefit that the cruise industry has historically provided is no longer as competitive. He points out that it also costs a lot more to keep the ships clean.

“I give the cruise industry, Carnival, Royal, Norwegian — tremendous credit. They've made unbelievable innovation on surface cleaning, air filtration. They're doing an amazing job,” says Ader. “That's really where I struggle with the stock price performance of the cruise industry relative to the likely outlook that it's going to be a very long road to get back to where we were in 2018 and 2019 before COVID-19.”

Year-to-date, Royal Caribbean’s (RCL) stock is down 46%, while Carnival Corporation (CCL) and Norwegian Cruise Line Holdings (NCLH) have each plunged nearly 60%.

Cost of air filtration and cleaning

In June, Royal Caribbean and Norwegian put competition aside to form the Healthy Sail Panel, a group of top medical and scientific experts who created new health and safety protocols to protect guests, crew and the communities that cruise ships visit. Together, they filed 74 safe sailing protocols with the U.S. Centers for Disease Control and Prevention, including testing and deep cleaning.

“These programs for surface cleaning and air filtration just don't come without added expense,” says Ader. “The time to clean and the utilization of the cruise ship is going to be lower for the foreseeable future. So to get back to normal levels of profitability, it just doesn't take demand coming back, it takes pricing, not just to go to where it was, but to even greater than where it was to offset the added cost of air filtration and surface cleaning. And honestly, that's going to take quite some time.”

From 2016 to 2018 the cruise line operators went on a building boom and that means at least 15 new ships are scheduled to come online in 2021.

Odyssey of the Seas, Royal Caribbean's second Quantum Ultra-Class ship, will launch in April 2021 and will spend its inaugural season in Europe.

“We're facing pretty significant industry capacity over the next few years, which will require more ships to come out of service just to absorb that capacity,” says Ader.

“It's a very concentrated industry at the top with Royal Caribbean, and Carnival, and Norwegian having a very high market share. It doesn't really leave much room for consolidation. But you may see some significant capacity come out of service. And I think prices will stay low for quite some time.”

Alexis Christoforous is an anchor and reporter for Yahoo Finance.

[mworkman]

lol If they don’t return before the end of 2021, there won’t be a cruise industry.

[princevaliantus]

17 minutes ago, mworkman said:

lol If they don’t return before the end of 2021, there won’t be a cruise industry.

Exactly what I thought!

[Ray]

3rd paragraph done it for me...80% of people who have NEVER been on a cruiseship said they wouldn't cruise! 

 

On a brighter note RC are making Bonus payments to all staff ( land and sea )  in jan 

 

[Matt]

"peak profitability" is the key phrase. Meaning, when every dollar is maximized and the industry is outperforming Wall Street analysts.  In other words, what cruise industry was like in terms of PROFITS in 2019 or so.

[HeWhoWaits]

22 minutes ago, Ray said:

80% of people who have NEVER been on a cruiseship said they wouldn't cruise! 

In other breaking news, rain is wet.

[JeffB]

Looking at the health of an industry from a standpoint of profitability is going to skew projections downward for the cruise lines. The year 2030 as a return to 2019 level profitability is a WAG. There are multiple factors that will determine "profitability" beyond the levels of it that cruise companies experienced in the past. I don't think offering the analysis the author provides is particularly useful as a measure of cruise industry health.

I don't think there is any question that cabin capacity will contract by thinning fleets. That's already happening. With reduced capital costs and expenditures, profitability can and usually will rise rapidly. One thing that this article nails is the decreasing spread that the cruise industry previously enjoyed between the cost of leisure activities. Cruising, IMO, has been a great value compared to say, all-inclusive resorts or a two week, land based vacation somewhere. The net effect is going to be decreased demand for cabins - without the value incentive, the cruise industry is going to be in a spot. Moreover, fewer died-in-the wool cruisers will want to pay a premium to cruise. I certainly won't.

One thing I'm coming to grips with is that the post-COVID cruise experience is going to be markedly different and it's going to take a while for me to rebuild interest and confidence in cruising as the best means of traveling. As I get further and further away from my last cruise (March of 2020) I can feel interest waning and this is especially true when I consider what the cruise experience will be like during the first several months after a restart. I've got 4 bookings from March to early November, 2021 with Celebrity - 3 of them L&S'ed, the one in March booked in early 2020. I lost a New Year's 2020/21 cruise on Infinity when I L&S'ed to January 2022 and 2 weeks later Celebrity cancelled it - at that point I could only get a refund and I took it. That left a sour taste in my mouth. That I'm pretty sure the March 19th, 10d cruise on Reflection will be cancelled or modified isn't going to increase my enthusiasm for cruising either.

[JLMoran]

2 hours ago, JeffB said:

As I get further and further away from my last cruise (March of 2020) I can feel interest waning and this is especially true when I consider what the cruise experience will be like during the first several months after a restart.

Interesting to read this, as I'm feeling the opposite despite my last cruise being even longer ago (Oct 2019) and my next cruise not happening until July of '22. The dollar price difference may not be as great as doing a land vacation (although I'll bet it's still going to be pretty good when comparing the price of a Euro-based 2-week land tour through the Greek Isles, Italy, France, and Spain), but when I think about what I won't be having to do on several days of the trip, cruising is still far more compelling for me.

• I won't be repacking my bags every couple of days
• I won't be rushing to an airport or bus/ train station for the trip to our next leg
• I won't be burning a chunk of my day stuck in that moving little tube, or waiting to check in to the next hotel, or unpacking again for the next couple of days
• I won't be trying to figure out which place is our best bet for breakfast or dinner, or grappling with possible language barriers while ordering (although I'll concede I may well miss out on some fantastic surprises here)

Cruising still takes a lot of the planning stress away from me, since all travel and accommodations are covered along with most of my meals. I can focus my planning time on the places we want to see most, the best options for doing that; the transportation there and back; and one hotel each for pre-/post-cruise. Believe me, the planning is a great part. But I would be overwhelmed if I also had to plan out all those other bits, along with figuring out the optimal travel route and best means of transportation between stops.

[Cakemeister]

I think Ader is full of crap. Nine years is an eternity in business. 

[JeffB]

In response to JLMoran's post.......Make no mistake. My memories of cruising are way better than memories of any other vacations I've taken and your list of plus-ups to cruising v. land vacations is a good one, but....

... our first cruise was in 2001 aboard Celebrity Mercury. In the 19 years since, we've logged 38 cruises with Celebrity and another dozen with other lines. The only itineraries we have not experienced are Northern Europe and the Middle East. My Daughter and her husband, an Italian, live and work in Switzerland. We've visited Europe 3X in conjunction with visits to see our grandchildren and them and had extended stays in Italy. Traveling and seeing the world both ways are distinctly different.

Over the two decades of experiencing the cruising life, I've watched the cruise industry change dramatically. It's growth has been phenomenal and not all of it for the good. There's less glamor and more Greyhound with pizzazz of course but most people my age can remember what it was like to fly in the 50s and 60s aboard a Pan Am Constellation then 747 compared to what the experience is like today on a United or Spirit Airlines flight. There are huge differences from the boarding process to food service and the in-flight experience between Pan Am of the 60s and Spirit of the oughts. Cruising has been a lot like that for me. My expectations for cruising in 2004 or 5 have been dutifully lowered for these days.

Still, we like ship life and have this sort of routine. We just like being aboard and after having seen many ports multiple times, we often don't even debark. Food service, at least aboard Celebrity has been maintained at a very high level. I find that amazing although its a step down from our dining experiences a decade ago. The elimination of the old cruise line themed specialty restaurants that survived into the Millennium Class ships but then finally disappeared a few years ago was a sad day for us. At least Murano has survived but we're not big fans of the direction dining has taken on the Edge class ships. No Ice Martini bar and a long list of memorable flair bar-tenders? Shame!!! I get the transitions though. Cruise lines are delivering what customers want ..... most of the time.

Admittedly, it is the loss of some of the glamor of the Golden Age of cruising that when cruise lines returned in earnest in the late '90s attempts were made to preserve that. That's giving way to a much more family centric, theme-park sort of experience and I think this is especially true with RCCL. Still, there are options for more sedate and luxurious yet still value experiences aboard NCL brands such as Oceania. Celebrity targets sales toward a different cruising cohort than say Carnival so, there's always options - finding the balance between value and luxury on a cruise though is getting harder and harder.

[PaulRC]

That article is so far off.

On 12/22/2020 at 9:14 AM, princevaliantus said:

I don't think you'll see a return to peak profitability in the cruise industry until 2030,” says Ader. “And that's just not a function of demand coming back, because I do think the cruise industry will see people want to go on cruises. But the prices will be a challenge. People aren't going to pay a premium for it right away.”

I do not think prices are much cheaper then any other time I have looked.  I think this Ader guy is just wanting to write something.  True they might be paying for the air filtration systems but by scrappaging / selling older less profitable ships in favor of more energy efficient and more pax per ship means they are off setting that cost.  The price of there stock at this point has nothing to do with any thing.  In fact the lower there stock is when they start sailing again the more people are going to buy it and inject even more $$ in to the companies.