How are cruise lines impacted by COVID-19?
The specialist started by giving a high-level overview of the major trends. In the short term, there is uncertainty about what is going to happen in Q2 and Q3, which are normally the most profitable for cruise lines owing to sailings in Alaska and Europe. Longer term, reinvigorating demand was pointed out. Although cruises tend to have loyal customers, “the question is, what will it take to get those people back into the fold”, and the length of time this will take is also uncertain.
Shipbuilders could also face knock-on effects. “Looking at the order book of how many ships are on order between now and 2027, it’s an immense number.” With many of these companies situated in Europe, which rely on thousands of suppliers from all over the world, there could be significant delays for new ships – but late payments could equate to extra liquidity.
There was a focus on Royal Caribbean and Norwegian Cruise Line. They are both “pretty well-positioned in terms of mitigating their risk” and had announced they had gained extra credit. Moreover, Royal Caribbean said they were cancelling and suspending some CAPEX over the next couple of years, as well as cutting back on OPEX. The geographic exposure of both companies was also highlighted.
The conservation moved to the impacts on pricing and routes, as well as how long recovery could take. “What tends to happen is there’s a sharp decline in pricing and a sharp decline in demand and… typically, what you find is a pretty quick recovery.” However, it could still take up to a couple of years for pricing to reach 2019 levels.
To access all the human insights from Third Bridge Forum’s Interview, Coronavirus Impact on Cruise Line Industry – Norwegian Cruise Lines & Royal Caribbean, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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