Carnival Sails Ahead, but What’s in the Offing for the Rest of the Cruise Industry?

Carnival Sails Ahead, but What’s in the Offing for the Rest of the Cruise Industry?

Carnival cruise lines lay down a marker this week when it announced that its plans a staged resumption of sailing this summer and that leaves one big question to be answered: What will the rest of the cruise industry do?

Carnival’s plans to recommence sailing on August 1 with a total of eight ships from Miami, Port Canaveral, and Galveston are obviously contingent on how the coronavirus pandemic continues to play out in the United States and on whether the planned destination ports for those cruises have opened by then, not to mention whether passengers feel it is safe to cruise. 

Industry analysts say that the Big Three – Carnival, Royal Caribbean and Norwegian – have a history of playing in chorus when it comes to policy changes, but so far neither Royal Caribbean of Norwegian have announced solid plans to resume embarkations even though a few days have passed since the Carnival announcement.

In fact, Norwegian stunned the market a couple of days ago by issuing a “going concern” warning about the viability of its business, sending its stocks sinking. Norwegian also said that it had experienced “meaningful softness” in near-term demand – corporate speak for people aren’t buying – while longer-term bookings were lower than at the same time last year with lower prices. 

Given its cash flow problems, Norwegian will be desperate to get its ships back on water as soon as possible. But as yet it has not announced any concrete milestones for doing so other than pushing back its suspension of sailing to June 30, which means that in theory, if the CDC lifts its no-sail order it could resume on July 1.  

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Raising the bar to new heights

One company that has been talking openly about COVID-19 is Royal Caribbean. CEO Richard Fain in a video message to travel advisers spoke extensively about the virus’ impact on the industry and what could be done to chart a path forward.

“There is no silver bullet which will magically destroy this horrible infestation. On the other hand, there’s a cornucopia of smaller actions, which taken together can bring it under control,” said Fine. 

“Our role is to do everything that passion and ingenuity can offer to keep our ships safe and healthy. 

“Looking forward to restarting, health and safety are absolutely paramount as I’ve said before, what was fine just a few weeks ago is no longer adequate…. We need to raise the bar to new heights, and we have teams of doctors, of scientists, of epidemiologists, and teams of people who know our business, all looking hard and charting the safest and surest path forward that we can.”

Clearly Royal Caribbean is working hard to get itself ready for when the no-sail order is lifted, but at the moment it looks like it might just let Carnival test the waters before it dives in. 

The Big Three face myriad medical and technical challenges as to how to resume cruising, from what to do with ventilation systems and how to implement social distancing on board mega-ships that carry thousands of passengers – and that in an industry that needs over 80 percent booking to break even.  

Small is beautiful 

The economist E.F. Schumacher once wrote that “small is beautiful” and in the cruise industry that could well apply when it comes to getting boats back on the water. 

American river cruise operators are already planning a staged return in June, with many of them operating ships that fall below the CDC prohibition on more than 250 passengers. While river cruise operators will have to take similar measures to their seafaring counterparts to guard against coronavirus outbreaks, their high guest-space ratio should put them in good standing, as well as the fact that they are easily accessible from private vehicles without having to rely on flights – a factor that was key in Carnival’s choice of ports for the resumption of its operations. 

Operators of expedition cruises, a sector that was booming prior to COVID-19 with over 30 ships in construction, could also come out on top. 

Steve Ebsworth, co-founder and CEO of luxury yacht operator Rascal Voyages, told CNBC the pandemic could accelerate a wider industry shift toward “more considered,” smaller-scale travel. 

“People will want to be closer to nature, closer to the beach, closer to animals. I think the winners will be any experience that leans heavily towards that,” he said.

Polar cruise operator Lindblad Expeditions — which is due to roll out the 126 guest National Geographic Endurance ice class explorer later this year (described by the company’s CEO Sven Lindblad as the most extraordinary expedition ship ever built) —  talked about the difference between expedition ships and ocean cruise liners in light of the coronavirus crisis during a recent earnings conference call.

Polar bear

We believe there are significant advantages to our size of 48 guests, our smallest ship, to 148, our largest. On most levels, developing protocols, communication and monitoring are so much easier with this sized community,” Sven Lindblad said. 

“The other advantage that we have absolutely clearly aside from size is that we need very, very little external logistical support,” he explained. “If you think about a cruise ship, for example, that goes from port to port, they have to book the ports. They have to coordinate with other ships, so there aren’t too many in any particular time… it’s a massive logistical exercise. 

“For us, we get to a place, we drop the anchor, we drop the zodiacs, we take people ashore with our naturalists. They take a hike. They jump into a kayak or whatever. So, we control the logistics. And so, starting up again and reactivating requires a small, tiny fraction of what the cruise industry needs in order to reactivate.” 

For those looking to book now, there may never be a better time to book at discount prices 

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