Cruise line investors embark on the wrong ships

Fears that the Delta variant could hinder the expected recovery of cruise lines have weighed on the sector lately. But shares in Norway have been especially low this year, falling more than 7%, while shares in Carnival Corp.

and Royal Caribbean Group have recorded slight gains during this period.

Investors can be on the wrong side of this trade for multiple reasons. On the one hand, passengers in Norway tend to be older, which makes the fact that young children still cannot receive vaccines less relevant. On the other hand, Norwegian brands stand out more than their peers.

Luxury is important right now. Based on his conversations with major travel agencies, Truist Securities analyst Patrick Scholes said in a July note that recent bookings for 2022 were significantly higher than those made two years earlier for markets that were skewing. to premium price shipping like Alaska, Europe and the Mediterranean. Meanwhile, its channel checks showed that the reserves of more cruise ships in the mass market, such as those in the Caribbean, fell by up to 25% over the same period.

These data points seem to suggest that consumers are booking cruises for larger trips, with a full list, rather than shorter weekend getaways, he said. If true, this is good news for Norway, which, along with Carnival, seems to have historically had relatively lower exposure to the Caribbean and many trips to Alaska and Europe.

The extension of Norwegian’s mandate comes despite the Centers for Disease Control and Prevention essentially requiring that 95% of the crew and 95% of passengers be fully vaccinated so that ships can start sailing without having previously taken cruises. test. Meanwhile, Royal Caribbean said earlier this month it expects 90% of all its guests to be vaccinated, even if they do not require children under 12.

“Enough passengers might prefer a 100% vaccinated boat to a 90-95% ship that could give [Norwegian] best price and volume? UBS analyst Robin Farley asked in an August note.

The answer may vary by geography. Florida, a major U.S. cruise center, has banned companies from requiring Covid-19 vaccine testing, which Norway has successfully challenged for now. But Ms. Farley worries about the loss of Norwegians in Florida’s family summer travel market, and estimates that 15% to 20% of passengers on summer cruises in the Caribbean are children.

However, given the continued proliferation of the Delta variant, a 10% difference in the vaccination rate could begin to seem much more significant in the eyes of consumers, especially in the event of a major outbreak on any vessel. It should also be noted that many ports outside the United States have their own vaccination requirements, meaning that cruise lines that do not require vaccination of all passengers may need to offer different experiences for different passengers.

According to a July survey conducted by cruise review site Cruise Critic, 55% of respondents said they would be less likely to book a cruise that offered a different passenger experience depending on vaccination status, and 48% he said he would look for a boat where everyone had to be vaccinated.

With many schools finally returning to the session, childless travelers are likely to be booked more often for unlisted trips. Although after another year working at home with their children, it is not crazy to think that parents who plan these trips dream of their own escape.

Overall, Norwegian’s bet seems both safe and healthy.

Write to Laura Forman at [email protected]