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Cruise Stocks Bounce Back After Omicron Sell-Off
After sinking to 2021 lows, cruise stocks appear to be bouncing back. A November sell-off was exacerbated by concerns around the highly-publicized omicron variant, which stoked fears across the industry that short-term demand for cruising could be dampened.
However, early signs indicate the new variant may not have as big an impact on cruise demand as previously thought. According to Forbes, investors are growing less fearful about the severity of the variant and the subsequent impact it will have on travel plans.
Cruise bookings rose just weeks after the initial news broke of the omicron variant as wave season rapidly approaches. Wave Season is the approximate three-month period from January 1 to March 31 when cruise lines typically book the largest number of cabins.
Per Seatrade Cruise News, last week’s purchases were up 35% compared to the same week two years prior, highlighting a steady return toward pre-pandemic norms. 2022 Alaska cruises have seen the strongest interest with sales doubling over the same week in 2019, while Europe cruise purchases are up 26% over that same time.
The big three of Norwegian, Carnival and Royal Caribbean all reported jumps in quarterly revenue as sailing slowly resumed, yet pre-pandemic profitability has yet to return.
Norwegian Cruise Line has seen steady growth in bookings since it returned to the seas over the summer and has experienced two major waves of sales. Travel Market Report writes that the company’s Norwegian Prima line broke all previous NCL booking records a few months back and that Black Friday sales were nearly on par with 2019 levels.
Keene Luxury Travel Executive VP Susan Walsh told Travel Market Report that she expects a strong wave season, noting that most cruisers are continuing with their travel plans after news of the omicron variant broke.
Demand for cruises, and travel in general, is still set to be unleased in 2022 as operations ramp up and cruises remain on a path toward profitability.
2022 Bookings, Pricing Remains Strong as Capacity Ramps Up
Carnival and Norwegian are both predicting profitability in 2022, boosted by bookings inching close toward pre pandemic figures, writes Forbes. Morningstar analyst Jaime Katz notes that consumer behavior regarding travel should continue to return to normal over the next year, which will restore positive profits to major cruise operators.
Further, fleet redeployments are “well under way” and should accelerate as consumers return to the seas in 2022. Cruise Industry News reports that global cruise capacity is expected to jump 8.4% in December, reaching nearly 60% of the global cruise fleet.
68 of the roughly 90 active cruise lines are now sailing with guests again, and the number of passengers per voyage is growing as well. Average capacity per ship has gone from 1,109 guests in June 2021 to 1,782 in December, an indicator that consumers are growing more comfortable with sailing and less fearful about new COVID-19 variants.
Royal Caribbean outgoing CEO Richard Fain told CNBC that the cruise line is seeing historically strong bookings for next summer, with plans to use the cash to pay down debt incurred during the pandemic shutdown.
Royal Caribbean’s sailings for full-year 2022 are booked within historical ranges and are priced even higher than 2019 rates. For the overall cruise industry, bookings are 22% above what they were during the same period in 2019.
The Wall Street Journal recently reported on the discounts cruise operators are giving to travelers with hopes of bringing back sales at a faster rate. Unfortunately, discounts are sinking near-term pricing, as short-term windows to sell near-term tickets have created lower rates. In some cases, once companies begin discounting, it can take years for tickets to return to pre-discounted levels.
However, that does not appear to be the case this time around as the pandemic created an unprecedented level of pent-up demand for travel that may not fall in line with historical pricing trends. Tickets for the second half of 2022 are already holding strong, up 5-7% compared to 2019 rates with luxury lines showing the greatest strength.
The Wall Street Journal notes that while there might be some near-term discounting, demand should exceed supply longer-term as there is a limited number of yards building cruise ships each year. That creates an environment for pricing stability, meaning lower near-term rates may not have much of an effect on ticket prices after all. |
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