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Carnival Offers Its Ships as Hospitals During the Coronavirus Crisis

By Pearl Wang - Mar 22, 2020 at 9:20AM

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Making its docked vessels available as makeshift hospitals is a smart move, but will it mitigate the damage to the industry?

Late this week, Carnival (CCL -14.67%) announced its offer to governments and health authorities to use its cruise ships for temporary medical facilities, as the growing number of COVID-19 cases could put pressure on land-based hospitals. This could be seen as a good PR move for the company and a positive move as well since the cruise industry has been under intense pressure because of ships being linked to the spread of the disease.

Shares of Carnival are down 76% year-to-date, following the global public health debacle around the coronavirus. Carnival announced plans to suspend all cruises through April 9, with service resuming on April 10. On March 19, Carnival announced that its first-quarter earnings were halved to $0.22 a share versus $0.49 a year ago, citing a $0.23 per share impact from COVID-19-related cancellations.

Given the severity of the current health crisis, on top of the COVID-19 deaths and infections linked to some cruise ships, it will likely take time for consumers to become fully comfortable with taking cruises. The move to offer its ships as hospitals is a step in the right direction for Carnival to regain goodwill from customers.

Carnival Cruise ship

Image source: Carnival.

How Carnival plans to help

Carnival, the world's largest cruise operator, is offering a number of its ships as makeshift hospitals in the midst of the pandemic. It is offering governments and health authorities the use of vessels from its Princess Cruises, Carnival, Holland America, and P&O Cruises Australia brands.

Cruise ships can be provisioned to serve as floating hospitals with monitoring devices and medical equipment that can help patients dealing with non-COVID-19 issues. The cruise ships' medical centers could be transformed into seven intensive care units (ICUs) with key medical devices and ventilators. "If needed, cruise ships are capable of being quickly provisioned to serve as hospitals with up to 1,000 hospital rooms that can treat patients suffering from less critical, non-COVID-19 conditions," according to Carnival's press release.

The use of cruise ships for floating medical facilities would free up space in existing hospitals to treat cases of COVID-19, which could be a life-saving measure for some severely ill patients. Italy's hospitals have been overrun with novel coronavirus patients, leading to staff having to decide who gets a hospital bed and who is turned away. U.S. medical experts are warning that some hospitals here could also face a shortage of intensive care beds for the growing number of COVID-19 sufferers.

This move helps Carnival's brand

This is likely a good move for the leisure travel company's image, which will need a boost once the pandemic has receded. The whole cruising industry will likely need to rebuild trust with customers following reports of eight COVID-19 related deaths aboard the Diamond Princess and quarantines of thousands of passengers on other ships.

Consumers have been spooked by reports of coronavirus transmission on cruise ships. The U.S. State Department has advised Americans, especially those with underlying health issues, against taking cruises, warning that there's higher risk of contracting COVID-19 aboard cruise ships. The government noted that cruise passengers could face quarantines and other international travel restrictions.

COVID-19 tends to cause serious complications for elderly people and those with underlying health conditions. The median age of travelers on cruise ships is between 60 and 69, with 19% of passengers in this age bracket, according to travel provider Cruise1st. If this demographic continues to shun cruises after the pandemic is controlled, it could hurt Carnival's business for a prolonged time, and it may need to woo a younger demographic.

With the offer of its ships in treating the ill, Carnival could be viewed positively after coronavirus resolves, by doing its part to assist in the global health crisis, potentially generating goodwill.

The cruising industry will recover eventually, but it's uncertain how much time it will take. While offering ships as temporary healthcare facilities is a move in the right direction, Carnival will likely experience short- to mid-term turbulence as the whole industry normalizes.

 

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