It was another rough week for cruise line stock investors, as all three of the publicly traded players failed to keep up with the market and its 3% gain for the week. Carnival (CCL -2.77%) (CUK -2.54%), with a 1% gain, stands out as the lone cruising specialist on the rise, weighed down by a 7% slide at Royal Caribbean (RCL -3.42%) and a nearly 6% drop at Norwegian Cruise Line Holdings (NCLH -2.65%).
This could've been a good week for cruise stocks. The markets in general began to move higher on optimism that the U.S. is laying down the groundwork to start reopening the economy, essentially the first step to eventually get cruise ships sailing with passengers again. There was also a jaw-dropping revelation late last week in a Los Angeles Times story about the surprising consumer appetite for future sailings. Online cruise marketplace operator CruiseCompete.com is quoted as saying that it has seen a 40% increase in bookings for 2021 in the past 45 days compared with where things were last year. It's a metric that seemed too good to be true -- largely because it wasn't true.
Not so bon voyage
A 40% surge in advance bookings would be huge, but it seems as if somewhere along the way the marketplace's metric was distorted. CruiseCompete's CEO clarified the statistic in an interview with The Points Guy, explaining that the increase refers to the shift to far-off sailings instead of the last-minute bookings for cruises leaving in the next few months.
Bookings for next year are actually running 23% below the pace CruiseCompete was seeing a year earlier. Bulls will argue that just the fact that there's some level of activity -- and not just from people putting future credits from cancelled sailings to work -- is a victory for Carnival, Royal Caribbean, and NCL. This is also just one online marketplace seeing things through its own flow of customers. Some travel agents specializing in cruises are seeing actual improvement.
It's hard to take third-party information as gospel, especially for a highly fragmented industry with so many marketplaces commanding thin slices of the overall market. The only source that ultimately matters is what the three actual cruise lines see, and for now even they're not sure what the future holds.
Carnival's CEO was on CNBC's Closing Bell on Tuesday, and while Arnold Donald did classify 2021 bookings as "substantial" and "strong," he wasn't ready to stack up its performance against where it was a year earlier. The road back won't be easy. Royal Caribbean reportedly laid off more than a quarter of its U.S. workforce this week, and that's not the kind of move you see a company make if it expects to bounce back anytime soon. Royal Caribbean waited until Friday afternoon to announce that it's suspending all of its sailings worldwide through at least June 11.
Investors know this industry is in a bind, and that's why the three stocks are trading for less than a quarter of what they were fetching during their January peaks. The companies have lined up liquidity to get them through the next few rough months, but this industry will undeniably wind up being one of the hardest hit sectors as a result of the coronavirus crisis. The good news will be hard to believe until there's an to the bad news.