Please ensure Javascript is enabled for purposes of website accessibility

1 Trend That Is Getting Better at Carnival

By Rick Munarriz – Updated May 14, 2020 at 3:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The news isn't kind for the cruise line industry these days, but the global leader does have some good news on the refund request front.

Belts are being tightened at Carnival (CCL 13.29%) (CUK 14.50%) as the world's largest cruise line operator is announcing a combination of layoffs, furloughs, reduced work weeks, and salary reductions across the company on Thursday. Despite raising $6.4 billion in additional liquidity last month -- enough to keep it afloat through next year -- industry uncertainties dictate taking a stand sooner rather than later even as many of its crew members await to be repatriated off of the ships they are currently not allowed to leave.

Carnival's press release isn't all negative. It does point out that booking trends for the first half of next year remain within historical ranges -- even though it's not clear if Carnival is talking about only new bookings, or if it's also including the passengers on cancelled sailings who are applying future cruise credits to 2021 vacations.

On a potentially related and more encouraging note, Carnival is also saying that less than 38% of its passengers on cancelled sailings are requesting refunds. 

Carnival Corp.'s Costa Fortuna cruise ship docked at Nagasaki

Image source: Carnival Corp.

Shore leave 

Carnival, Royal Caribbean International (RCL 16.65%), and Norwegian Cruise Line Holdings (NCLH 16.84%) are giving passengers on nixed cruises the option of a refund -- warning in some cases that it may take as long as three months to process -- or the ability to use the money that's already been paid as credit for a future sailing. Cruise lines have tried to improve their chances of preserving the money they've already collected by sweetening the deal for future cruise credit, giving folks hundreds in onboard credit or up to 25% in additional value for what they already paid. 

Having just 38% of its passengers requesting refunds is a good thing, especially since a month ago, Carnival was saying that 55% of the people contacting the cruise line about cancelled sailings wanted their money back for the month of March. If anything, one would figure the percentage of folks wanting cash refunds would get worse over time, especially as sailing resumption dates keep getting pushed out and negative industry headlines are everywhere. 

One can always hope for a little more clarity out of Carnival regarding that 38% refund request rate. Does this mean 62% of the customers have actively opted for future cruise credit, or is it also including folks who have yet to contact Carnival with a decision? It's still an encouraging development.  

"The majority of guests affected by our schedule changes want to sail with us at a later date," reads Carnival's announcement on Wednesday. That certainly was not the case with the first wave of affected passengers who were reaching out to the cruise line in the first few weeks of cancelled trips. 

Carnival's news is in line with what Royal Caribbean reported earlier this month. The country's second largest cruise line operator had also reported that bookings for next year were in line with historical ranges and that fewer than half of its passengers -- in Royal Caribbean's case, 45% of them -- were asking for their money back. 

This is obviously a fluid situation. A lot has to happen for the cruise lines to start sailing again, and most of it is now out of their control. We also don't know what the consumer appetite for sailings will be once a plan is in place for exactly what the cruising experience will be like with the inevitable safeguard measures in place.

There's also the pesky -- and at this point seemingly inevitable -- global recession that will be in play at the other end of this pandemic crisis and how that could limit the ability to pay for future sailings. However, for now, Carnival shareholders can take comfort in knowing that its refund request rate is improving -- and that matters. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$43.85 (16.65%) $6.26
Carnival Corporation Stock Quote
Carnival Corporation
$7.76 (13.29%) $0.91
Carnival Corporation Stock Quote
Carnival Corporation
$6.87 (14.50%) $0.87
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$13.32 (16.84%) $1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.