Theme parks have begun making concrete plans to reopen. Las Vegas casinos have done the same, as have hotels all over the country. These join restaurants that have begun welcoming customers, and retailers that have thrown open their doors as society heads haltingly toward a new normal with face masks, limited capacities, and social distancing guidelines in place.
The three major cruise lines -- Royal Caribbean (RCL 16.65%), Carnival (CCL 13.29%), and Norwegian (NCLH 16.84%) -- want to take the same path and get their ships back out to sea. Carnival has even listed August 1 as the day it plans to restart operations, and Royal Caribbean has hinted at a similar timetable.
That's encouraging for shareholders and fans of cruising, but it may not be realistic. The precautions that work in a restaurant won't be enough to keep thousands of people living in close quarters for multi-day periods from spreading coronavirus. That makes it very difficult to picture the U.S. Centers for Disease Control and Prevention (CDC) allowing cruising from U.S. ports in a way that makes sense for consumers and cruise lines.
The dilemma facing the cruise lines
All three publicly traded cruise lines plan to step up health checks for customers. This will include temperature screening and more extensive reviews with medical professionals where needed. That goes along with stepped-up cleaning measures, revamped buffets, and, likely, constrained capacities.
Those measures, however, can't account for what happens if someone shows symptoms onboard. It seems likely that rapid testing could be available. In the event of a positive test, that person can be quarantined -- but he or she may have already spread the virus. If that happens, what will the procedure be? Will the whole ship be locked down? Would customers be stuck onboard?
All three cruise lines need to make a clear plan for getting exposed customers off a ship and safely into a self-quarantine situation. That's something the CDC will want to know, and it's relevant information for potential cruisers who fear being stuck onboard.
It's possible that there are procedures that could be put in place to deal with this, but it gets complicated when you factor in people traveling by plane to take a cruise. Many passengers, at least in the early days, will be local, and they can exit the ship, drive home, and self-quarantine.
That's harder to do for out-of-state customers. Will the cruise lines quarantine those passengers in a hotel? Might they fly them home on charter planes, or drive them in specially equipped vehicles?
None of those solutions are cheap, and they're not easy to implement even if the cost weren't an obstacle.
Should you buy cruise line stocks?
All three companies have taken major steps to increase their liquidity to survive longer without revenue coming in. At some point, however, not being able to cruise may lead to more drastic measures, including bankruptcies.
Royal Caribbean, Carnival, and Norwegian need two things to be able to turn their businesses around. The first is, of course, CDC approval to cruise. The second is for consumer demand to return.
Diehard cruisers who live near terminals will likely be the first to come back. Those regulars, however, generally pay lower prices, and some even get comped. To succeed in the long-term, the cruise lines need casual customers to come back. They probably will, but when remains a major question.
There's some long-term upside in buying cruise line stocks if you have the investing mentality to take on risk. If these companies can't cruise or customers are slow to come back, though, bankruptcies remain possible.
Before the pandemic, these companies were profitable. They could be again -- and that makes them investable -- but it's important you know that along with big upside comes major risks.