All three of the country's cruise-line stocks inched lower on Monday, despite the general market moving higher. Shares of Carnival, (NYSE:CCL) (NYSE:CUK), Norwegian Cruise Line (NYSE:NCLH), and Royal Caribbean (NYSE:RCL) didn't slide by much. We're talking about a 1% to 3% dip between the three seafarers. However, it's still a notable negative return across the board on a day that was highlighted by promising news on yet another COVID-19 vaccine candidate.
It wasn't that long ago that cruise line stocks would rally on the mere whiff of a potential coronavirus-zapping treatment. It happened last week. What if a vaccine won't be enough? What if Carnival, Royal Caribbean, and Norwegian Cruise Line will need more than just a fix to what has stalled their sailings for more than four months? A cure to the global pandemic isn't the only thing that has to go right to get the industry back on track.
The love boat
A bullish reaction to positive vaccination news makes sense. Cruise ships were hit hard by some of the earliest COVID-19 cases. The novel coronavirus spread quickly, and the contagion didn't end after passengers left the ships. Crew members were stuck on the floating Petri dishes for months awaiting repatriation, and not everybody made it back home.
COVID-19 was particularly fierce on cruise ships. The combination of thousands of crews and passengers in contained spaces and the largely older clientele that have the time and means for luxury voyages made it a hotbed of grim headlines.
Cruise passengers have been skewing younger in recent years with the growing popularity of family friendly vessel features. The average age of a passenger according to industry trade group Cruise Lines International Association is 47 years, but that's pulled lower by summertime getaways when kids are out of school. This will be a lost summer for the industry. We're looking at a fall or winter resumption, and that means we need a healthy scene for vulnerable elderly passengers. A vaccine that is safe for senior citizens will be essential, but -- again -- it won't be enough.
The negative press will weigh on attracting potential passengers, and it's going to take a lot of money to woo frustrated crew members back on board. Cruise lines have also loaded up on debt and equity financing to stay afloat, and that's going to weigh on per-share profitability. A vaccination -- even a less than perfect one -- will lift the CDC's "No Sail Order," but it's not the only barrier for the industry. We're in a recession right now, and cruises don't come cheap.
Even after the pandemic's been licked, it will take some time before the travel industry has a legitimate shot at recovery. Potential passengers will eventually warm up to flying to the embarkation point, but will they truly be comfortable hopping on a cruise ship for a week or longer when the threat of a new virus can spring up? Will they choose instead to fly directly into destinations so they don't get caught on a shipboard outbreak? Carnival, Royal Caribbean, and Norwegian Cruise Line are preparing themselves, but it's going to be a hard sell in more ways than one.