Please ensure Javascript is enabled for purposes of website accessibility

Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks All Sank Friday

By Rich Smith - Jan 29, 2021 at 4:03PM

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

Coronavirus mutations pose a particular problem for cruise lines.

What happened

Cruise line stocks, which broadly popped Thursday on no particular news, are closing the week on a down note Friday afternoon. As of 2:50 p.m. EST, shares of Carnival (CCL -1.33%) (CUK -1.20%) and Royal Caribbean (RCL -0.39%) are both down 5.5%, and Norwegian Cruise Line Holdings (NCLH -0.80%) is doing worst of all -- falling 6.4%.

And you guessed it: The coronavirus is to blame.

Collage showing a cruise ship, a person in a face mask, and coronavirus particles

Image source: Getty Images.

So what

Everyone knows all about COVID-19 by now, and what it did to the cruise industry. You've probably also heard of the U.K. variant of the coronavirus, a more virulent and possibly more deadly mutation of the disease. But there's also a third mutation to worry about, B.1351, which was first identified in South Africa. As The Washington Post reports today, it's this last variant that is convincing governments in Canada, Britain, and Germany to introduce new travel bans on top of the restrictions that were already in place.  

For a time, Europe was actually one of the few places on earth where cruise companies seemed willing to give resumptions of cruise activity a shot, but as new travel restrictions slam into place, that's looking increasingly unlikely now. For that matter, even where outright bans aren't being contemplated, traveling is getting harder. In Canada, for example, there are discussions about mandatory testing and quarantine for all returning travelers. Here in the U.S., Dr. Anthony Fauci says B.1351 is a "wake-up call" that makes accelerating the rate of vaccinations even more important.

Now what

How does this impact investors in cruise line stocks in particular? Well, new travel bans are obviously not good news for any company in the cruise industry. But even restrictions short of a ban could pose a problem.

Just last week, U.K.-based Saga Cruises announced that even once cruising resumes, it will require that all passengers be able to show proof of vaccination before they are allowed to board. "The majority of our guests fall into the at-risk age bracket," explained Saga, "and our priority is their safety and wellbeing."  

Now, Saga is just a small operator -- two ships in its fleet -- so where it sails, other, larger cruise lines may not follow. But last month, larger Norwegian Cruise confided that it, too, is considering whether to require passengers to show proof of inoculation. The Post also reports that Carnival and Royal Caribbean are taking a wait-and-see approach -- not yet requiring mandatory vaccination but not ruling it out, either.

On the one hand, requiring vaccinations seems prudent both for purposes of containing the pandemic's spread and reassuring customers that it's safe to cruise again. On the other, getting everybody vaccinated is going to take time. And the longer it takes, the longer cruise companies will have to wait to resume cruising -- and the more cash they'll burn while they wait.

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

Carnival Corporation Stock Quote
Carnival Corporation
CCL
$14.09 (-1.33%) $0.19
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$61.39 (-0.39%) $0.24
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$13.15 (-1.20%) $0.16
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$16.09 (-0.80%) $0.13

*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 service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

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.