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 (NYSE:CCL) (NYSE:CUK) and Royal Caribbean (NYSE:RCL) are both down 5.5%, and Norwegian Cruise Line Holdings (NYSE:NCLH) is doing worst of all -- falling 6.4%.
And you guessed it: The coronavirus is to blame.
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.
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.