It was naive to think that Royal Caribbean (RCL 1.23%) was going to start sailing again in May. Last month, rivals Norwegian Cruise Line Holdings (NCLH 0.66%) and Carnival (CCL -0.42%) (CUK -0.55%) pushed out the restart dates for most of their vessels until at least June. Royal Caribbean was just fashionably late by waiting until Tuesday to spill the beans.
Only a pair of Royal Caribbean ships sailing out of Singapore and Israel will be taking on passengers before June now. Pushing out the restart line is getting tiresome, particularly for customers who canceled 2020 voyages for springtime sailings this year that are also not happening. The three cruise lines aren't happy about the situation either. There's a lot of cash being burned in what will be an interruption of 14 and a half months. However, the industry's turnaround is a lot closer than you might think. We'll be cruising soon, and if you're a cruise line stock investor Royal Caribbean continues to be the best name to own.
Image source: Royal Caribbean.
Making waves
Waiting another month isn't necessarily a bad thing. We'll be a month deeper into the vaccination process, and it wouldn't be a surprise if the cruising experience is a lot more like the pre-COVID experience than it was with the originally proposed passenger and crew restrictions.
It's probably not a coincidence that all three of the major cruise lines have now drawn a line in the sand at resuming operations in June. President Biden said last week that there should be enough vaccines produced by the end of May for every adult in the country. A big reason Royal Caribbean is taking Israelis through the Greek Isles and Cyprus in May is that 80% of the country has already been vaccinated. It's easy to restrict sailings to fully vaccinated passengers and crew members and still fill up a ship.
Whether or not June sticks as the restart date for Royal Caribbean, Carnival, and Norwegian Cruise Line it would be a shock if there's at least some degree of activity during the summer travel season. The industry will be back, and between pent-up demand, stimulus checks, and money that a lot of people have saved this could be a potent recovery for the hardest hit niche among consumer transportation stocks.
All three stocks have already started showing signs of life since the vaccination process commenced late last year. Let's go over why Royal Caribbean should be at the top of your shopping list.
Royal flush
Royal Caribbean has been the better performer of the three publicly traded cruise lines since the pandemic began. They may have all suspended their operations around the same time and aggressively pursued stock and debt to keep their liquidity buoyant, but Royal Caribbean has always been the class act here. No one matches Royal Caribbean's margins when the going is good, and even when things were anything but good Royal Caribbean had the lowest percentage of passengers requesting cash refunds on nixed sailings.
It also helps that Royal Caribbean had some encouraging words to offer when it posted fresh financials two weeks ago. Its latest quarter was understandably a mess, but the segment darling turned heads when it revealed that bookings for the first half of next year are roughly where they historically been at this point. As a bonus, passengers aren't flinching at higher price points.
With 30% of the country now fully vaccinated -- and 60% with at least one shot in the arm -- it wont be long before the cruise industry gets the shot in the arm that it desperately needs. The cruise line industry is going to spring to life soon, and Royal Caribbean will continue to be the one leading the way on Wall Street.
