Cruise line stocks got the closest thing to a green light to set sailing again this summer. The U.S. Centers for Disease Control is relaxing its guidelines, allowing Carnival (CCL 1.97%) (CUK 3.04%), Royal Caribbean (RCL 1.09%), and Norwegian Cruise Line Holdings (NCLH 1.89%) to resume revenue-generating voyages as soon as mid-July.
It wasn't enough. In a cruel and quite frankly surprising "sell the news" moment the stocks failed to rally on the announcement. Carnival took a 2% hit on Thursday following the Wednesday night development. Royal Caribbean -- the best performing of the three stocks through the pandemic -- suffered a 3% slide on the trading day. Only Norwegian Cruise Line kept its head above water, but the 0.3% gain was less than half of the S&P 500's ascent. Thursday was a great day for the industry, but ultimately a forgettable one for its stakeholders.
A cumbersome restart process is now refreshingly simplified. If a cruise line can certify that 98% of a ship's crew and 95% of its passengers have been fully vaccinated against COVID-19 it won't have to go through costly and lengthy test cruises that were previously required.
There will be other hurdles to clear, but having 98% of a ship's crew vaccinated won't be a deal breaker. The cruise lines have previously committed to having fully vaccinated staffs when they resume sailings. The real challenge will be getting passengers to comply with the 95% vaccination rate.
It's still wild to consider what the cruising industry has had to go through. Airlines, hotel operators, and most of the other travel and tourism stocks didn't have to suspend their operations entirely. If cruise lines begin meaningful operations by mid-July it will be a 15-month hiatus for the industry.
Carnival, Royal Caribbean, and Norwegian Cruise Line have been through a lot. They have collectively raised more than $40 billion just to stay afloat this far, and even though the stocks are trading at sharply lower price points than they were before the pandemic happened they've made all of that back -- and then some -- in enterprise value.
A return to sailing doesn't mean a return to profitability. It will take a while before the industry gets into a good groove, and it remains to be seen the capacity that ships will be able to sail with this summer. Even if we coast through the recovery out of the pandemic, passenger demand will be another issue, especially once we head out of the seasonally potent summer stretch.
The actual timeline for a full recovery matters, but right now it's not as important as getting ships back in the water. We finally have a viable restart window. A lot can happen in the next 2 1/2 months, but it is the first step in the recovery process. Carnival, Royal Caribbean, and Norwegian Cruise Line shares may not have rallied on the news, but they had already earned back their pandemic slides on an enterprise value basis.