What happened
For the second day in a row, Carnival (CCL -0.39%) (CUK -0.55%) stock is sinking. After falling 1.6% from Friday's close on Monday, shares of the cruise ship operator are down another 2.5% as of 11:11 a.m. EDT on Tuesday.
It's not hard to figure out why.
Image source: Getty Images.
So what
On Monday, The Miami Herald reported that in an effort to keep its ships free of the novel coronavirus -- but also comply with a Florida law forbidding cruise companies from requiring that passengers show proof of vaccination against it -- Carnival has decided to demand that vacationers purchase "special COVID-19 travel insurance" if they want to board its ships.
In theory, Carnival, like its rival Royal Caribbean (RCL 0.61%), wants all passengers to be vaccinated because, according to the U.S. Centers for Disease Control, a cruise line that requires 95% of its passengers to be vaccinated can get a "conditional sailing certificate" without needing to run a "simulated sailing" beforehand. Florida, however, has stepped in to forbid vaccination requirements -- and will fine any operator that requires them.
To achieve its goal without running afoul of the law, Carnival will permit passengers who don't show proof of vaccination to instead purchase travel insurance covering at least $10,000 of medical expenses and $30,000 of emergency medical evacuation expenses and to pay a $150 fee for a COVID-19 test to prove they are not currently infected.
Now what
So why is that bad news for Carnival stock (and for Royal Caribbean, too, which has instituted a similar policy)? Simply because loading on fees and a requirement to purchase travel insurance makes the company's services more expensive, potentially deterring customers from sailing, and without adding anything to the revenue that Carnival will collect from the added expense.
It's bad news for the stock -- but necessary to stay within the lines drawn by Florida's government.
