What happened
Carnival (CCL +0.57%) (CUK +0.60%) stock fell more than 3% by midday Thursday, the fourth day this week the company's stock had fallen. It closed at $22.58 on Wednesday, opened at $22.30 on Thursday and fell as low as $21.64 in mid-morning trading. It was part of an industrywide trend as Royal Caribbean and Norwegian Cruise Line Holdings were also down on Thursday.
So what
A number of factors are behind Carnival's reversals this week. The company followed Royal Caribbean in requiring that unvaccinated passengers 12 years old or older would have to purchase travel insurance and also added that they pay a $150 fee for COVID-19 testing and other precautions.
Cruise companies are under pressure internationally to prevent the spread of COVID-19, but Florida recently passed a law forbidding that cruise lines require passengers to show a proof of vaccination. That's a problem because Florida is the No. 1 spot for cruise embarkations in the United States, responsible for $9 billion in tourism revenue for the state and 159,000 jobs, according to Carnival.
Image source: Getty Images.
The requirement for travel insurance and the fee accomplishes two things, neither good for Carnival. It discourages discount-minded travelers because of the extra expense and it signals, to the vaccinated and unvaccinated, that perhaps COVID-19 is still a major problem for cruise vessels, where passengers are in close contact with one another.
The other concern that might be driving the stock down is the company is still losing money. It recently said in its half-year report that it lost $1.4 billion in the first six months of 2021, compared to a $1.6 billion loss in the first six months of 2020.
Now what
The company just had its first departure in 16 months from PortMiami when Carnival Horizon began a six-day cruise for the Dominican Republic and the Bahamas on July 4. A day before that, it had its first departure from the U.S. in 15 months when the Carnival Vista left Galveston, Texas, for a weeklong trip to Honduras, Mexico, and Belize.
As the company begins to have more and more departures from the U.S., barring any COVID-19 outbreaks onboard, the good news should eventually drown out the bad news for Carnival, particularly when it begins to see increased funds from operations.
There's plenty of pent-up demand for travel because of the limitations travelers faced last year. Carnival recently announced a 40-night cruise from England to the Caribbean and even at roughly $3,000 per ticket, it sold out in six hours.
