Bad news: Late-breaking reports that the omicron variant of COVID-19 had arrived on U.S. shores shook up cruise line investors on Wednesday, sending shares of Carnival (CUK 4.53%) (CCL 6.14%), Royal Caribbean (RCL 2.28%), and Norwegian Cruise Line Holdings (NCLH 2.05%) tumbling after what had initially looked like it was going to be a "green" sort of a day.
Good news: As the shock wears off, all three cruise line stocks are recovering today. As of 11:40 a.m. ET, Carnival shares are back up 6.2%, with Royal Caribbean and Norwegian not far behind with gains of 5% and 4.7%, respectively.
But is there any good news to explain today's rally?
Surprisingly, no, not really -- and that may be the reason why, despite scoring some relatively impressive gains this morning, shares of those cruise lines have yet to return to where they were trading before the omicron news broke yesterday. In fact, you could even describe the news today as bad for cruise stocks.
As CNBC reports, to slow the spread of omicron, "the Biden administration is tightening travel rules to and within the U.S., requiring all in-bound international passengers to test [negative] for Covid within 24 hours of departure," and also "extending its mask requirement on all domestic flights and public transportation through March 18."
Granted, neither of these measures targets cruise lines or their customers directly. Both actions, however, speak to a heightened sense of worry in Washington, D.C., and both will tend to make traveling a markedly less pleasant experience than cruise customers, and cruise lines, might prefer them to be.
You can debate whether these measures are necessary. (The administration argues that they are, with Dr. Fauci, for example, warning that mutations in the omicron virus may make currently available COVID-19 vaccines less effective.)
What's beyond debate is that tighter restrictions on travel are going to impede the recovery of the cruise business in America. By making cruising less attractive, they're going to postpone a return to profitability by Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings. They're going to dampen the companies' ability to pay down the more than $67 billion in combined debt they are carrying -- debt that was taken on primarily because the cruise companies weren't able to generate revenue earlier in the pandemic, and debt that has now grown to nearly twice the companies' combined market capitalization.
Suffice it to say this is not a great reason to be buying cruise line stocks today.