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Why Royal Caribbean Was Sailing 10% Higher in December

By Rich Duprey – Jan 8, 2022 at 1:37PM

Key Points

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Despite widespread outbreaks of the omicron variant, the cruise industry is enjoying smooth sailing.

What happened

Considering the omicron variant of COVID-19, it might be natural to believe Royal Caribbean (RCL 0.89%) would have run into a rogue wave in December, sinking its shares. Yet according to data provided by S&P Global Market Intelligence, the cruise ship operator's stock gained 10.1% for the month and it's tacked on another 5% so far in January.

Royal Caribbean still sits well below its 52-week highs, but the cruise line doesn't look like it's heading to Davy Jones' locker.

Mother and daughter on deck of cruise ship.

Image source: Getty Images.

So what

Royal Caribbean -- and the entire cruise ship industry, really -- actually finds itself looking forward to some smooth sailing despite the prevalence of likely omicron cases across the country. 

Indeed, despite the cruise operator's Symphony of the Seas docking in Miami in late December with 48 cases of COVID-19 among its crew and passengers, there was no sense of doom about any damage it might cause the cruise line. The ship set sail later that day for a weeklong excursion with another full set of passengers ("full" being relative, as cruise ships are operating at reduced capacity). 

It's become increasingly apparent that the coronavirus is something we're going to have to live with going forward, much like the seasonal flu. The panic that had marked previous outbreaks is not obvious anymore, as more individuals are determined to return their prior normal lifestyles.

Now what

That's good news for Royal Caribbean because a return to normalcy means more people wanting to take cruises. Even in the face of the U.S. Centers for Disease Control warning people not to take cruises and The Washington Post calling ships "petri dishes," the facts don't bear this out. 

Royal Caribbean Chairman and CEO Richard Fain noted at the end of December that despite the prevalence of omicron, since the cruise line returned to sailing in June 2021 it has carried 1.1 million guests with just 1,745 people testing positive for COVID-19, a minuscule 0.02% positivity rate. 

Couples on deck of cruise ship.

Image source: Getty Images.

Fain said, "We don't like to see even one case, but our experience is a fraction of the comparable statistics of virtually any other comparable location or industry."

The cruise line added that cruising is one of the very few vacation options available to travelers and tourists where nearly everyone you come in contact with is fully vaccinated.

In Royal Caribbean's third quarter, which ended in October, the cruise line said while it has a large deficit to make up for, second-quarter bookings were better than those in the first quarter, and third-quarter bookings were better than the second. 

It's looking forward to an even better 2022, and investors may find the disruptions that cruise line stocks suffered over the past two years are now sailing off into the distance.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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