What happened
Cruise stocks floated higher on the back of a positive outlook from Norwegian Cruise Line Holdings (NCLH +4.78%) Tuesday. Norwegian noted that "net booking volumes have continued to improve sequentially" as the omicron wave of COVID-19 begins to subside. It expects to have its full fleet back in operation by the second half of this year, and as a result, "pricing for the first half, second half, and full year 2022 are above the record levels for the same time in 2019."
So, good news all around, and what's true for Norwegian is presumably true for its competitors, too. Still, I don't think that this is the biggest reason that shares of Norwegian stock are up 4.3% as of 10:55 a.m. ET Wednesday, or why rivals Royal Caribbean (RCL +8.75%) and Carnival (CCL +6.79%) are up 2.2% and 2.4%, respectively.
Image source: Getty Images.
So what
I think the reason all these cruise stocks are flying today is masks.
I'm referring to the other bombshell that Norwegian Cruise dropped yesterday: It's ending its requirement that all passengers wear masks on board its ships to slow the spread of the coronavirus. "Our cruises ... operate with 100% vaccination of crew and guests age five and over, therefore face coverings are not required while on board," explained Norwegian yesterday, as CruiseIndustryNews.com reports.
True, Norwegian is still encouraging passengers to wear masks in most situations -- indoors and outdoors as well. But going forward, following this recommendation will be optional and "the decision to wear a mask covering when on board is at the discretion of each guest."
Now what
So far, neither Carnival nor Royal Caribbean have imitated Norwegian Cruise in removing their own mask requirements. Maybe they've decided to use their competitor as a guinea pig, and see if Norwegian's new policy results in a noticeable uptick in infections reported on board. But barring a surge in COVID-19 on Norwegian cruises, I expect we'll see Carnival and Royal Caribbean remove their own mask requirements in very short order.
And this is huge news for the cruise industry. Already, the CDC has basically given the cruise industry the all-clear, indicating it has no intention of reimposing cruise bans on cruise companies. Furthermore, at this point, most everyone who is inclined to accept a vaccination already has been vaccinated. That means that, currently, the only impediment to most passengers signing up for a Carnival cruise, or a Norwegian or Royal Caribbean cruise, is the requirement to wear uncomfortable masks 24/7.
Once that requirement has been lifted, I think it's safe to say the cruise stocks recovery will be in full swing.
