What happened
Cruise tourism stocks Royal Caribbean (RCL 3.55%), Carnival (CCL 3.57%), and Norwegian Cruise Line Holdings (NCLH 5.39%) dropped in Tuesday morning trading. As of 11:11 a.m. ET, Norwegian Cruise Line stock was down 4.8%, Carnival had fallen 6.6%, and Royal Caribbean led the pack lower with a 7.2% loss.
You can thank Vladimir Putin for all of the above.
Image source: Getty Images.
So what
Last week, Russian troops invaded Ukraine, and they continue to bomb, missile, and generally wreak havoc across the country. Of particular pertinence to cruise line stocks is the fact that Russia began its assault on its neighbor last week with a de facto naval blockade, as the Russian navy conducted "exercises" off the Ukrainian coast.
The threat to commercial shipping (and Black Sea cruises) shifted from potential to actual as the conflict progressed, with Russian forces first rocketing the Ukrainian outpost at Snake Island to the south of Odessa, and then apparently widening their war to attack commercial vessels doing business with Ukraine. At last report, at least two such ships, the Panama-flagged dry bulk carrier Namura Queen and Moldovan fuel tanker Millennium Spirit had been hit by missiles.
Now what
As if the presence of a shooting war in the Black Sea wasn't bad enough news for cruise stocks (each of Norwegian, Carnival, and Royal Caribbean used to list Black Sea cruises on their itineraries), the West has responded to Russia's invasion by levying financial sanctions against Russia -- and this is having an impact on cruises even nowhere near the conflict zone.
Last week, first Norwegian Cruise and then Carnival announced they are removing Russian ports of call from their European cruise itineraries. Royal Caribbean appears to be the odd man out in this regard. But CruiseIndustryNews.com reports that at Carnival at least, Russian cruises will likely be off the table "for the foreseeable future."
In light of the recent attacks by Russia in Ukraine, Carnival Corporation brands will be modifying our itineraries in the coming week once alternative ports can be confirmed. We stand for peace.
-- Carnival Corporation (@CarnivalPLC) February 26, 2022
How big of a deal will this be for the cruise stocks?
Historically, European cruises have accounted for less than 18% of overall revenue at Royal Caribbean, but about 26% at Norwegian, and more than 30% at Carnival. Granted, much of this revenue will be tied to cruises in the Mediterranean and to the West of Europe. Still, some impact on the cruise business has to be anticipated -- and that seems to be exactly what investors are doing today.
