BA Cruise Bulletin – Future of the Cruise Industry is Bright, According to the Major Cruise Lines
The Industry Begins to Look Beyond the Pandemic
Over the past two months, the cruise industry has continued to propel itself towards a return to normalcy. It appears that we are nearing an inflection point with the worst of the pandemic now behind us. The recovery has been gradual, as it relied on multiple factors including vaccine distribution, declining cases, varied protocols, border restrictions, public perception, and pent-up demand. The industry is now able to look forward to the future with confidence and excitement, a sentiment that was clear from both RCG and NCLH’s Q3 earnings calls last week (and CCL’s last month).
Here are our key takeaways from these calls surrounding the resumption efforts and the optimistic future for the cruise industry.
Full Fleet by Spring & Normal Occupancy Levels by Summer (2022)
A year and a half after the voluntary suspension, BA estimates that 65% of the global fleet has resumed sailing, equated to approximately 3.7 million passengers who have cruised since resumption in June 2020. By year’s end, it is anticipated that ~70% of the global fleet will be in operation, ending the year with approximately 5.5 million passengers sailing in 2021. Based on current announcements from all major brands, they anticipate having ~100% of their fleets back in service by Spring 2022, with full load factors by end of Summer 2022.
Based on statements from their latest earnings calls, each brands’ remaining resumption plans are summarized below:
Protocols are Working, and Restoring Consumer Confidence in the Sector
Many people have said in recent times that cruise ships are now considered to be one of the safest vacation options out there, and for a good reason. Ships sail with a large majority of guests (and crew) fully vaccinated onboard, upscaled sanitation levels, and air filtration systems that guarantee a clean onboard environment. Additionally, operators and ports remain agile and adjust protocols depending on the itinerary or how the COVID situation evolves. The protocols appear to be working at preventing outbreaks onboard, as well as restoring the public’s confidence in cruising.
While it’s hard to know precisely how many cases have occurred onboard since the resumption, each brand provided some statistics which confirm lower incident rates on ships when compared to land. RCG confirmed that since they’ve resumed operations, they have carried over 500,000 guests with only 150 COVID positive cases. That is a 0.03% incident rate.
Not as specific but along the same lines, Del Rio stated that “the prevalence of cases we identified at pre-board testing, mid-cruise and then at debarkation were inconsequential and well below what we all saw in the general population during this time.” As such, NCLH confirmed they will continue mandating a 100% vaccination policy. Per NCL statements – this is coming days after the approval of vaccines for children ages 5 to 11, which will allow for an expanded group of 100% vaccinated guests, especially families, to sail.
Per a USA Today article published Nov. 5, 2021, “From June 26 through Aug. 26, there were 452 confirmed cases of COVID on cruise ships reported by cruise lines to the Centers for Disease Control and Prevention… Of the 452 cases confirmed, 146 were among crew members and 306 were among passengers. Fifty-seven ships reported COVID data to the CDC within the two-month period, 11 of which reported no confirmed cases at all.”
From a booking perspective, which is indicative of pent-up demand and consumer confidence in the sector, both companies confirmed that they are better booked for 2023 sailings, and at higher pricing, than at any similar point of time in the past.
Optimism for the Future via Resumed Investments
Not only did each brand confirm their protocols were working on their Q3 calls, but they each spoke with a renewed sense of optimism in the future of the industry, and the investments they have in the pipeline.
NCLH spoke about the 9 ships to be delivered between 2023 through 2027. Looking into the future, they said they are ready and eager to easily and profitably absorb this new capacity as it will allow them to “further diversify our product offerings and penetrate numerous attractive and high potential unserved and underserved markets globally.” Through these orders, they confirmed that the company’s berth count will grow by some 24,000, or ~40%. In 2023 alone, they will introduce 3 new ships, making their berth capacity ~20% higher than 2019’s pre-pandemic levels.
RCG touched on their destination development. While acknowledging that this was one aspect they had paused during the pandemic, they confirmed that they have re-engaged all of the pre-pandemic plans. Most notably in the immediate future, they have:
1 – An expansion taking place in Perfect Day with the addition of Hideaway Beach
2 – The construction of a Beach Club in Nassau
3 – A new homeport terminal in Galveston, TX
Carnival confirmed they also plan to increase their CAPEX in 2022 and 2023 compared to 2021 levels.
The Return of Profitability
Now that cruising (and revenues) have returned, all companies confirmed record high levels of guest satisfaction and onboard spending. Guests are boarding vessels with a fresh wallet, which coupled with robust pent-up demand for all kinds of experiences, is translating to remarkably strong onboard revenue generation that has exceeded expectations across all demographics and regions.
Additionally, during the pause, each company took severe measures to minimize costs. These included selling older, less efficient vessels (with the exception of NCLH) as well as increased operating efficiencies and cost structures. Additionally, new building continued for the key brands, with each company (including CCL who disposed of 19 ships) planning to have more net capacity than pre-pandemic levels. These newer vessels provide not only additional capacity but richer cabin mixes and more operational efficiencies that all lend well to additional revenues.
The Return to Normalcy
The protocol approaches taken by each brand have been somewhat different, but each has achieved the goal of creating a safe and enjoyable cruise experience and have limited any impacts to shoreside ports over the period, which appeared to be the “worst fear” as the industry began the return to service.
Moving forward, while a return to normalcy is anticipated, the industry will need to continue to strive for a healthy onboard and shoreside environment and maintain vigilance in monitoring health activities onboard and continue to work with local authorities to ensure the industry has no local spillover. We believe the Covid protocols, operations, and infrastructure changes will also further assist in alleviating Norovirus outbreaks and other health issues onboard, which is a positive for the industry moving forward.
How BA Can Help
The purpose of BA’s cruise bulletins is to provide insights, guidance, and assistance during the cruise recovery. Since the start of COVID, BA has tracked the cruise industry’s latest resumption plans in terms of ships and lower berths scheduled to resume sailing by month, protocol requirements by brand, and CDC regulations and approvals, to name a few. BA is well-positioned to assist with any of your cruise resumption needs, so please do not hesitate to reach out, simply by replying to this email.
We look forward to hearing from you.