While dealt a blow by coronavirus, the cruise industry is managing to hold the line on pricing, at least for now. The long-term impact of the crisis remains to be seen, but the cruise industry has weathered many others in the past.
While coronavirus has left few corners of the travel industry unscathed, its impact has been especially worrisome for the cruise segment, given the dramatic coverage of ship quarantines and the history of virus outbreaks onboard ships.
Although financial analysts and cruise experts acknowledge the severity of the coronavirus impact, many think any damage to the cruise business will be short-lived once the crisis has abated.
“This definitely appears to be among the worst issues facing our industry in over 30 years,” said Anthony Hamawy, president of Cruise.com. “I can’t imagine any cruise line not feeling the impact on their business.”
However, he added that he expects the situation to return to normal within weeks of coronavirus no longer being front-page news. “The cruise industry is extremely resilient.”
Sharon Zakfia, an equity analyst with William Blair in Chicago, also noted the resiliency of the cruise industry.
“If you look at prior (virus) outbreaks what you see is a kind of short-lived duration impact on bookings followed by a return to normalcy over the subsequent months,” she said. “I don’t expect we’ll be talking about this in 2022.”
However, Tuna Amobi, travel and entertainment industry analyst at CFRA Research, said the coronavirus impact on the cruise industry is taking a serious toll, with reports of the Diamond Princess quarantine and ships being refused entry at ports creating a “wariness” among travelers. He recently downgraded Royal Caribbean and Norwegian stocks.
“The fundamentals of the cruise industry are healthy and we were expecting a banner year, but now all bets are off,” he said during a Bloomberg News podcast. “Even when situations like this are resolved, we usually see several months before normalization. The severity of this concerns us — as well as how long it’s going to go on.”
While Tanner Callais, founder of the cruise site Cruzely, sees coronavirus as a “big threat,” he also said it so far pales in comparison to the impact dealt by the financial crisis of a decade ago.
“Right now the overall impact seems to be a disruption with some cancellations, more stringent screening at boarding and a lot of headlines,” he said. “It’s our impression that there hasn’t yet been a dramatic slowdown worldwide like we saw with everything in 2008 and 2009.”
Cancellation Policy Changes
Cruise lines across the board have cancelled cruises calling in Asian ports this spring, many redeploying ships to other destinations that are less affected by coronavirus. A comprehensive and continually updated list of itinerary changes and cancellation policy updates are available on the Cruise Critic website.
While passengers booked on cancelled or rerouted cruises that were to call in Asian ports have been offered full refunds or credits, most cruise line policies on cancellations and payment timelines for cruises outside of Asia remain unchanged. However, some lines are starting to temporarily modify their cancellation policies on cruises outside of Asia.
The first to do so was Norwegian Cruise Line, which told travel advisors in a statement: “We understand that your clients may be hesitant to plan or confirm their vacation.”
Final payment for Norwegian’s June and July voyages are now not due until 90 days prior to sailing, rather than the usual 120 days. Up until 60 days prior to sailing, rather than the usual 120 days, Norwegian is allowing passengers to transfer a reservation to any other cruise of equal or greater value that departs on or before June 30, 2020.
The cruise line has also relaxed its policy on name changes — the substitution of another passenger for the original passenger booked on a cruise. Rather than viewing any name change as a cancellation, the restriction on name changes is waived up to 45 days prior to sailing.
MSC Cruises has tweaked its cancellation policy to allow any passenger who is booked on a Mediterranean cruise in March and April 2020 to postpone their cruise or switch to a different one operating in another region and sailing within the next year.
Viking Cruises is making a temporary exception to its cancellation policy so that passengers can postpone their cruise at any time up until 24 hours before the planned departure, without incurring any cancellation fees. Passengers wishing to postpone will be issued with a voucher for future travel valid for 24 months.
Windstar announced a new cancellation policy, the Travel Assurance Booking Policy, for any cruise departing on or after June 1, 2020. It enables passengers to cancel their cruise up to 15 days before the cruise departs without incurring a cancellation fee.
Incentives and Discounts
Is coronavirus sparking deep discounting on upcoming cruises? While some travel advisors told Skift they are seeing attractive booking incentives, especially on close-in sailings, the cruise lines appear to be holding the line on pricing so far.
“We’re not going to allow what we believe is a temporary situation to derail us from our long-term proven go-to market strategy of focusing on value to consumers over using low price as a lever to stimulate demand,” said Frank Del Rio, president of Norwegian Cruise Lines Holdings, which oversees the Norwegian, Oceania and Regent brands, in a recent call to investors.
With wave season, the period from January through the end of March when cruise lines offer booking incentives, still under way, it’s hard to tell if the coronavirus is prompting offers that would normally not be made, said Colleen McDaniel, editor of Cruise Critic.
Callais at Cruzely has a similar observation.
“I’m not seeing anything too out of the ordinary. Cruise lines constantly run deals, but they seem in line with what is seen normally,” he said. “There might be some deals you can find, especially if you sail soon, but I’m not seeing rates cut to the bone just yet.”
The cruise industry is enacting strict precautions related to coronavirus, including those in a recent directive from Cruise Lines International Association, whose members represent 90 percent of ocean-going cruise capacity worldwide. The association’s new protocol includes screenings of any passengers exhibiting suspected symptoms and denying boarding to any passenger who has traveled from or transited through airports in South Korea, China, Hong Kong and Macau within 14 days prior to embarkation.
While the cruise lines have responded to the norovirus and other previous outbreaks with improved onboard sanitation practices in recent years, some travel professionals hope the latest crisis will spur them to do a better job.
“It may change the ‘business as usual’ on some ships — perhaps the big buffets, tong sharing and self-serve dining venues may go away in light of what has happened,” said Wendy Denny, a travel advisor with Dream Vacations-Pinnacle Cruise and Tour in Seattle.
While noting the improvements already made on many ships, including hand-sanitizing stations outside dining rooms and outbreak prevention plans, Jennifer Holland, a tourism and cruise industry consultant who teaches at the University of Brighton in the UK, said more needs to be done.
“Cruise lines need to be even more prepared,” she said. “This is only the latest health crisis to hit the industry and we can expect many more. The cruise industry is experiencing incredible growth, and so it is likely to be hit even more severely when the next virus strikes.”
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Photo credit: Norwegian Cruise Line is among cruise lines that have made temporary modifications to cancellation policies due to coronavirus concerns. Norwegian Cruise Line