It's been a rough two years for the cruise industry, where fortunes have taken another downturn with the appearance of the Omicron variant of COVID-19, and in the wake of a recent recommendation by the Centers for Disease Control and Prevention to avoid leisure travel on the high seas.
With new infections showing no sign of relenting anytime soon, the CDC has said cruises should be avoided, regardless of vaccination status. The CDC increased the travel warning for ships to level 4 — the highest risk level — amid a surge of coronavirus outbreaks on seafaring vessels.
All of which should spell bad news for various cruise lines like Carnival (CCL), Disney (DIS), Norwegian (NCLH) and Royal Caribbean (RCL), which have ships on the CDC’s Cruise Ship Color Status. In a statement last week, the Cruise Lines International Association (CLIA) criticized the CDC's move as "particularly perplexing," given that the total number of cases on ships were a "slim minority of the total population onboard."
Yet the stocks of all of those companies ended sharply higher on Friday, underscoring how the industry is taking the long view on Omicron. The mutation is highly transmissible but less debilitating, especially among the vaccinated. And despite the CDC's worrying call, ships have kept sailing from ports around the country.
“The science does not support the CDC. You're actually safer on a cruise ship,” Stewart Chiron, a cruise expert, told Yahoo Finance on Monday.
“Everybody's being vaccinated, everyone's tested, frequently. We're seeing an increase, which is 90% of these recent cases are crew, not passengers,” Chiron added.
He argued that cruises are doing what they can to mitigate risk, insisting it’s “more safe on a cruise ship than it is to be at home.”
It's unclear how long the CDC's travel advisory will be in place, but the agency has issued a Conditional Sailing Order (CSO) that's been extended until January 15.
Omicron explosion on ships
However, the data paint a different picture. In figures provided to Yahoo Finance, the CDC found that between November 30 and December 14, only 162 COVID-19 cases were reported to the agency by cruise ships operating in U.S waters.
Yet between December 15-29, over 5,000 COVID-19 cases were reported from cruise ships — a whopping 31 times the number of cases from the comparable two week period.
“Unfortunately, a lot of people are not honest about their health situation,” Chiron explained. "And some people think that, 'well, I'm symptomatic that I'll be able to fake my way through it,' but they don't realize that your symptoms are only going to get worse.”
Cruise lines constantly test crew three to four times a week, and are expected to bump up testing as they move forward, he said.
“We also have to take into consideration that some of these ships with the 5,000 number [cases] aren't even yet in service, and as [they] continue to add more ships, there's a lot of these ships doing short cruises, three, four, and five night sailings, you're gonna have higher increase,” Chiron said.
“The CDC’s color code really is meaningless because one crew, seven passengers, means you go from green to yellow, so it really doesn't tell anything,” he added.
Last week, Royal Caribbean reported an increase in people testing positive, but without a corresponding increase illnesses — a sign of how the Omicron wave has been less grave in terms of medical outcomes.
People are still calling the travel agent. They're still booking their cruises through the travel agent.Stewart Chiron, travel expert
Since the return of cruise ships in June of 2021, Royal Caribbean has ferried over a million guests with over 1,700 people testing positive — a positivity rate of 0.02%, according to company. The majority of those cases were mild symptoms, with 41 people being hospitalized.
In addition, none of the Omicron cases were severe or needed to be taken to hospital, signaling how guests were vaccinated and had negative tests before boarding the ship.
And since resuming operations in September 2020, Carnival, the largest cruise company, has carried 1.2 million guests onboard its ships. As of late November, 61% of the company’s capacity was operating with guests on board; the company expects the full fleet to back in operation in the Spring of 2022.
'Not gonna be an issue'
As the travel industry slowly starts to recover from the pandemic woes, analysts believe the CDC's stricter guidance would not impact business or travel bookings, especially for warm weather months when the virus tends to wane.
“People are still calling the travel agent. They're still booking their cruises through the travel agent,” Chiron said. “Bookings for 2022 and 2023 are ahead of where they were in 2019 at record levels and at higher pricing."
And Wall Street is optimistic that the industry will continue to sail on as it tries to overcome the pandemic's latest hurdle.
“The view is this is just not gonna be an issue in six months when people go on their summer vacation,” Chris Woronka, a senior analyst at Deutsche Bank who covers the cruise lines and other travel sectors, told Yahoo Finance in an interview.
The impact from Omicron and the CDC’s latest advisory is likely to be less of a factor as the year rolls on — and certainly not in 2023, according to Deutsche's research.
“The market is just taking a much bigger, longer term view of this and saying that guidance, maybe won't be out there forever and customers are making their own decision[s],” Woronka said.
Last week, Royal Caribbean reported a decline in bookings and increased cancellations for near-term sailings, but said it was less than they experienced during the summer's Delta variant surge. The first half of 2022 bookings remains below historical levels, but the second half of 2022 continues to be booked with historical ranges at higher prices.
“People couldn't go on a cruise for basically 15 months and again, they're not all back yet, so there's still that pent up demand,” Woronka said, even as he said investors are worried about the appearance of a new variant.
The course of the pandemic has "been unpredictable and nobody's gotten it exactly right,” Woronka said.
Meanwhile, Carnival's short interest has increased 21% since its last report, a sign that some investors are betting on the stock to fall. Woronka has a "Hold" rating on Royal Caribbean, Carnival and Norwegian. Despite Friday's rally, all of those have sold off more than 10% since early November.
“We don't see sufficient enough upside right now,” Woronka said. "There is still uncertainty with the virus out there.”
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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