Cruise Industry Returns

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Since the resumption of US operations in June, several cases of coronavirus have been detected on cruise ships, testing new Covid-19 protocols that include isolation, contact tracing and testing passengers to prevent the spread of the virus. Most ships were able to complete their itinerary without any problems, but American Cruise Lines, a small cruise line, interrupted an Alaskan expedition earlier this month after three people tested positive for the virus.

The return of the industry is far from guaranteed. The highly contagious Delta variant that has caused the virus to fluctuate worldwide could hinder the industry’s recovery, especially if major outbreaks occur on board. But analysts are generally optimistic about the prospects and the potential for passenger numbers to return to pre-pandemic levels perhaps as soon as next year. This optimism is fueled by what may be the industry’s best asset: an unwaveringly loyal customer base.

Even during the pandemic, large numbers of people booking chose not to get a refundinstead, converting payments already made into loans for future travel, which companies often offer at a higher value as an incentive. Last fall, Carnival reported that nearly 45 percent of customers whose trips were canceled preferred a credit over cash. The company said that about half of customers who were in a similar position to Royal Caribbean Cruises at the time did the same at the end of last year.

“The demand is there,” said Morningstar analyst Jaime Katz. “You know, there are people who’ve had cruises booked and canceled for 15 months.”

As of April 2020, the industry was in crisis. Worldwide voyages were halted following alarming outbreaks on ships, leading to sailing bans from the CDC and other global authorities.

While many Americans were employed, the major cruise companies were all established abroad and were ultimately excluded from the $2 trillion federal incentive known as the CARES Act. deputies in hopes of bailing out foreign companies that are largely exempt from income taxes. Environmentalists lobbied against the aid, citing the industry’s poor track record on climate issues. And criticism of how companies handled early virus outbreaks on ships has weakened the remaining political will to help. Massive losses swelled as questions swirled about whether cruise ships could prevent bankruptcy.

Pete Trombetta, an analyst focusing on lodging and cruises at Moody’s, said, “All of our conversations here are, ‘How long can they survive at this cash burn rate for each of these companies?’ was,” he said.

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