Cruise comeback: Shipping companies are experiencing a booking boom

The future is bright, said Pierfrancesco Vago, CEO of MSC Cruises, at a recent conference in Miami. As early as 2022, the industry service Cruise Industry News calculates in its annual report that the number of cruise guests will be seven percent higher than before Corona. In the Mediterranean in particular, things will get tight again this summer. For 2024, the world industry association CLIA even expects an increase of twelve percent compared to 2019.

“The shipping companies have significantly refined the internal procedures on their ships in order to prevent corona outbreaks from occurring in the first place,” says CLIA Germany boss Helge Grammerstorf. Infected people would be isolated immediately. Since only those who have been tested and vaccinated are allowed on board, the course of the disease there is almost always mild.

At the beginning of the pandemic, this had looked completely different. At the beginning of February 2020, a single corona patient on the “Diamond Princess” off Yokohama caused 712 passengers and crew members to become infected with Sars-CoV-2. Seven people did not survive the disease. A further 58 people died on nine similar ships before the cruise stop imposed globally on April 23, 2020.

Corona worries among cruise lines seem to have vanished

And even at the end of 2021, the situation still looked desperate. Instead of carrying 3,000 passengers to Madeira for the New Year’s Eve fireworks as planned, the German cruise ship “Aida Nova” canceled its trip after a corona outbreak among crew members in Lisbon. For the passengers of Tui Cruises’ “Mein Schiff 6” it was over shortly afterwards in Dubai. Due to “isolated cases” of Corona, the trip had to be abandoned, the shipping company said.

The pandemic has not disappeared from everyday life on board to this day. It was not until May 5 that the “Carnival Spirit” in the port of Seattle reported a Covid 19 outbreak, a few days earlier more than 100 passengers on the “Ruby Princess” contracted the infectious disease off San Francisco.

But the great fears in the industry seem to have vanished. As of May 29th, the “Mein Schiff Flotte” lifts the obligation to wear masks on board for all trips, insofar as this is permitted by the rules of the respective shipping areas. Hapag-Lloyd Cruises and Aida followed shortly thereafter with similar announcements. Dancing indoors is also permitted again on the ships, and kids’ clubs are open to children from the age of three. However, a prerequisite remains full vaccination protection for all guests aged twelve and over – including those who have recovered.

>> Read also: Cruise market leader Aida abolishes mask requirements

The changed situation fuels hopes in the cruise shipyards, who are urgently waiting for new business after the deep sales crisis. “We keep talking to the shipping companies,” reports a spokesman for Meyer Werft. “The mood is getting better there.”

The shipyard in Papenburg, Emsland, which, along with the Italian Fincantieri and STX in Saint Nazaire, France, is one of the few shipbuilders in the cruise business, extended the agreed construction contracts by two years after the outbreak of the pandemic and decided to cut 450 jobs. “After all, we haven’t lost any existing orders,” says Meyer Werft, and interest in new builds is also returning.

Debts prevent new orders from shipping companies

However, the optimism is not yet reflected in the Emslander’s order book. In view of the accumulated debts, many shipping companies currently lack the necessary money for new buildings, the shipyard managers repeatedly learned in discussions.

The most recent quarterly reports from cruise operators show the full extent of the situation. For example, shipping giant Norwegian Cruise Line Holdings had total debt of $13.6 billion as of March 31, after posting a $1 billion net loss in the first quarter of 2022. Investors recently demanded an interest rate of up to 12.25 percent for senior secured bonds.

Market leader Carnival piled up its debt to $34.9 billion, a circumstance that is expected to cost it $1.5 billion in interest this year. Competitor Royal Caribbean, which indirectly acquired half of the Tui shipping company Hapag-Lloyd Cruises for around 600 million euros at the beginning of the corona pandemic, is now 22.9 billion dollars in debt.

At an average interest rate of 5.6 percent, Royal Caribbean is expected to pay $1.28 billion this year — as much as it would pay to build a stately cruise ship.

Nevertheless, the prospect of a comeback is boosting cruise line share prices. Royal Caribbean’s shares have risen 167 percent since their low in mid-March 2020. The shares of Carnival, the US parent company of the European shipping companies Aida, Costa and Cunard, among others, have since recorded an increase of 74 percent, the values ​​​​of Norwegian Cruise Line (NCL) have increased by 105 percent.

>> Read also: How investors can benefit from the comeback of tourism

At least on the income side, the pre-crisis level could be reached again in a few months. Crusaders who want to snag a bargain now have to hurry. German travel agencies only report average occupancy rates of between 50 and 70 percent for Tui Cruises or Aida for May and June. “From July, however, the tours are almost fully booked,” says Marija Linnhoff, head of the VUSR industry association. The prices of many shipping companies are already correspondingly “stable”.

NCL even announced that it would continue to forego special offers. “You’ve heard me say over and over again that we will not sacrifice our industry-leading pricing to temporarily increase our load factors,” CEO Frank Del Rio said recently. “And I continue to stand by that philosophy.”

Cruise fleet shrunk in the pandemic

According to the NCL boss, the strategy has paid off. He calculated that the prices for future cruises would be significantly higher compared to the corresponding periods before the pandemic. In doing so, one accepts that the utilization in the second quarter of 2022 will be around 65 percent.

What keeps the prices up: Sea travelers have to be content with a slightly reduced offer – even though all available ships will be on the road again for the first time since 2020 by August at the latest. In mid-January, the cruise portal “Seetours” counted 341 ships worldwide with a capacity of 100 or more passengers. Since the beginning of the pandemic, the number has been reduced by almost 25 due to decommissioning, sales and rededication to hotel ships.

The scrappings have continued since then. Last month, for example, the “Carnival Sensation” built in 1993 ended up in a sea scrapyard in Turkey. At least three ships from Star Cruises, a cruise subsidiary of the insolvent Genting group, headed towards Alang in May. The passenger ships built between 1992 and 1994 are now waiting on the Indian beach to be scrapped.

The reduced supply, which is now meeting a sharply increasing demand, is once again causing unusual blooms in pricing. The price for the ship’s diesel has doubled, the Bremen-based cruise operator Plantours recently informed its already booked customers. For trips on the “MS Hamburg” he therefore charged them an additional eleven euros for each day of travel.

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