Settle in for a Kiwi summer of cruise ships. 🛳️ While some travellers are unhappy with Carnival-owned (CCL) P&O Australia for replacing their highly anticipated Rakiura Stewart Island stopover for Timaru, 206 people were probably stoked to disembark to anywhere after their luxury vessel ran aground for several days in a Greenland fjord last week. Meanwhile, Kiwi tourism operators and local businesses are gearing up for New Zealand’s record 1,000 port stops by more than 50 cruise ships bearing tens of thousands of tourists for our incoming El Niño summer. 

But not everyone is putting out the welcome mat. Last summer, Auckland commuters faced ferry cancellations, delays and long queues standing cheek by jowl alongside cruise line passengers - who contribute around 20% towards the city’s summer economy - putting ferry services at capacity. And ahead of the upcoming 98 ships scheduled to dock in Lyttelton Harbour, locals remain fiercely divided over cruise tourists passing through their small port - with behemoth vessels like Royal Caribbean's (RCL) Ovation of the Seas carrying nearly 5,000 passengers - more people than the port’s 3,000 residents.

Many Hawke’s Bay businesses, however, welcomed the return of cruise ships after Cyclone Gabrielle devastated the ‘fruit bowl’ of New Zealand with the cruise tourism sector estimated to be worth around $30 million to the region. And this November, 4,000-passengers will disembark Disney’s (DIS) Disney Wish in the legacy entertainment company’s first cruise to Kiwi shores.

Beached as, bro 🐳

Just how bad was the global pandemic to the cruise industry, and has it recovered? In April 2020, at the time Disney Wish was being built in Germany’s dry docks, onboard contagion, social distancing (aka, stateroom isolation), and the halt to the cruise ship industry hit critical mass. It wasn’t until around July 2021 that US-based vessels returned to the open seas after more than a year of mooring, with The New York Times reporting at the time that US summer demand was ‘outweighing supply‘.

Shipping stocks and ratings tell the story. Citing Genting Hong Kong (GTHKF), Moody’s noted that the pandemic ‘revealed the cruise industry’s high vulnerability and sensitivity to global macroeconomic changes’. 

The credit rating company, which downgraded Carnival Corporation and Carnival plc, NCL and Royal Caribbean in mid-2020, also reported that the world’s three largest cruise line companies had a combined monthly loss of US$900 million as COVID overwhelmed the industry, and shipping stocks plummeted.

ZOOMIN’ IN 🔍

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Carnival (CCL) has a market cap of US$19.709 billion and operates cruise ships and owns hotels and holiday destinations including islands in the Bahamas:

• 1 January 2018: Carnival stock reached an all-time stock high with a share price of US$71.69
• 10 February 2020: As COVID news trickled into the headlines, their stock had fallen nearly 42% to US$41.69
• 30 March 2020: As infection numbers climbed, CCL shares had fallen a further nearly 80% to US$8.49 - a total of 88% down from their 2018 peak 
• Today: While cruise ship demand has returned in the US, CCL’s stock value today at US$15.06, is 78% lower than their 2018 highs.
• See Carnival’s Q2 earnings here

Norwegian Cruise Line (NCLH) has a market cap of US$7.32 billion and also owns of Bahama islands:

• 1 October 2015: NCL’s all-time high share price at US$63.62
• 1 January 2018: Like Carnival, NCL still had big numbers with their shares sitting at US$60.74 
• By 10 February 2020, shares had fallen to US$52.46, a drop of 13.6% since 1 January 2018
• 30 March 2020: NCL’s stock fell a whopping nearly 84% to US$8.46, a total drop of 86.7% down from their 2015 stock high 
• Today: As passenger bookings have returned, their stock has been slow to catch up, but NCL’s shares today are US$17.23, a hefty 71.6% below the start of 2018 
• See Norwegian Cruise Line’s Q2 earnings here

Royal Caribbean Cruises (RCL) is the world’s biggest cruise line company with a market cap of US$24.649 billion: 

• 1 January 2018: RCL has an all-time high with shares at US$133.55
• 10 February 2020: RCL’s stock dropped 15% to US$113.16
• 30 March 2020: Like their cruise ship industry peers, RCL took a hit when COVID took hold, dropping their stock once again by 78.4% to land at US$24.39
• Today: In a recovery that has out-paced others in the industry, Royal Caribbean Cruises stock has climbed to US$97.42, growth of just under 300% from their March 2020 low, and only 27% down from their all-time high
• See Royal Caribbean Cruises’ Q2 earnings here

Wall Street’s not quite cruising but is optimistic 🤏

While the heady heights of 2018 are unlikely anytime soon, in June this year, JPMorgan Chase and Bank of America analysts were buoyant about the cruise industry, upgrading their stock to ‘buy-equivalent’ as summer demand climbed - a move that boosted the big three’s stock ahead of the S&P 500. And today, all three cruise company’s year-to-date (YTD) stock has lifted:

• Carnival (CCL): is up nearly 51% YTD
• Norwegian Cruise Line (NCLH): is up 44.3% YTD
• Royal Caribbean Cruises (RCL): is up nearly 97% YTD

‍But it’s not all plain sailing quite yet. While analysts at Redburn Atlantic think a ‘gray wave of vacations’ could boost cruise stocks up a further 40% - last week lifting Carnival and NCL stocks from neutral to buy - and Zacks suggested investors hold onto NCL stocks, there are fresh warnings that US Covid infections are hovering near the same March 2020 levels that buckled an industry, leaving cruise companies with a nervous wait. 🏝️