In a previous post, we asked the question: What will the tourism and cruise industry look like after the virus? That was before COVID-19 hit so many countries as hard as it had. Prior to cruise lines voluntarily suspending service and governments “requesting” cruise lines do so for at least 30 days. (As of the time of this writing, it’s been extended an additional 30 days). The question today is similar but different. Today we’re asking: What will the cruise industry look like in the coming months?
Since no one has the ability to look into the future, the only thing we can go on is what’s happening in the world at the moment and what each company has put in print. Let’s look at what we know.
What Is the Situation Right Now?
That’s a tough one. And the answer isn’t as black and white as some present. For example, most of the big cruise lines have headquarters in Miami, FL, USA. But the ships are registered in other places around the world. If you don’t get much American news, you might not know that there is a lot of noise saying any financial bailout package should exclude cruise lines. Carnival Cruise Line alone is seeking $6 billion to help it get through the crisis.
Are they right? Or are they just overblowing the situation because they personally don’t like the cruise industry?
If we’re being objective, they do have a point. While cruise lines do employ tens of thousands of people – with many being Americans – the tax revenue is very low.
Since we already mentioned how much help they want, let’s stay with Carnival Cruises Line. According to one source, the amount of corporate taxes paid on $1.1 billion was only 1.1%. With numbers like that, it’s no wonder that a vocal group doesn’t want tax money to be used on an industry that notoriously pays very little in taxes!
Now, before you break out in an “I told you so” chorus, you should know that cruise lines aren’t the only corporations that engage in these types of practices. For example, not only did Amazon.com pay $0 in taxes on profits of $11.2 billion (more than 10x the profit of Carnival Cruise Line, I should point out), this company got $140 million as a tax refund! Paying 1.1% in taxes is still way more than getting a refund of any amount, let alone $140 million.
Therefore, any bashing of the cruise industry as the posterchild of everything that is wrong in the world would be energy better spent elsewhere. There are other American companies that pay taxes but do things far more egregious than what cruise lines have done or are accused of doing.
In any case, as to whether the cruise industry will survive the pandemic or not, a bailout by the U.S. government isn’t likely to factor into the equation.
Factors to Weigh
What I’m about to say next is totally subjective but based on facts. Do me a favor and head to the comments section below to share your opinion on the subject.
Most of the big cruise lines are publicly traded on the stock market. The one exception being MSC Cruises, which is privately owned. That means that shareholders will expect to see a detailed plan on how the company will address the colossal drop in share price. They will especially want one since there was no provision for the cruise industry in the American bailout bill. The possibility remains for help if the tourism industry as a whole is deemed worthy to receive assistance. But that’s a big “if”.
Which cruise line will be in better shape? The answer is not as clear as it might seem on the surface. Of all the cruise lines on the ocean, most are owned by a handful of companies. Here’s the rundown:
Cruise Lines owned by Carnival Corporation
- AIDA Cruises
- Carnival Cruise Line
- Costa Cruises
- Holland America
- P&O Cruises
- Princess Cruises
Cruise Lines owned by Royal Caribbean Cruises Ltd.
- Celebrity Cruises
- Pullmantur Cruceros
- Royal Caribbean International
- TUI Cruises
- Silversea Cruises
Cruise Lines owned by Norwegian Cruise Line Holdings Ltd
- Norwegian Cruise Line
- Oceania Cruises
- Regent Seven Seas Cruises
As you can see, what the public understands about ownership of cruise companies is not the reality. 17 of the world’s biggest cruise lines are owned by 3 companies. So even though Princess Cruises initially had the most cases of COVID-19, it was Carnival Corporation stock that took the hit when Princess Cruises was in the news.
This brings us back to our question: What will the cruise industry look like after this is all over? For the publicly traded companies listed above, no one can say for sure. Each has an idea of when they need to start sailing again before crossing the threshold of no return. Will some be acquired by other cruise lines or even companies not related to the cruise industry? That’s a possibility.
One company we haven’t given much attention to is MSC Cruises. Because the company is not publicly traded, its financial stability can’t accurately be measured. What makes this company stand out against the rest is that cruising is only part of the bottom line. MSC stands for “Mediterranean Shipping Company”. Unlike all the other cruise lines listed above, it is the only one that has an alternate stream of revenue. Put another way, MSC is still making money even though its cruising business is stalled. This presents two possibilities.
- Some corporations might decide to sell off assets, possibly a division or multiple divisions. It’s not uncommon for corporations to take such actions in times of financial hardship.
- Another possibility is to sell the entire company to another organization with stronger financials. There are a number of high-profile stories of this happening in the corporate world.
I’m not suggesting that MSC Cruises wants to buy the competition. But if anyone would be in a position to do it, MSC Cruises would likely be the one.
What this means is that we don’t believe the industry as a whole will collapse. We do, however, believe that it will look different. Either there will be fewer cruise lines in existence. Or we’ll see the same ones that are operating now but under new ownership.
We talked about all these details because it’s necessary in order to answer the question of whether you should take advantage of future cruise deals. What if your favorite cruise line doesn’t exist after the pandemic is over? What if it’s still here but under new ownership? Will the promises made under the former ownership be honored by the new? These questions can’t even begin to be answered. Here’s why.
Where Ships Sail From Is Only Part of the Problem
Much of the discussion of the future of cruising swirls around financial and political issues in the United States. And that makes sense. Most of the cruise companies are American companies, even if the ships are registered elsewhere. Many countries in Europe have ports that are home to outgoing cruise ships also.
The question of cruising going back to normal has a lot to do with designation ports of call. If Bermuda, the Bahamas, Jamaica, Belize, Mexico and all the other countries with ports of call don’t allow ships in, then nobody is cruising anywhere.
Some would argue that these countries have a vested interest in allowing ships to return in order to make money from vacationers. The question for those countries becomes: Is the money generated worth the health risk to citizens?
But there’s another variable that will have an even bigger impact on whether the cruise lines sail again. And it has nothing to do with countries or cruise lines.
In the United States, unemployment has exploded. For those that still have jobs, will they want to spend money on a cruise or save it? Experts are predicting the pandemic might re-surge in the winter. Will those people want to save cruise money for that potential rainy day? And for those that have lost wages, the last thing they will want to do is spend money on a cruise.
So, will the cruise industry exist? We think so. Will it look like it does now? Probably not. Will people be in a position to book a cruise after the pandemic is over? That is unclear.
In our next post, we will examine the offers and “guarantees” various cruise lines are pushing out in an effort to retain or gain consumer confidence. So, head down to the comments section below and sound off on your opinions – good, bad, and even the ugly. We’ll even use your thoughts in the next post. And we’ll make sure you get the credit too.