Carnival says cruises for 2021 a hard sell

Business

Carnival says cruises for 2021 a hard sell

Friday, April 10, 2020

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Carnival, the world's largest cruise company, in its latest assessment of operations, said that amidst the ravaging effects of the coronavirus disease (COVID-19) on global tourism, they have found that even cruises scheduled for next year are proving to be a hard sell.

The popular cruise company said that they have realised that customers have become skittish about booking a cruise, even if it's for next year — even if prices are lowered.

“In the first two weeks of March, bookings for 2021 cruises were considerably worse than a year earlier, and bookings for the rest of 2020 are meaningfully lower, despite major price cuts,” Carnival said in a regulatory filing last Friday according to Bloomberg news.

“The outlook suggests the cruise industry will have a tough time bouncing back from its coronavirus shutdown,” the news report further stated.

Carnival halted new sailings in mid-March after a series of outbreaks at sea raised concern about the safety of the voyages. Since then, the company has expressed that it has been a struggle for them to get some ships back to port because local authorities are worried about passengers spreading COVID-19.

“Carnival still has thousands of passengers on ships at sea, according to the company, but plans to get them home by the end of April,” the Bloomberg report said.

Several governments in the Caribbean through the imposition of bans on cruise ships said that they have taken such precautions as a mitigating factor against preventing the transmission of the deadly virus through their ports. Outside of this, many of the countries in the region have also had to grapple with significant downturns in tourism [a major revenue earner for most Caribbean countries via their strong tourism product] as the COVID-19 pandemic continues its onslaught on several industries.

Countries such as Jamaica, which is branded as a premium tourist destination, have reported declines in vistor arrivals amounting to some 54 per cent last month. This, as most of its major hotels, ports and tourism products have had to take the decision to make temporary closures.

Carnival Corp further said that they had some US$4.7 billion in customer deposits up to the end of February when there was a pause in operation but predicts that that they will have to give cash refunds “for a substantial portion of the balance”.

The company also expects to face delays in ship deliveries as a result of COVID-19's effect on shipyards, potentially affecting the 16 cruise ships it expected to take delivery of through 2025.

They, however, expressed hope, noting that “in the first two weeks of March, about 45 per cent of guests seeking compensation accepted future credit instead of demanding cash”. This they said may have been a promising sign.

STOCKS SOAR AMIDST iNVESTMENT

Shares of Carnival Corp rose more than 20 per cent on Tuesday after gains on Monday when a Saudi fund group is closed gaining stakes in the cruise operator even as the company's stock remains below 70 per cent since January.

According to a recent report, the disclosure of the public investment fund's US$43.5-million stake in Carnival comes as the company scramble for liquidity as the pandemic cripples the global travel industry.

“In the quarterly earnings report published last week, Carnival did not provide 2020 guidance but assured investors that it will be able to remain in compliance with its debt obligations for at least 12 months — adding that the pandemic presents an unprecedented challenge to the industry,” the news report further informed.

According to UBS Securities analyst Robin Farley “of the big three cruise companies — Carnival is best suited to weather a sustained downturn without any revenue”.

“The company could survive for as long as 15 months without making any money,” she said.

—Kellaray Miles


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