Cruise Lines Push Back Profitability Forecasts, But New CDC Directives Signal Hope for Summer Season

As airlines and hotels return to pre-pandemic levels of demand and occupancy, the cruise industry has seemingly fallen behind a broader travel industry recovery. Cruise lines had originally planned to return to pre-pandemic operations and report profits during the spring of 2022, but that has now been pushed back to the summer by the Omicron variant’s lingering impact and soaring fuel costs.

Cruise stocks have fallen year-to-date, but have staged an impressive comeback over the last month on optimism that summer travel will be the strongest since the pandemic began. Consumers are likely to feel more comfortable with the idea of cruising as the CDC recently removed their COVID-19 warning for cruise travel. In addition, booking trends remain promising while pricing power in the industry is as strong as ever, which should help cruise lines book profits in coming quarters.

Related ETF & Stocks: Defiance Hotel, Airline, and Cruise ETF (CRUZ), Norwegian Cruise Line Holdings Ltd. (NCLH), Carnival Corporation & plc (CCL), Royal Caribbean Cruises Ltd. (RCL)

Cruise Industry Battles Setbacks, Delaying Return to Profitability

While airlines and hotels have seen their pandemic recoveries accelerate over the last few months, the cruise industry comeback has been anything but smooth. Airlines have been able to capture pent-up demand for travel and offset rising fuel costs by passing them on to consumers, while hotel prices have hit record highs and are seeing no shortage in visitors.

Meanwhile, cruise lines have hit more speedbumps in the road to recovery than their travel counterparts. The outbreak of Omicron in January spooked cruisers more than travelers looking to venture to a hotel or on a flight. According to a Jefferies survey published in March, which surveyed 600 avid cruises, 40% said they were less likely to cruise since Omicron hit.

Jefferies analyst David Katz predicts that the industry will continue to face a prolonged recovery with heightened pandemic related risks, notes The Wall Street Journal.

MRP highlighted the cruise industry back in December, noting that at the time, cruisers were largely unfazed by the new COVID-19 variant and cruise operators were still looking at early 2022 profitability. However, the last few months have shaken up the industry’s forecasts.

Not only has Omicron stalled that recovery, but the war in Ukraine has also had its effects on cruisers’ attitude, with nearly half of respondents in the Jefferies survey saying that the war has delayed their travel plans.

War has also caused fuel prices to rise for cruise operators, which is leading some cruise lines to push back their forecasts for a return to profitability. According to Reuters, fuel costs are estimated to have jumped 8-10% higher than previously anticipated in the first half of 2022, and potentially 10-11% higher in the second half.

Carnival Corp., which had expected to post a positive monthly EBITDA in the second quarter, now expects that figure to turn positive in the summer. The company noted that rising fuel costs were having a “material impact” on its business but predicted a…