During the pandemic, major cruise lines have slowed spending in every possible way.
Royal Caribbean International (RLC) – Get the Royal Caribbean group reportfor example, delayed the amplification of one of its ships, even though a few had been scheduled for the procedure, which adds slides and restaurants and includes other improvements on board.
The cruise line has also slowed or halted work on projects such as its Nassau beach club and its deal to buy the Grand Lucayan Resort in Freeport, Bahamas (although that may not be something the company wanted).
These changes in spending made a lot of sense given that revenue had essentially stopped coming in.
Royal Caribbean, Carnival Cruise Lines (CCA) – Get Carnival Corporation reportand Norwegian Cruise Line (NCLH) – Get the report from Norwegian Cruise Line Holdings Ltd. however, did not stop building or even slow down the construction of their new ships.
Royal Caribbean added Odyssey of the Seas and Wonder of the Seas to its fleet shortly after resuming sailing, and Carnival hosted Mardi Gras during the same period.
Building ships, of course, takes a very long time, and postponing a new order means you don’t think the demand will be there. Demand is difficult to predict, but delaying the construction of a ship that is already under construction suggests that near-term demand has slowed.
This is what a new player in the field of cruises, Richard Branson’s Virgin Voyages, has done.
The timing of Virgin Voyages was terrible
Branson’s cruise line was scheduled to debut in the spring of 2020 when the entire industry was shut down due to the covid pandemic. It had to push back its launch to summer 2021, when all the major cruise lines had made a cautious comeback with limited capacity and many pandemic-related rules in place.
Virgin Voyages has successfully sailed two ships, but the company has decided to delay the launch of its third ship, Resilient Lady, by several months, Cruzely reported.
The ship was scheduled to start sailing in August 2022 with Athens as its home port and make voyages to the Greek islands from August to October. After that, he was going to be based in San Juan, Puerto Rico.
Scroll to continue
Instead, Virgin Voyages has decided to delay the launch until May 2023.
The fledgling cruise line blamed “a number of global challenges affecting travel and in particular the cruise industry, including supply chain issues, crew issues and regional uncertainty”, according to a statement posted on its website.
What does this mean for Royal Caribbean, Carnival and Norwegian?
Virgin Voyages is unlikely to have delayed Resilient Lady if demand exceeded its existing supply. Crewing and supply chain issues are, of course, a factor, and the Greek economy may make this market less viable than shipping from US ports. But the global economy has raised concerns about weakening consumer demand.
So far, Royal Caribbean hasn’t seen that, according to chief executive Jason Liberty’s remarks during the cruise line’s first-quarter earnings call.
“We continue to see strong demand for leisure travel and cruises,” he said.
“The robust secular trend of experiences on things that propelled our business over the past few years is now recovering towards pre-covid levels. Consumers are now re-engaging with the world and as a result, travel spending in 2022 is expected to exceed pre-pandemic levels with consumers planning to travel more frequently.”
Liberty also noted that “consideration for cruises is the highest in two years and is approaching pre-pandemic levels, with the strongest recovery among cruise newcomers.”
The CEO said economic conditions could affect demand, but he said that hasn’t happened yet.
“We are monitoring the high inflationary environment, but so far have not seen any impact on consumer behaviors or their willingness to spend on cruise travel,” he said.
Virgin Voyage’s delayed ship may be in one market, but the company could also have taken delivery and found another port.
The fact that this hasn’t translated into business issues for its rivals, but it does suggest that cruise demand may not be where Royal Caribbean, Carnival and Norwegian hope in the medium term, even if the patterns of Current reservations are encouraging.
For investors, this is a watchdog environment that could delay a stock price recovery for the three cruise lines.