Cruise Pricing Could Drop at Least 10%, Nomura Says
Cruise Pricing Could Drop at Least 10% This Year, Nomura Says
(Bloomberg) -- Cruise operators could see pricing sink at least 10% in 2020 as their “booking cushion” evaporates with the onslaught of coronavirus-related headlines, according to Nomura Instinet.
Carnival Corp., Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. have seen their market values crushed by at least 43% since the beginning of this year as the virus continues to spread throughout the world. Carnival in particular has seen its share of passengers fall ill with Covid-19. The latest focus is its Grand Princess ship after a 71-year-old California man died of the virus following a recent voyage on the vessel.
“Cruise lines bookings (and the stocks) are likely to keep deteriorating until Covid-19 cases peak domestically and news coverage abates,” Nomura analyst Harry Curtis wrote in a note. While Norwegian Cruise and Royal Caribbean haven’t had any confirmed coronavirus cases aboard their ships, the analyst said it’s “naive to believe they are risk-free.”
Curtis believes net bookings -- new bookings less cancellations -- have been “running negative for the last week and are eating into the industry’s booking cushion for 2020/2021.” New bookings have been stable over the past week but at “significantly lower levels than is required to fill the ships,” Curtis said. The Grand Princess situation will likely result in a further deterioration in net bookings, such that pricing could be down by 10% or more this year.
Meanwhile, cruise industry leaders are set to meet with Vice President Michael Pence Saturday to discuss containment and consumer protection strategies. Curtis is concerned Carnival won’t be as “forward-thinking” as it should be. While Royal Caribbean and Norwegian have taken precautions “in excess of the industry standard,” Carnival could have been more aggressive in the protection of its guests, he said.
Nomura rates Carnival Corp. neutral and has a $42 price target on the shares. Royal Caribbean and Norwegian Cruise are both rated buy, with respective targets at $115 and $60.
To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Kristine Owram, Steven Fromm
©2020 Bloomberg L.P.