Can The Cruise Ship Industry Survive The Coronavirus Epidemic?

U.S. cruise ships are facing daunting challenges as the coronavirus outbreak has wreaked unprecedented havoc upon the industry. After weeks of relentless bad news, including the illness and deaths of passengers, a lengthy quarantine in Japanese waters, ships barred from port entry, vessels stranded at sea, lawsuits filed by angry passengers and massive booking cancellations, the three biggest companies in the sector -- Carnival Corp. (CCL), Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL) -- recently suspended operations.

Since Feb. 19, shares of CCL, NCLH and RCL have plunged by 66%, 80% and 72.7%, respectively.

Industry experts are watching an unprecedented collapse unfolding.

“I’ve only ever seen them close cruise ports for [things] like hurricanes or earthquakes,” said Jackie Ceren, a Florida-based travel agent. “And I’ve been through [severe acute respiratory syndrome], Ebola, Swine Flu. I’ve seen it all. This is like a travel apocalypse.”

Last week, the U.S. State Department advised Americans not to travel on cruise ships, due to the increased risk of infection of coronavirus. The Centers for Disease Control and Prevention also said that “a cruise-ship environment” can heighten the risk of infection.

Government agencies have been criticized for these proclamations.

“When the government came out and said don’t go on anymore cruises, that was it. That was the death blow,” Ceren said. “What they have created is fear.”

Carl Winston, director of the L. Robert Payne School of Hospitality & Tourism at San Diego State University, said: “I can’t imagine a single industry being called out like that.”

Ceren also thinks coronavirus has damaged the cruise lines as much as or even more than 9-11 hurt the airlines.

“Things happen, but nothing of this caliber,” Ceren said. “This is worse than 9/11 when they were canceling flights all over the place. This is the cruise lines’ 9/11.”

Nonetheless, Ceren contends that the cruise line industry will recover – first by dropping ticket prices to attract more customers once the crisis eases. Royal and Norwegian Cruise have also tapped their large credit lines for necessary funding.

“These are extraordinary times and we are taking these steps to manage the company prudently and conservatively,” said Royal CEO Richard Fain.

Ross Klein, a professor of social work at Memorial University of Newfoundland and a cruise industry expert, said the coronavirus epidemic is the worst thing to befall the industry since 1985, when the Palestinian Liberation Front hijacked the Achille Lauro vessel and shot and killed an elderly American passenger named Leon Klinghoffer before tossing him overboard.

"[The Achille Lauro murder] stuck with the cruise industry for a while, particularly in places like Europe, like the Mediterranean," Klein said, adding that the industry eventually recovered and has since flourished.

"It will [now] take [the cruise lines] time to rebuild their customer base, but I think it will be rebuilt," he added.

Stewart Chiron, who reviews cruises on cruiseguy.com, also thinks the industry will not collapse. “It’s inevitable that the industry will rebound and persevere,” he said. “It’s a resilient industry.”

However, for now, will problems piling up, it’s anything but smooth sailing for the cruise industry.

“If [coronavirus] confirmed cases continue to rise in North America, no lodging or cruise company could be immune to financial consequences,” Moody’s said in a recent report.

Indeed, if people continue to avoid taking cruises, the companies will suffer revenue drops that will likely lead to massive layoffs.

“The key question is -- what is their staying power,” Winston said. “How much cash do they have in the bank to stay afloat?”

The Cruise Lines International Association, a trade group, noted the industry supports more than 421,000 American jobs and annually contributes nearly $53 billion to the U.S. economy.