As high inflation and the ongoing COVID-19 pandemic weigh on consumer purchasing decisions, there may be a decline in demand for cruise vacations.
According to new data from BofA Global Research, Royal Caribbean, Norwegian Cruise Line and Carnival saw capacity-weighted sequential tickets pricing declines between May and June. Prices fell between 1% and 3% in June compared to May. Carnival saw the greatest price drop (2.6%).
BofA observed that the pricing softness appears to be continuing into 2023/2024. In fact, ticket prices for all three lines of cruises fell by 2.6% in the most recent survey.
According to BofA researchers, “The strong booked position that most cruise lines cite seems to be declining based on these data.” This is more relevant to the cruise industry than to the leisure consumer, given additional COVID pressures (testing still necessary), increased cruise capacity and possible difficulty in attracting the new to cruise’ consumer. This is why we are more cautious about cruise stocks.
As high inflation and the ongoing COVID-19 pandemic weigh on consumer purchasing decisions, there may be a decline in demand for cruise vacations.
According to new data from BofA Global Research, Royal Caribbean, Norwegian Cruise Line and Carnival saw capacity-weighted sequential tickets pricing declines between May and June. Prices fell between 1% and 3% in June compared to May. Carnival saw the greatest price drop (2.6%).
BofA observed that the pricing softness appears to be continuing into 2023/2024. In fact, ticket prices for all three lines of cruises fell by 2.6% in the most recent survey.
According to BofA researchers, “The strong booked position that most cruise lines cite seems to be declining based on these data.” This is more relevant to the cruise industry than to the leisure consumer, given additional COVID pressures (testing still necessary), increased cruise capacity and possible difficulty in attracting the new to cruise’ consumer. This is why we are more cautious about cruise stocks.
BofA has neutral ratings for shares of Carnival and Norwegian, as well as an underperform rating for Royal Caribbean.
As traders are skeptical about the industry’s recovery after the pandemic, the three largest publicly traded cruise stocks have dropped an average 30% annually.
Inflation may be reducing demand for expensive cruise vacations. As companies try to keep up with inflation in areas like fuel and labor, cruise vacations are becoming more expensive.
A new survey by Outdoorsy revealed that four out of five people with summer travel plans have had their plans affected by inflation. Around 72% of those polled said they have had to borrow money from their vacation budgets to cover the cost of living.
Arnold Donald, Carnival CEO, recently stated to reporters that consumers continue to spend onboard ships despite the higher prices of amenities like WiFi and alcohol.
Donald stated, “We have amazing occupancy.” People are having a blast. Carnival is doing extremely well.”
