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April 21, 2020COVID-19: Cruise Industry and its Future
In the wake of COVID-19, the US Centers for Disease Control and Prevention (CDC) has extended its March 14 No Sail Order (NSO) for cruise ships operating in waters under the jurisdiction of the United States. The NSO makes note of the health and safety of passengers and crew employed onboard cruise vessels and provides detailed guidance for cruise liner operations.
In Europe, the European Union has issued guidelines for cruise ship operators who have temporarily ceased their operations. Elsewhere too, in Japan, India, Taiwan and the UAE, the governments have instructed local port authorities to either restrict or ban cruise liner arrivals amid the coronavirus pandemic. During the last three months, the cruise liner industry has been in the crosshairs of the COVID-19 pandemic and nearly three dozen cruise ships have been hit.
Some common issues confronted by the cruise liners since the outbreak of the pandemic merit mention. Many vessels were prevented from berthing at ports and passengers were disallowed to disembark for repatriation amid fear of importing the virus through infected passengers and crew. Furthermore, crew change could not take place due to the disembarkation restrictions/lockdown at the ports and they remained stranded on virus-stricken ships. In fact, they continue to be on voyage adding to mental stress and deep psychological impacts.
Besides, there are other major limitations onboard a cruise vessel such as inadequate facilities to manage large scale infections, and quarantining passengers is difficult due space constraints. Perhaps more worrisome is that some cruise line companies have been slapped with class action lawsuits by passengers over lack of transparency of infections and poor management of onboard medical emergencies.
Meanwhile, the World Health Organization (WHO) has issued guidelines for ships to manage/contain corona outbreak onboard ships. Similarly, the International Transport Workers’ Federation (ITF), the International Labour Organization (ILO) and the International Maritime Organization (IMO) have also issued guidance and advisory to cruise liners and their companies.
It is true that the cruise liner industry is in the midst of an unprecedented crisis arising from COVID-19 and to be fair was caught unawares. There are 272 cruise ships worldwide which host nearly 30 million passengers annually. The cruise liner industry is the fastest-growing category in the leisure travel market and is valued at about US$ 45 billion.
The industry is now experiencing an adverse impact of COVID-19 on its operations and the financial condition of the sector is marked by widespread losses. The Carnival announced that it needed to raise US$ 6 billion (US$ 3 billion in three-year secured bonds, U$1.75 billion of bonds that can convert into shares and US$ 1.25 billion in newly issued stock) to remain afloat and conduct its future operations. Further, the stock value of at least three publicly traded cruise line companies has plummeted during February and March 2020, i.e., the Carnival stocks may have lost as much as 60 per cent, and the Norwegian Cruise Line and the Royal Caribbean losses are estimated to be over 70 per cent of their value.
The impact of COVID-19 is also being felt by a number of other stakeholders and there are fears that the pandemic could potentially result in job losses and revenues, and sink the industry. In particular, people in small island nations are highly dependent on the cruise liner industry for livelihoods and jobs which provide them with a variety of hospitality services, and ready cash obtained from the tourists and visitors makes small business remain afloat. For instance, the cruise industry contributes annually nearly US$ 2 billion to the Caribbean nations. In the case of St Kitts and Nevis, the cruise industry contributes nearly 5.9 per cent to their GDP.
Many cruise lines are witnessing huge financial losses and may not be able to sustain their operations at least in the short term. Significantly, a few of them have stopped taking reservations for itineraries over the next nine months; likewise, some passengers have chosen to cancel the reservations. However, according to a report, cruise bookings for 2021 are on the rise and the cruise booking site CruiseCompete.com has seen a “40% increase in its bookings for 2021 over its 2019 bookings” in the past 45 days. Similarly, Swiss bank USB has reported 9 per cent more cruises booked for 2021 as compared to the same period in 2019 suggesting “surprising resilience in desire to book a cruise” by people. This is further reinforced by an online poll of more than 4600 people and put out on CruiseCritic.com which notes that “75% of former passengers would continue sailing the same amount or more frequently”.
A cruise industry operator is confident about the resilience of the industry and has argued that it has weathered many such pandemics and health scares including political unrest and wars. It is not surprising that the cruise industry is upbeat about its ability to bounce back while many other sectors of the global economy take a hit, the effects of which will continue in 2021.
Views expressed are personal and need not reflect or represent the views of Centre for Public Policy Research.
Dr Vijay Sakhuja is Honorary Distinguished Fellow with CPPR and associated with our Centre for Strategic Studies. Dr. Sakhuja, a former Indian Navy officer, is also former Director, National Maritime Foundation, New Delhi. He earned his MPhil and PhD from the Jawaharlal Nehru University, New Delhi. He specializes in issues of national security and public policy, particularly in the context of ocean affairs, geopolitics, Climate Change, Arctic, Blue Economy and 4th Industrial Revolution Technologies.
