Cruise stocks tumbled yesterday after Carnival Corp. said in a 10-K filing that bookings for the second half of 2022 were "dampening."
"Since the beginning of our fiscal year, we have experienced an impact on bookings for our near-term sailings, including higher cancellations resulting from an increase in pre-travel positive test results and challenges in the availability of timely pre-travel tests," the filing said. "In addition, in the last few weeks we have seen a dampening of the booking activity for the second half of 2022 relative to 2019."
For most of the last year, cruise lines and sellers have reported that despite the roller coaster of Covid, cruise bookings and pricing were strong in 2022, especially the second half. And while it seemed that the omicron surge had certainly impacted close-in bookings, future sailings at first seemed untouched.
Truist Securities analyst Patrick Scholes said that information in Carnival's 10-K was of concern and dovetailed with conversations he had earlier this month with senior executives at large travel agencies that specialize in cruising, as well as examining future booking and price data.
"While it is increasingly becoming common knowledge that [the first and second quarters of 2022] will likely be even bigger write-off quarters, we have increasing concerns that [the first half off 2022's] weak demand trends are now bleeding into [the second half]," Scholes wrote. "We observe that while [second half] pricing vs. 2019 is still holding/stable, the industrywide cumulative booking pace for [the second half] vs. 2019 continues to decelerate, as does 2023's pace."
Will cruise lines have to reduce prices?
In his note, Scholes said that while the belief for cruising has been that demand would remain strong throughout most of 2022, his proprietary research "strongly suggests that omicron is having a bigger impact on business than delta and that unless booking trends quickly start to reverse, which as we discuss is not impossible if/when omicron subsides, pricing will likely need to be cut for 2022, as well."
Scholes said that cruise pricing for the second half of the year was currently holding up, as "cruise lines are holding their breath ... and do not want to cut pricing until they absolutely have to," which he called "very deja vu" to what Truist had noted several months ago for the first half of this year.