The scope of the cruise industry's challenge after the outbreak of coronavirus in China is starting to become evident, and one of the less recognized problems is the difficulty of filling ships that have suddenly lost their book of business in Asia.
Some ships such as the Celebrity Millennium have cut short their tour in Asia. Others, such as the newly refurbished Norwegian Spirit, were scheduled to sail to Asia for a season that would have started April 15 and carried on through Dec. 7.
And then there's the Princess Cruises ship Diamond Princess, which has been in the spotlight for being quarantined in Yokohama. Its next departure has now been set for April 29, more than two months from now.
The question for all of the cruise lines is what to do with these ships if they're not going to deliver the Asian cruises that they were scheduled to sail.
For Princess, one answer is to move up redeployment. The line's Sapphire Princess is advancing its season in Australia to start May 1. The ship had planned to do a series of cruises from Singapore, Yokohama, Hong Kong and Shanghai through June 11. Those are now canceled, and the Sapphire Princess will move to Australia from May to December.
Princess will presumably begin marketing the new Australian cruises as soon as possible. It plans to keep the Diamond Princess in Japan.
Norwegian Cruise Line, too, may be doing some fast marketing of the Norwegian Spirit, which was headed to Asia until the Feb. 14 announcement that it will sail in the eastern Mediterranean instead. The Asian season is canceled, with full refunds and a 10% future cruise credit issued.
Perhaps some passengers who had signed up to see Asia can be induced to switch to a different part of the world, but Norwegian faces the task, much like when it suddenly moved the Norwegian Joy from China to Alaska in 2019, of having to fill a ship in a hurry.
"We are essentially starting from zero," Norwegian Cruise Line Holdings CFO Mark Kempa said in a recent conference call for investors. "It's not an itinerary where we went from region A to region B that was right next door, where you can lure the customer in.
"So we do believe there's going to be some yield dilution on that itinerary," Kempa said.
It is a cruise commonplace that ships, unlike land assets, can be moved
in response to geopolitical events. But less talked about is the
increasing cost, as ships get larger, of moving them abruptly. It can
take the better part of two years to fully sell a 5,000-passenger cruise
at optimum price levels. Starting from scratch is taking a toll on
profits when cruise lines have to do it.
In the case of Royal Caribbean Cruises Ltd. (RCCL), rather than attempt close-in selling of cabins on its Spectrum of the Seas, which had been sailing from Shanghai, Royal Caribbean International said it will offer free cruises from Sydney to first responders in the wake of the Australian bushfire disaster. Similarly, the RCCL-owned Millennium will redeploy to California for a series of first-responder charity cruises in March and April.
Carnival Corp. has so far estimated that the disease outbreak will cost it $290 million to $342 million if Asia cruises are canceled through April. RCCL said on Feb. 13 that the 18 canceled sailings in Asia as of that date had already cost it $136 million, and it anticipates another $115 million hit to earnings if cruises are canceled through the end of April.