Norwegian and Royal Caribbean Extend Cancellations

Cruise lines are continuing their policies of rolling, incremental cancellations of future sailings as they react to the global public health emergency. While the executive remain optimistic, they also acknowledge that many factors will come into play before the industry can resume operations.

Norwegian Cruise Line Holdings, the parent company of the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands, announced an extension of its suspension of cruises for voyages through July 31, 2020. Royal Caribbean International and its sister brands including Celebrity Cruises and Silversea Cruises also extended their suspensions till August 1, 2020, or in some cases into the fall of 2020.

Speaking to investors, Royal Caribbean management declined to offer any specifics on when or how its cruises might resume. Management told investors on its quarterly update that it was in consultation with ports and other officials while working on plans for how to relaunch operations to meet everyone’s expectations for health and safety. CEO Richard Fain said just like the travel industry evolved after 9/11, cruising will not be the same instead evolving to reflect the realities of traveling after the pandemic.

In announcing the additional cancelations, Royal Caribbean, however, noted that its China sailings are suspended through June 30, 2020. Michael Bayley, president and CEO, Royal Caribbean International, responding to an analyst question said, “It is a very different story by region and by country. I think, it's highly likely that either the Asian markets in China for example, or the European region, could come back earlier, because of course, they went through this experience earlier, and that's particularly true of China.”

These two cruise lines became just the latest companies within the industry to again extend their canceled sailings. A week ago, Disney Cruise Line suspended new departures through Monday, July 27, 2020. Holland America Line and Princess Cruises also recently extended their cancelations through the summer of 2020.

While the cruise lines remain anxious to retain as many bookings as possible they continue to offer liberal policies to permit passengers with reservations to reschedule to future sailings when they would feel comfortable traveling. For those passengers that do have their sailings canceled the cruise lines are generally offering future cruise credits (FCC) at 125 percent of the value of the canceled reservation as an enticement to maintain a reservation. 

By managing the cancelations incrementally, the cruise lines are seeking to take the pressure off their operations and reduce the strains on cash flow and liquidity for as long as possible. Indeed, Royal Caribbean told investors “To-date, approximately 45 percent of the guests who are booked on one of these (canceled) voyages have requested a refund and the remainder are holding an FCC.” They went on to detail that approximately 20 percent of the guests who have been issued an FCC have already rebooked on future voyages, most rebooking on similar itineraries with many using the credits to upgrade to a higher category of accommodation on the future cruise.

Nonetheless, some of the people opting for the cash refunds remain frustrated waiting for the cruise lines to complete the refunds. Asked about the split between cash refunds and credits, Royal Caribbean said, “millennials or the younger part of the millennials are typically looking more for their cash back, while families and baby boomers are likely to take the FCC and utilize it.”

Across the cruise industry, there is nearly universal acceptance that the industry will return incrementally with small parts of its fleet at a time working to rebuild operations. Several of the executives have said that it will not be like a light switch turning on all at once. Royal Caribbean speculated that they might resume with cruises in “drive markets” meaning where people will be able to drive to the embarkation ports as opposed to depending on airplane travel. Carnival Cruise Line targeted resuming sailings from Florida and Texas operating its first cruises to the Caribbean.