Cruise Stocks In Limbo As Delta Variant Cancellations Derail Sales Recovery

Cruise stocks Carnival Corp (NYSE: CCL), Royal Caribbean Cruises Ltd (NYSE: RCL) and Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) have finally resumed operations, but the latest numbers from Bank of America suggest the companies still have a long way to go to right the ship.

The Numbers: On Tuesday, Bank of America analyst Andrew Didora reported that core aggregate cruise spending on BofA credit and debit cards remained down 59.5% from 2019 in the month of August. While that decline is a slight improvement over the 60.6% drop reported in July, it highlights just how much the cruise industry is lagging other recovering industries.

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“Across the travel space, companies have reported a slowdown in demand and near term cancellations due to the delta variant, with total monthly card spend decelerating in August,” Didora said.

Including refunds, cruise spending was down 69.1% in August compared to 2019, slightly worse than the 65.7% drop in July. The spike in cancellations is certainly due largely to the spread of the delta variant of COVID-19.

Didora said Bank of America's credit card data has historically had a 75% correlation to industry net yields on a one-quarter lag. That historical correlation suggests the second half of 2021 could be more difficult for cruise stock investors than they had previously anticipated.

Benzinga’s Take: The three cruise stocks are all up at least 89% since their March 2020 pandemic lows, which is a huge run for three businesses that are still struggling mightily to even get back to half of the business they were doing prior to their extended shutdowns.

The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover fully and whether or not the pandemic has permanently changed consumer demand.

Photo: Courtesy Carnival Corp