Hurricanes Irma and Maria disrupted many sectors of the economy but none more so than the cruise industry. The shares of major cruise line operators Carnival, Royal Caribbean and Norwegian Cruise Line faced significant headwinds in September.

Still, most cruise lines appear to have weathered the financial hit of the storms.

After dozens of canceled, diverted or delayed cruises affecting half of its fleet, Carnival Corp., the company with the most ships in the region, said in September that Hurricanes Harvey, Irma and Maria would hit per-share earnings by 10 cents to 12 cents in the fourth quarter of its fiscal year.

Seven destinations in the Caribbean – St. Thomas and St. John (U.S. Virgin Islands), St. Maarten, St. Barts, Barbuda, Tortola (British Virgin Islands), San Juan (Puerto Rico) and Grand Turk Islands (Turks and Caicos), and Dominica – remained closed.

However, more than 40 ports in the Caribbean are fully operational, including the ports in the southern and western Caribbean.

“We have not experienced lots of cancellations. Cancellations are running at around 1 percent,” said Carnival Chief Executive Arnold Donald in the company’s third-quarter earnings call.

Meanwhile, Carnival’s bookings for the first half of 2018 are ahead of this year, both in terms of price and occupancy.

Mr. Donald said the affected destinations should be up and running before the end of the year. The company mainly replaced eastern Caribbean ports affected by the storms with western Caribbean destinations. Stops in Grand Turk were diverted to ports in the Bahamas.

Royal Caribbean’s customer refunds ranged from 25 percent to 100 percent depending on the disruption customers faced. The company also offered 25 percent to 50 percent credits for future cruises.

Royal Caribbean CEO Richard Fain said in an interview with Yahoo Finance that the company cannot forecast storms “but we’re resilient and frankly we go to some 450 destinations around the world, so we’re able to mix and match. [Irma and Maria] seemed to be particularly well-pointed at us. So every port that we went to in the Caribbean got some of the harm. But fortunately we were able to make some adjustments. And we’re a strong enough company to move on,” he said.

Some analysts even believe the recent sell-off in cruise company stocks represents a buying opportunity. Cancellations and route changes due to the hurricanes were “insufficient to derail strong trends” in the cruise industry, Wedbush analyst James Hardiman said in a research note in September.

“August pricing remained strong, and although the two major hurricanes are likely to be material to numbers, the impact should be short-lived,” he said.

“We see the resulting sell-off in the cruise space as an opportunity,” Hardiman added.

Both Royal Caribbean’s and Carnival’s shares had climbed continuously before August, but then took a dive after Irma and Maria disrupted their service. Royal Caribbean’s stock recovered at the end of September trading just below its Aug. 31 high. Carnival’s stock traded about $4 below the shares’ $65 peak at the end of August.

Despite the hurricanes, the cruise industry is growing overall. Shipyards that specialize in building cruise liners are fully booked until the middle of the next decade. The impact of the storms on the cruise companies was also not as hard as it could have been. The companies’ home ports remained unaffected, with the exception of San Juan, Puerto Rico, but Carnival positions just one Fantasy-class vessel there. And despite the devastation in some of the eastern Caribbean destinations, alternative ports were operational and available.

In addition, September is considered low season in the Caribbean and The Bahamas. Companies such as Princess Cruises, Holland America and Celebrity Cruises route most of their ships in other parts of the world during that time. Royal Caribbean has eight of its 24 vessels in the region at this time of the year, and Carnival has 20 ships in the Caribbean.

Cruise lines aid Caribbean islands

The cruise industry expanded its aid efforts in the Caribbean in the wake of Irma and Maria.

Royal Caribbean dispatched one of its 24 vessels to Puerto Rico, St. Thomas and St. Croix on a humanitarian mission. The Adventure of the Seas delivered supplies to the region and evacuated 3,800 people to Fort Lauderdale.

Both Caribbean and Norwegian Cruise Line also sent vessels that were available after cruise cancellations to St. Thomas and St. Maarten to deliver relief supplies and evacuate stranded travelers.

In addition, cruise lines are transporting relief supplies for affected islands on Florida-based ships that were heading to the Caribbean on regular sailings with passengers.

Carnival Cruise Line used 11 ships to deliver water, food, clothing and other critically needed items to several affected islands in the Caribbean.

Following the storms, Carnival Corp., together with the Miami Heat Charitable Fund and the Micky and Madeleine Arison Family Foundation, pledged up to $10 million for relief and rebuilding efforts in the Caribbean and Florida.

“Be assured, we will continue to bring many resources to bear for those impacted [by Irma and Maria] by providing ongoing help and support in the coming months,” Carnival’s CEO Donald said after the company’s quarterly conference call with Wall Street analysts in September.

Royal Caribbean Cruises, the parent company of Royal Caribbean and Celebrity Cruises, has pledged to match donations of up to $1 million that aid hurricane relief efforts. Norwegian Cruise Line’s parent company has made a similar pledge to match donations of up to $1.25 million. Norwegian’s sister line, Oceania Cruises, said it would donate $500 per cabin to hurricane relief efforts for each new booking on select Caribbean voyages sailing from December 2017 through April 2018.

Royal Caribbean’s Fain believes that the islands will eventually recover. “What we really want to do is see the strength that the cruise industry and tourism bring to these islands,” he said. “Tourism can be one of the strongest contributors to these economies going forward. We intend to be part of that.” 

 

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