By Saqib Iqbal Ahmed and Uday Sampath Kumar
NEW YORK / BENGALURU (Reuters) – The rapid spread of coronavirus disease is taking a $ 46 billion toll on the global ocean cruise industry.
The industry is dominated by three US-listed companies, Carnival Corp, Royal Caribbean Cruises Ltd and Norwegian Cruise Line Holdings, and is under close scrutiny following the outbreak of the virus that quarantined a ship in Asia.
Many see Asia as a potential growth area for cruise tourism: According to the Cruise Lines International Association, 39 cruise brands were active in Asian waters last year and used a total of 79 ships.
The long-term impact of the virus on the industry is unclear, and some analysts have warned investors against depositing cruise stocks.
“We remind investors not to panic as SARS, H1N1 and Zika, Carnival and Royal saw positive yield growth the following year, reflecting the resilience of demand across the industry,” said Morningstar analysts in a final note.
Authorities reported 5,090 new coronavirus cases in mainland China and 120 more deaths on Friday. The cases now total 63,851 with 1,380 deaths.
Royal Caribbean Cruises canceled 18 cruises in Southeast Asia on Thursday after canceling eight trips to China last week. Together with industry leader Carnival, he warned that the epidemic would affect earnings for the full year.
Graphic: Cruise ships in the Asia-Pacific region https://fingfx.thomsonreuters.com/gfx/mkt/13/2091/2059/cruise%20ships.png
The three major cruise line companies – Carnival, Royal Caribbean and Norwegian Cruise Line – have nearly 200 ships in their global fleet. Norwegian declined to comment on the long-term impact of the virus on its business. Carnival and Royal Caribbean did not immediately respond to requests for comments.
Graphic: Cruise companies listed in the USA https://fingfx.thomsonreuters.com/gfx/mkt/13/2092/2060/Pasted%20Image.jpg
Each of these companies generates a large part of its annual turnover in the region. China in particular has grown as a cruise market in recent years due to its large middle class population and growing international tourism.
Graphic: Cruise company – Asia exposure https://fingfx.thomsonreuters.com/gfx/mkt/13/2144/2112/Pasted%20Image.jpg
The carnival, which China sees as its most important long-term growth opportunity in Asia, was in the eye of the Coronavirus storm.
Carnival’s Diamond Princess has been docked in Yokohama, Japan, since February 3 after a man who disembarked in Hong Kong was diagnosed with the virus. With 218 infected passengers and crew, the British-flagged ship has the largest group of infected people outside of China.
Another carnival ship, the MS Westerdam, was at sea for about two weeks after several Asian countries prevented it from docking at its ports. The ship finally moored in Cambodia.
Carnival has already ceased cruising in ports in China. The company estimated that if it were forced to cease operations in the rest of Asia, earnings for 2020 would drop 55 cents to 65 cents a share.
The fear of viruses has hit the stocks of all cruise companies in recent months.
Graphic: Shares of the cruise company https://fingfx.thomsonreuters.com/gfx/mkt/13/2090/2058/Pasted%20Image.jpg
Cruise ships that bring together large numbers of people in crowded, semi-enclosed environments can sometimes promote the spread of infectious diseases such as norovirus and other gastrointestinal disorders.
The average age of a cruise ship customer was 46.7 years in 2018, according to the Cruise Lines International Association. The average age of people infected with the coronavirus is 55.5 years. This results from a study of 99 patients in a single hospital in Wuhan, China, from January 1 to 20, as reported in the Lancet Medical Journal.
(Reporting by Saqib Iqbal Ahmed, additional reporting by Uday Sampath Kumar in Bengaluru; editing by Megan Davies, Ira Iosebashvili and Richard Chang)