Cruise Investors Expect Omicron Will Have Little Lasting Impact

As the variant heads for a rapid peak in the U.S., a return to "normal" may arrive by mid-2022

Royal Caribbean file image
Royal Caribbean file image

Published Jan 2, 2022 3:50 PM by The Maritime Executive

Last week, the CDC advised the public to avoid cruise ships due to the risk of catching the omicron variant of COVID-19. While this might be expected to have some effect on near-term bookings, cruise investors have largely shrugged. The share prices of the main publicly-listed cruise companies - Royal Caribbean Group, Carnival Corp. and Norwegian - have dipped slightly, but they are still trading higher than at the beginning of December. 

"Investors are completely taking this in stride," Deutsche Bank analyst Chris Woronka told Barron’s this weekend. 

Royal Caribbean's data on cruise outbreaks might hold some clues. Its numbers show an increase in the rate of positive COVID test results among passengers and crew, but no increase in the number of people actually getting sick on board. This is consistent with most early clinical studies, which suggest that omicron is more infectious but significantly less dangerous than delta (for vaccinated people). 

"Since cruising restarted in the U.S. in June 2021, the Royal Caribbean Group has carried 1.1 million guests with 1,745 people testing positive – a positivity rate of 0.02 percent," the cruise operator said in a statement Friday. "The vast majority of those cases had no symptoms or only mild symptoms, with only 41 people needing hospitalization. None of the Omicron cases have been severe or needed to be taken to a hospital."

Royal Caribbean chalked up this positive outcome to the fact that almost everyone who boards its ships must be vaccinated and tested before embarkation. 

"Our case count has spiked, but the level of severity is significantly milder. We will remain nimble and in constant contact with health authorities," said the group's chief medical officer, Dr. Calvin Johnson. 

The omicron variant is spreading very rapidly on shore, but is not driving higher rates of hospitalizations (except among young children, who appear to be more vulnerable). At the current rate of spread, it could peak in some states - including the dominant U.S. cruise state of Florida - before the end of the month, according to epidemiologists. 

This could be good news for cruise lines going forward. A rapid peak and decline would mean a faster return to business as usual. Royal Caribbean says that booking numbers align with a rebound later in the year: its ships are sailing with fewer passengers now than they have historically, but bookings for the second half of 2022 are "within historical ranges" and at higher prices. 

"Omicron is having a big short-term impact on everyone, but many observers see this as a major step towards COVID-19 becoming endemic rather than epidemic," said Richard Fain, the group's chairman and CEO. "We expect these factors to have a negative impact in the short term but are optimistic they will lead us to a more pervasive but less severe health environment. Taken together, this should enable us to produce a strong transitional year in 2022 and a very strong 2023."