To say that the global outbreak of COVID-19, or the coronavirus, is causing unprecedented amounts of traveler anxiety is an understatement.
The International Air Transport Association projects that more than $113 billion in revenue will be lost if the coronavirus isn’t resolved soon.
So far, the cruise industry has arguably been the most devastatingly affected. The industry is besieged by trip cancellations and half-full cruises during its travel season peak.
On March 4, 2020 the first coronavirus death was reported in California. The Californian was a passenger on a Grand Princess cruise that had previously visited Mexico.
Earlier, on the other side of the world, the Diamond Princess, a sister cruise ship operated by the same cruise line, was quarantined in a Yokohama, Japan port for 14-days in mid-February. More than 700 Diamond Princess passengers tested positive for coronavirus at the time.
The panic-inciting optics of cruise ships being quarantined in ports, and potentially expediting the international spread of coronavirus after quarantine, is causing incalculable levels of cruise traveler anxiety.
More than 65% of Americans queried in a poll conducted by GOBanking Rates said they would reject an all-expenses paid luxury cruise due to the coronavirus.
In another poll, 59% of Americans said they would cancel preexisting travel plans due to the coronavirus — even if it meant losing money they’ve already paid.
However, it’s during distressing times that opportunities present themselves.
On the other hand, it might be a strategically optimal moment to invest in cruise industry stocks.
Sunken opportunism
John Buckingham, portfolio manager for the Kovitz Investment Group, which manages more than $5 billion in assets, believes that investors should practice patient, long-term strategies.
Buckingham advises investors to look at current cruise line stocks because they’re tanking over coronavirus panic.
According to Buckingham, several of the most popular cruise line companies have suffered total return losses of up to 39% within the first eight weeks of 2020.
These include:
- Carnival Corporation (CCL)
- Royal Caribbean Cruises (RCL)
- Walt Disney Company (DIS)
Buckingham warns that even with the repositioning of cruise ships in Asia and pricing discounts, cruise companies can expect “…one or two quarters where you have much lower revenue.”
As per Buckingham’s advice, he believes that investors should take advantage of discounted cruise stocks now for long-term gain.
He said it might take up to five years before the cruise industry normalizes again post-coronavirus panic. “In the fullness of time, my belief is people will get back to cruising,” said Buckingham.
On March 8, 2020 the U.S. State Department and the CDC issued an advisory urging Americans to avoid cruises for the foreseeable future to help stem coronavirus infections.
Carnival Cruises, which operated two cruises quarantined over COVID-19 concerns, suspended global operations for 18 of its ships for two months on March 12.
