<p>Undoubtedly, among the devastation of the new coronavirus, the cruise industry has absorbed the burden of the damage. I am not just referring to stock erosion in companies such as Carnival (NYSE: CCL), Royal Caribbean Cruises (NYSE: RCL) and Norwegian Cruise Line (NYSE: NCLH). Rather, the sector has been hit by a public relations nightmare that nothing – not a sinking ship or brown water incidents – can match. At the same time, I am sure that opponents will be attracted to CCL shares because of the discount.
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Admittedly, this is not an unreasonable framework. In addition to the discounted price, consumers’ emotions will at some point move back towards the besieged industry. It’s really about the megatrend of demographics, something I often discuss regarding long-term investment strategies.
Of course, cruise ships tend to attract the older demographics. And it’s no small feat for CCL shares. For example, retirees are looking for experiences to reward a lifetime of work. Therefore, many cruise ship passengers are willing to pay more money for a more memorable vacation.
But an interesting dynamic has occurred with the much younger millennial generation. Instead of working with the daily grind to move forward like all other generations, millennia also focus on experiences. In fact, the phenomenon is so powerful and widespread that many social scientists have described this trend as the “experience economy”.
Not only that, CCL shares are a clear benefit to this new economy, whether the statistics quantify it or not. Because an integral part of this trend is the documentation of exotic travels and activities, which urge spectators to keep up.
In addition, there are few other travel platforms that give you more money than cruise ships. Unfortunately, this is not a winning idea yet.
The CCL share may be launched … eventually
Don’t get me wrong: I love the forward-looking concept here. In a few years, I can imagine that the industry will be much better off than right now. But jumping far ahead of the curve also creates unnecessary pain for your portfolio.
Right now, investors are collectively monitoring economic data, especially consumer sentiment. Unfortunately, the Department of Labor continues to report millions of Americans applying for unemployment benefits. Over a five-week period, more than 26 million have claimed the unemployed.
When considering the fact that many workers have been unable to make these claims due to outdated communications infrastructure that underscores government benefit offices, the current unemployment rate may be 20% or higher.
Of course, we should expect this figure to improve gradually as our country reopens. But I mention this because it is obvious that holidays are the last item on people’s agendas right now.
Another reason to avoid CCL shares at the moment is the serious PR damage. As I said, cruise ship passengers have reported many problems with their travel experiences. Nothing comes close to what coronavirus-affected passengers have encountered.
From a health perspective, prospective travelers would witness terror when the virus spreads rapidly, with government agencies unwilling to immediately dock affected ships. In that situation, it is an obligation to go out to distant places when all you are trying to do is come home.
To encourage customers, several cruise ships have made changes to their booking and cancellation policies. Over time, this can lead to those wanting to take advantage of discounts and a more relaxing experience (due to lack of passengers).
But the industry is likely to find that in general no price is low enough to make a noticeably convincing argument.
Voluntary quarantines will still push cruise ships
Here’s the real problem for CCL stocks within the immediate time frame. No matter how many discounts and incentives the industry launches, consumers care more about their health than even their own livelihood.
This is according to a Reuters / Ipsos opinion poll, which shows that 72% of American adults prefer that protection on site remains intact “until doctors and public health say it is safe.” In my opinion, it is a powerful proof that cruise ships and the wider travel industry are waiting to do.
Unlike other sectors, travel requires close contact between passengers. With cruise ships, it’s worse because you’re stuck with thousands of others. In addition, the international community has set a precedent that if a contagious disease spreads on board a ship, they will impose quarantine measures until they formulate a plan.
Then many passengers could give in to the disease and quickly spread panic and fear.
As I said earlier, the besieged cruise industry will also overcome this crisis. But let’s be realistic – it takes longer than other sectors to recover. While CCL shares can be a purchase, it is not one right now.
Matthew McCall left Wall Street to actually help investors – by getting them into the world’s biggest, most revolutionary trends FOR anyone else. The power of being “first” gave Matt readers the chance to bank + 2,438% in Stamps.com (STMP), + 1,523% in Ulta Beauty (ULTA) and + 1,044% in Tesla (TSLA), just to name a few . Click here to see what Matt has up his sleeve now. Matt does not directly own the above-mentioned securities.