Cruise Lines Betting on Summer Rebound Face Obstacles From Omicron

While cruise companies remain bullish about their prospects, the developments are the latest wrinkle for an industry that nearly two years after the start of the Covid-19 pandemic is working to recover from a mountain of debt and significant losses.

“Capacity is coming back strongly, mainly with repeat cruisers,” said

Roger Frizzell,

a spokesperson for

Carnival Corp.

CCL -3.89%

, the world’s largest cruise operator by passenger capacity. “There is pent-up demand, and we are not discounting, except with traditional wave season promotions,” he said, referring to sales usually held between January and March. “I am not seeing a lot of refund letters in 2022, and I saw a lot in 2020,” he added.

Omicron hasn’t resulted in rapidly spreading infections among passengers, cruise lines say, adding that operating pressures have eased since early in the pandemic, when liners were stuck for days or weeks outside ports as authorities tried to accommodate scores of sick and frustrated cruisers.

Passengers must now be fully vaccinated, space has been reserved for isolation cabins, and port authorities are more responsive to requests to accommodate sick passengers or crew and allow ships to continue their journeys.

But this month

Royal Caribbean Group

RCL -2.57%

and

Norwegian Cruise Line Holdings Ltd.

NCLH -4.61%

, two of the industry’s largest operators, halted some cruises to popular destinations, including the Caribbean, with some cancellations stretching to April.

Industry executives said that since the beginning of the year, cruise ships have been denied entry to island destinations such as Puerto Rico, Curaçao, Bonaire and Aruba. Some liners have canceled short cruises in South Africa and South America, saying changes in health protocols in some countries make trips nearly impossible.

Cruise Lines International Association, an industry trade group, said it is in talks with Caribbean destinations on how ships can allow sick passengers to disembark without problems.

“Ships turned around at the last minute have a negative impact on passengers, and it’s difficult to deal with,” said Anne Madison, a spokesperson for the association. “We are making progress, but more needs to be done.”

The carriers have said all passengers booked on cruises that were canceled will get a full refund or a credit for future voyages.

Data from the Centers for Disease Control and Prevention, which still advises the public to avoid cruises, show that between Dec. 15 and 29 there were 5,013 Covid cases among passengers and crew on ships, compared with 162 during the previous two-week period. While operators say the infections are a fraction of the number of cases reported earlier in the pandemic, industry analysts say elevated case counts could once again depress demand.

“We saw strong bookings six months ago for 2022 cruises, well over the same period in 2019 before the pandemic,” said Patrick Scholes, managing director at Atlanta-based Truist Securities, an investment and advisory firm that tracks the cruise industry. “But since Omicron in December, bookings are down by as much as 25% and if they don’t reverse fast, cruises will go on a big sale to fill up the ships.”

KHM Travel Group, a cooperative that includes around 4,000 independent travel agents, made 40% of its revenue from cruises before the pandemic and 60% from land services such as hotels and tours. Now 5% of its revenue comes from cruises, said Geoff Cox, the cooperative’s vice president of sales. Mr. Cox said repeat customers aren’t shying away from new trips and account for three-quarters of all tickets for some cruise operators.

Large companies such as Carnival, Royal Caribbean and Norwegian, unlike airlines, didn’t get federal relief through the pandemic and have stayed afloat by refinancing debt and selling some assets.

Carnival, which for years notched steady growth of earnings and bookings, lost $9.5 billion in the year ended in November and $10.2 billion in the year before that. The company, which has roughly $33 billion of debt and about $9.4 billion in liquidity, said in December that it expects to return to profitability in the second half of this year.

Carnival now operates around 50 ships from its 94-vessel fleet after selling or recycling 19 vessels since the start of the pandemic. It expects all of its ships to be operational by early summer.

Other operators haven’t fared so well.

Genting Hong Kong Ltd.

678 5.06%

said it expects to run out of cash around the end of the month and requested liquidation help.

Genting Hong Kong, which is majority-owned by the Malaysian billionaire Lim Kok Thay and his family and runs cruises under several brands, said some businesses would continue, but it expects many operations to cease.

Crystal Cruises, which operates in the U.S., has suspended ocean sailings through April 29 and river operations through the end of May. It said the pause will allow it to evaluate the business, examine its options and refund existing customers.

Write to Costas Paris at [email protected] and Dave Sebastian at [email protected]