How much is it costing cruise lines to completely cancel their cruises? It’s an amount that soars into the billions of dollars in missed revenue.
It’s no hyperbole to say that what we’re seeing in the cruise industry right now is unprecedented. Never before has there been this many cruises cancelled across the entire globe.
The closest approximation is hurricane season, but even that doesn’t hold a candle to what’s happening today.
Hurricane Dorian in 2019 tore through the Bahamas, impacting several cruise line private islands before slowing to a crawl just off the coast of Florida. The storm had an effect on the biggest cruise ports in the world, including Miami, Port Canaveral, and Port Everglades. Trips had to be re-routed, with some cancelled.
At the time, it was among the biggest disruptions cruising had ever seen. That is, until the start of this current crisis.
What started as simply cancelling a few trips in Asia turned into harder restrictions on who could board a ship, and ultimately to the entire industry cancelling cruises.
All Major Lines Have Stopped Sailing
At this point, all major cruise lines have suspended their sailings. The vast majority of announcements came on March 13, when major lines like Carnival, Royal Caribbean and Norwegian all announced they were cancelling cruises.
The suspensions were supposed to be for about a month. Royal Caribbean said its return to sailing date was April 11. Carnival slated April 10. Most other cruise lines were set to return around the same time.
As time has passed since that original announcement, however, there are signs that those suspensions could last longer.
The number of cases continues to grow in the United States, which is the largest cruise market in the world.
Royal Caribbean has already announced that it is postponing its return to sailing until mid-May, as the situation shows no sign of letting up soon.
It would be surprising if more cruise lines don’t follow suit.
How Much Revenue — and Profit — Is Missed by Cruise Lines
So how much is this disruption costing the cruise lines? As mentioned earlier, the impact could be measured in the billions.
In fact, we dug into the financial reports of the three major cruise companies — Carnival Corporation & PLC, Royal Caribbean Cruises LTD., and Norwegian Cruise Line Holdings LTD., to see just how big the impact might be.
These three cruise companies make up the lion’s share of the market. Under their umbrella are not just the namesake cruise lines, but also major players like Princess and Celebrity.
It gives us a great insight into how big a disruption this crisis is causing in the industry.
Note: The numbers below are estimates for how much revenue and profit the cruise lines miss each day based on entire 2019 revenues and net income.
There are factors that will vary, as the cruise lines see different amounts of revenue at different times of year, and expenses should be much lower with ships not operating.
These figures are meant to be a rough estimate how much revenue and profit the cruise companies are missing while they have to suspend their operations.
Carnival Corporation & PLC
The largest cruise company in the world by revenue, Carnival Corporation & PLC includes Carnival, Princess (which has been hit hard by the crisis), Holland America and Cunard, among others.
Princess was among the earliest to announce a voluntary suspension of its sailings and also has one of the longest-scheduled pauses. It doesn’t plan to return to sailing until mid-May at the earliest.
Carnival plans to return to service in mid-April, but as mentioned, it wouldn’t surprise us to see that date extended given the current climate.
In 2019, Carnival Corporation saw a record year. In total, the company generated $20.83 billion in revenue. That comes out to about $57 million in revenue per day if spread evenly over a year.
As for profit, the company earned a net income of $2.99 billion last year, or $8.19 million each day:
In other words, we can roughly estimate that a 30-day pause in sailing for the entire fleet means the loss of $1.7 billion in revenue and a loss of $246 million in profit. For each day the company doesn’t sail, it could mean another $57 million in revenue — and $8 million in profit — they miss.
Royal Caribbean Cruises LTD.
Royal Caribbean Cruises LTD. is known for having the largest ships in the world with its namesake fleet, but it also operates several other cruise lines. This includes Celebrity Cruises.
Royal Caribbean first suspended its U.S. sailings on March 13, but then announced a global shutdown soon after. Originally the plan was for the company to return to sailing on April 11. Since then, it has extended that date to May 12 as the crisis has yet to show signs of slowing.
The cruise company has been extremely successful during the past several years. In 2019, it brought in a total of $10.95 billion in revenue. Spread over an entire year, that means each day the cruise line doesn’t sail, it forgoes about $30 million in revenue. That adds up to $900 million over the course of 30 days.
What about profit?
Last year saw $1.88 billion in profits for the company, meaning each day it saw $5.15 million in net income. If it earned the exact same amount each day, that means each month it isn’t sailing, Royal Caribbean is missing out on an estimated $154 million in profit.
Norwegian Cruise Line Holdings LTD.
Norwegian Cruise Line Holdings LTD. is the smallest of the “Big Three” cruise companies that together dominate the market. But it’s no slouch. Through Norwegian Cruise Lines and its sister cruise lines Oceania and Regent Seven Seas, the company sails around the world and has more than two dozen ships in its fleet.
The company brought in $6.46 billion in revenue for all of 2019. That comes to an average of $17.70 million per day. In other words, if the company stops all sailing for a month, it’s forgoing about $531 million based on the daily average revenue.
As for profit, Norwegian saw just under a billion dollars in profit last year — $930 million in total. That comes out to $2.55 million per day that the company misses by not sailing, or more than $75 million in the course of a month.
More Than $3 Billion in Estimated Lost Revenue
Remember, the numbers mentioned above are simple estimates based on what an average day was like in 2019 for the major cruise companies.
They don’t take into account that costs should be much lower for the cruise line when it doesn’t sail, which should help offset some of the loss of revenue. Nor do they take into account seasonality of cruise fares, or the generous refund policies offered for the cancelled cruises.
Even so, it gives a good glimpse into just how big an impact the crisis is having on the cruise industry.
Combined, the estimated revenue hit to all three cruise lines to suspend sailing for one month is more than $3 billion, based on daily averages.
That’s to speak nothing of a longer shutdown, or any softer demand in the future once cruise lines start to sail again.
On the plus side, there is also the possibility that credits given to cancelled cruise passengers turn into revenue later on as these people sail in the future. That could help offset some of the loss.
No matter what the actual costs end up being, it looks to still be a long road for the industry to recover from the havoc caused.