Royal Caribbean (RCL) – Get Royal Caribbean Group Report, along with rivals Carnival Cruise Lines (CCL) – Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) – Get Norwegian Cruise Line Holdings Ltd. Report, has struggled to balance onboard safety with the wants of its passengers. All three returned to sailing in July under the Centers for Disease Control and Prevention’s Conditional Sailing Order.
That document set strict standards for both crew and passenger vaccinations while also making the three major cruise lines conduct non-revenue test sailings in order to show that they could operate safely.
All three met those standards and slowly began sailing with passengers, albeit with a lot of rules in place, and an ever-changing list of protocols that got stricter when the highly contagious Covid omicron variant began to spread.
Omicron even caused Royal Caribbean to cancel a few sailings due to high levels of crew infections (with no cases of serious illness) and to delay the return of one ship to service so it could be used for crew quarantine. Now, the CDC’s conditional order has expired and the three cruise lines set their own rules.
That does not mean they have dropped safety standards. For the past few months — even when the order became voluntary — all three actually tightened their mask rules, requiring passengers, regardless of vaccination status, to wear them in any public area except when stationary and actively eating or drinking.
Now, however, omicron cases have started to drop and the rules are changing once again.
Image source: Daniel Kline.
Royal Caribbean Follows Norwegian in Easing Rules
Before omicron, Royal Caribbean allowed vaccinated passengers (all adults and kids over 12) to take their masks off in areas designated only for vaccinated passengers. Essentially, this meant that you had to wear a mask in the hallways but could take it off immediately in the casino, as well as most bars, and some entertainment venues.
Now, Norwegian has said it’s planning to return to those looser rules later this month and Royal Caribbean plans to follow.
“Beginning Feb. 15, 2022, the stricter mask rules will go away and that means guests will not have to wear face masks at venues designated for vaccinated guests only, such as select bars, lounges, restaurants, shows, and Casino Royale.,” reported Matt Hochberg on the Royal Caribbean Blog, which is not owned by or affiliated with the cruise line.
Royal Caribbean Senior Vice President Vicki Freed told travel agents about the change during a Feb. 10 webinar.
“One thing that changed yesterday is we have now announced that in our casinos you will not be required to wear masks and you can smoke again in the smoking areas of the casino,” Freed told travel agents.
Why This Matters for Royal Caribbean Stockholders
Royal Caribbean serves a mix of passengers. Some are regular cruisers who board ships multiple times a year. That passenger base has generally been willing to put up with whatever safety rules were needed in order to return to sea.
Families, first-timers, and less frequent cruisers may be less willing to spend the money a cruise vacation costs while being onboard will come with the added hassle of wearing a mask.
Royal Caribbean Chief Executive Jason Liberty, speaking during the company’s fourth-quarter earnings call, more or less forecast that those customers would come back once restrictions eased.
With the declining cases, operational challenges are also abating, so while the variant is not done, it appears that the worst is behind us. The timing of omicron was particularly painful as a typical wave booking period begins in early January. So we do expect it will weigh on our performance in Q1 and, to a lesser extent, in early Q2. With the peak in omicron now seemingly behind us, we have seen meaningful and sequential improvement in the booking activity week over week since the beginning of the year.
Basically, fewer cases mean looser rules and that makes customers more willing to book.
“In fact, in the last week of January, bookings returned to pre-omicron levels, and we expect demand recovery to accelerate as the variant subsides,” he said.
“…While omicron created some short-term challenges and will likely delay our return to profitability by a few months, our recovery trajectory remains intact. We remain confident that we will have a strong spring and summer season with great demand for cruising, both domestically and internationally.”
Liberty made clear that he expected Royal Caribbean to be profitable in the second half of fiscal 2022.
Carnival is expected to make the same changes to its protocols, but has not yet made its plans public.