Updates regarding the financial outlook for three cruise shipping companies suggests that strong demand is giving reason for optimism despite deep losses two of these companies reported for the first quarter.
Norwegian Cruise Line Holdings Ltd (NCLH) said that bookings have been strong for future periods resulting in an elongated booking window as guests book further into the future, despite reduced sales and marketing investments and a travel agency industry that has not been at full strength for months.
“During the first quarter 2021, overall bookings, net of cancellations, were more than double the volumes during the prior quarter,” the company said in a statement.
Strong demand for 2022 cruises
Booking and pricing trends for next year are very positive driven by strong pent up demand. “The Company is experiencing robust future demand across all brands with the overall cumulative booked position for the first half of 2022 meaningfully ahead of 2019’s record levels with pricing higher when excluding the dilutive impact of future cruise credits (“FCCs”),” NCLH said.
NCLH had $1.3 billion of advance ticket sales, including the long-term portion of advance ticket sales, which includes approximately $0.85 billion of FCCs as per 31 March.
However, the company reported a net loss of $1.4 billion for the first three months of the year, a reduction from a $1.9 billion loss in the same period last year.
Royal Caribbean Cruises Ltd (RCCL) said a few weeks earlier that booking activity for the second half of 2021 is aligned with its anticipated resumption of cruising. “Pricing on these bookings is higher than 2019 both including and excluding the dilutive impact of future cruise credits (FCCs),” RCCL said.
RCCL’s bookings for next year at higher prices vs 2019
“Cumulative advance bookings for the first half of 2022 are within historical ranges and at higher prices when compared to 2019. This was achieved with minimal sales and marketing spend which the Company believes highlights a strong long-term demand for cruising,” the company said in a statement.
Since the last business update, approximately 75% of bookings made for 2021 are new and 25% are due to the redemption of FCCs and the "Lift & Shift" program.
RCCL had approximately $1.8 billion in customer deposits at the end of March, in line with its December 31, 2020 balance. Approximately 45% of the customer deposit balance is related to FCCs. “Since the suspension of guest operations on March 13, 2020, approximately 50% of the guests booked on cancelled sailings have requested cash refunds,” RCCL stated.
RCCL was also able to reduce its first quarter net loss, which narrowed to $1.1 billion from $1.4 billion in the same period last year.
TUI Cruises bond issued could lift credit rating
Meanwhile, the credit rating agency Fitch Ratings has nassigned TUI Cruises GmbH a first-time expected Issuer Default Rating (IDR) of 'B-(EXP)' with a Positive Outlook.
The Hamburg based company owns TUI Cruises and Hapag-Lloyd Cruises and it is jointly owned by RCCLv and TUI AG.
“Fitch has also assigned TUI Cruises' proposed EUR300 million senior unsecured notes an expected long-term rating of 'CCC(EXP)' with a Recovery Rating of 'RR6', reflecting significant higher- ranking debt ahead of the planned bonds resulting in no recoveries of the bonds under Fitch's waterfall analysis,” the agency said in a statement.
The assignment of final ratings is contingent on completion of the debt issue and receipt of information conforming to bond documentation already reviewed. However, the rating is constrained by high leverage due to the impact of the disruption to the cruise industry caused by pandemic-related restrictions and also because of the Hapag Lloyd Cruises (HLC) acquisition in 2020.
"TUI Cruises' business profile benefits from a strong market position in the European cruise market with a focus on Germany as well as the company's premium product offering and high repeat customer base. Successful execution of the currently ramp-up phase is expected to result in an improved financial profile in 2022, which is reflected in the Positive Outlook,” Fitch said.