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Opinion: Refocusing the cruise lens

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 11 May 2020 11 May 2020

Written by Dr Wendy London

There is a militant cohort of people who would prefer if cruise ships didn’t exist. Their collective, narrow focus lens only takes in the bad stuff, like the incidence of norovirus on the ships, the dumping of bad waste into the sea and the smuts that can be seen forming a hazy cloud above a ship. This militant cohort doesn’t look beyond the outward symbols of bad. These people think they are Erin Brockovich, Ralph Nader and Rachel Carson all rolled into one. They set about to trash even the most innocuous posts about cruising on social media and try to sway public opinion by writing and supporting sensationalist stories in the mainstream media. We’ve all suffered their disapproval, and have the bitten, scarred tongues to prove it.

What makes me particularly sad and frustrated is that the cruise industry doesn’t invest enough in refuting the critics’ claims. I guess the reason is that the cruise lines believe that the sheer joy of cruising, the dream-making, will win out. No doubt that this is a true belief, given that cruising has continued to grow and grow. At least until this pause, this Covid-19 era. Now, cruise ships have taken centre stage as one of the leading evils, as the prime breeding ground for Covid-19. Cruising has come to a halt.

All sorts of scenarios are running through my mind to try to respond to this negativity. It might just come down to a very simple, and perhaps slightly obtuse (at least in this context) saying: ‘My enemy is my friend.’ Maybe this militant cohort, the muckrakers, have done us a favour. Maybe they are indeed our friend, because they have told us what they think is wrong, paving the way for us to refute their negativity. They certainly have made me think more seriously about what Covid-19 means for cruise tourism.

My take? We need to shift their lens. This isn't a story about cruise ships, It is a story about a pandemic. This is equally not (in the first instance) an economic crisis, it is a public health one. That pivot tells us a lot and how we should proceed.

In the first instance, the cruise ships did not invent Covid-19. In fact, the incidence of cases (passenger and crew) cruise ships is miniscule. On 24 April 2020, The Miami Herald reported that there were 2,787 cases onboard the ships. On that same date, Johns Hopkins University reported that the number of worldwide cases surpassed 2.6 million. In other words, cruise ships account for only one thousandth of all cases as at the end of April. Sure, no one knows for sure how many cases there really were on the ships, but nor is it known how many are active onshore. An intriguing statistic: one US aircraft carrier alone – the Theodore Roosevelt – reported more than 900 cases while other US Navy ships are also reporting cases. What about nursing/rest homes? The numbers are very very scary. Prisons, airplanes, boarding schools… all of these institutions are spaces of containment, where viruses are known to flourish if robust health and sanitation procedures are not followed.

As it turns out, cruise ships are held to an extremely high standard of safety, health and sanitation. All of us are aware of trigger events like the sinking of the Titanic (resulting in the creation and implementation of SOLAS), and the high profile intervention of the CDC in requiring high standards of cleanliness. Sure, not all cruise ships adhere equally, but sadly, we only hear about the bad stories, not the good stories.

It is here where we need to start refocusing the lens of those whose mission it is to criticise cruise ships. For example, what has happened, and with dizzying speed over the past weeks? The cruise lines have come up with health and safety regimes which, I dare say, would rival any space of containment onshore. Pre-boarding health checks, increasing laundry temperatures onboard, deep cleaning of passenger cabins and no more free-for-all buffets are just some of the protective health measures being put into place. So, in this sense, the presence of a threat has proven to be a good thing – continuous, fast-paced improvement in the face of a global health crisis. Time to tell this story so that its lessons can be applied in other sectors as well. It is not just a story about cruise ship practices, it is a story about how all spaces of containment should respond to major public health crises.

Before I move off this point, however, here is an example which solidly illustrates my point about the attitude of cruise line critics. Emirates Airline’s announcement that it would require all passengers to have an instant Covid-19 test before boarding was met with fanfare and flourish across the world. No one used that announcement as an excuse to criticise airplanes as a ‘bad’ mode of travel. Write a Facebook post about the health and safefy advancements undertaken by the cruise industry, and disparagement has no bounds.

Next focal plane in our new lens to address? The political response. We have seen instances over the past months where politicians and their bureaucracies engaged in blame-shifting and point-scoring concerning the disembarkation of passengers into local communities. In addition, inflammatory lip service was sometimes paid by the politicians to the plight of crew onboard the passenger-less ships, calling them ‘imprisoned’ and ‘badly treated’ (their take on the fact that the cruise lines were following best practice, isolating crew on the ships). With respect to the first observation, cruise ships are not and should never become political footballs – especially not in times like this. Instead, lessons learned from process failures should be transformed into robust codes to be agreed not just by the cruise industry (e.g. SOLAS and MARPOL) nor just by onshore agencies (e.g. a destination’s health ministry or department). Instead, codes – not dictatorial regulations – should be agreed in partnership with all affected parties, with the inclusion of appropriate expert advice. Now is not the time for confrontation, public displays of power or rancor. It is, instead, a golden time for collaboration; recognition of the social, economic and environmental contributions which each party can make; and respect for individual views. These are values that are not the sole domain of the cruise lines in the face of a pandemic, but should be adopted by all stakeholders in relation to any issue of public policy.

With respect to the second observation, i.e., ‘inflammatory lip-service,’ that, too, needs to change. Again, this isn’t an issue just about the cruise lines and their ships, but about how the rest of the world perceives anything it doesn’t completely understand. Sadly, the cruise industry doesn’t adequately convey its good work, onboard or onshore. Onboard, good stories range from the ships’ exemplary and innovative efforts to make the ships more environmentally sustainable to caring crew who go far beyond their jobs to embrace passsengers as family, forging life-long friendships. Onshore, the cruise lines contribute to social institutions such as schools, charities and orphanages. Discuss any of this on social media or through the mainstream media? The critics will find a dark-side, and denigrate even the most admirable activities and actions.

Very much related to this point is how the media – and politicians – frame stories about the cruise lines and their ships. Language such as ‘crew imprisoned in their rooms’ (quarantine requirements); passengers ‘stuck’ on ships; ‘the last cruise ship on Earth; and 'captive cruise ship staff beg to be arrested’ needs to change. Politicians, and local community stakeholders, tend to absorb this language, leading to inaccurate portrayals of the situation which mask the issues which really need to be addressed.

The cruise lines need to take assertive stance to refocus the critics’ lens. First, the cruise lines need to tell the stories of their good works, and their exemplary crews. Over recent years, the cruise lines have begun to embrace social media, including blogs on their own sites, but much more needs to be communicated. There are many channels which the cruise lines can use to disseminate their good stories. Secondly, and perhaps more critically, the cruise lines need to find a way to shed the public perception that the cruise lines are arrogant and hold boundless power. Instead, they need to engage more with the local communities they visit. Port agents, cruise associations and local cruise committees currently engage in dialogue, but local politicians and community leaders and representatives also need to be included. Ill-informed perceptions conveyed by politicians during informal live press conferences on social media platforms need to be corrected. Dialogue is the best way to correct these perceptions -- dialogue which should be initiated by the cruise lines and embrace not just the local cruise fraternity, but also local decision-makers and leaders from government, the wider business community and residents.

No one will argue with the proposition that the world has changed, and cruising along with it. But, as we have seen since the very beginnings of passenger ship travel, the industry continues to adapt to change, change brought about by global events such as war, economic downturns, terrorism and pandemic. In fact, the cruise lines are one of the great crisis survivors of all time. Wartime has seen luxury liners turned into troop carriers while economic downturns have seen creative creative pricing strategies leading to huge growth in the industry. Terrorism has seen the implementation of highly sophisticated ship and passenger security measures, as well as the establishment of new ports close to where passengers live. Earlier in this article, I mentioned the cruise lines’ proactive work to expand their health and safety regimes in response to the current health crisis. However, today, adaptation can and should go beyond the immediate needs of managing a health crisis. For those who dream about the future, it can provoke some blue-sky thinking. This future needs to start with financial and social responsibility necessity – and a further opportunity to refocus the critics’ lens.

A hint can be found in the conversion of luxury liners to troop ships in wartime. Today, the media is full of stories of cruise ship parking lots off the coasts of Mexico, the Philippines and other hospitable, safe harbours. The headlines and their stories are once again, predictably hostile. Compare: stories about aircraft parking lots in deserts and abandoned airports compel sympathy for the mothballed airplanes. Moreover, positive stories are now beginning to emerge about the airlines re-purposing at least some of their mothballed capacity by carrying more and more cargo, even in empty passenger cabins.

The cruise lines are in an even better position to repurpose their fleets. Cruise ships’ potential goes far beyond the airlines’ shift to carrying more cargo. As obvious as this next statement it is, it makes financial and social sense and engenders some near-term blue-sky thinking: ‘People can, and want, to live on cruise ships – and do.’ Cruise ships parked offshore, with minimal contact with virus-exposed land, make fantastic floating institutions of all sorts. As governments wrestle with the logistics of mass-quarantining of inbound air passengers, cruise ships can make ideal quarantine facilities for international ports-of-entry situated in coastal cities. Even airports could avail themselves of such facilities – Manila’s international airport has had to close for several days to manage the throughput of Filippinos arriving back, dealing with the logistics of testing, quarantine and onward travel. The proximity of the airport to the harbour makes the ships perfect quarantine facilities. It is inevitable, though, that a new wave of criticism will result.

That should not discourage the cruise lines from repurposing their ships, though, even if only during the pause to try to recoup revenue lost from leisure cruisers. There are many other possible uses, temporary uses, for cruise ships. Cruise ships are already used as floating universities. What about making them available to schools and universities fearing outbreaks on their land-based campuses? Or, as the weakness in the airline industry may take several years to recover, smaller cruise ships could also double as coastal ferries, offering point-to-point transportation options along with their leisure cruise guests. Longer term, though, I personally hope that the cruise lines re-consider their plans to jettison smaller ships in favour of larger, feature-rich, technologically-flash ships.

Certainly, Covid-19 has caused my lens to refocus, producing an even clearer image of how I perceive cruising. I have never been a fan of overt consumerism or glitz on land, or on the ships. Now, I value small, intimate, ‘learning’ ships even more – for the passengers and crew I meet, and frankly, for the benefits smaller ships can enjoy in terms of the monitoring and management of passenger health and safety. And even this compels a comparison with air travel and how it is perceived. Positive media attention and favourable comments surround recent press coverage about leaving middle seats free, changing the configuration of passenger cabins or installing protective screens. Raise the issue of a preference for smaller ships for any reason on social media? ‘All cruise ships are evil and should be banned.’ Time to re-focus.

I reckon that a recalibration of cruising would not be a bad thing, and indeed, we see it happening. Now, we just need to refocus the lens of the critics. Make them understand that cruising is about making dreams, about pumping billions of dollars a year into local economies, about creating jobs onshore as well as on the ships and about offering a form of tourism that makes travel possible for so many who would find land travel difficult or impossible. Make them understand that cruising is about adaptation and change. Now it is time for the critics to change, to refocus.

Dr Wendy London is acknowledged as one of the leading cruise tourism experts in both academic and economic development circles. She has written for publication in both the academic and commercial media. In 2018, Wendy completed her PhD on Auckland, New Zealand’s cruise infrastructure development, and is an Adjunct Research Fellow at Griffith Unviersity (Brisbane). Wendy is a tri-national (US/UK/NZ), having grown up in New Jersey and lived and worked in London, Amsterdam, Melbourne, and now New Zealand for the past 25 years. Prior to pursuing her love of tourism, Wendy was an IT lawyer and also worked in the area of information technology. Wendy and her husband are addicted cruisers, having traveled on 39 cruises to all continents, but New Zealand remains their favourite itinerary.

RCCL identifies capex cuts and estimates monthly cash burn at up to $275 million

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 08 May 2020 08 May 2020

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping company, has identified significant reductions in capital expenditure and it estimates its cash burn at $250 million to $275 million per month.

Since the last earnings call, the company has identified approximately $3.0 billion and $1.4 billion of capital expenditure reductions or deferrals in 2020 and 2021, respectively, RCCL said in a statement.

The 2020 reductions and deferrals are comprised of:

$1.2 billion, of non-newbuild, discretionary capital expenditures and

$1.8 billion in reduced spend or deferred installment payments for newbuild related payments which the Company is currently finalizing.

The company believes COVID-19 has impacted shipyard operations and will result in delivery delays of ships previously planned for delivery in 2020 and 2021.

Since the last earnings call, RCCL has taken several additional actions to further improve its liquidity position and manage cash flow:

Increased the capacity under its revolving credit facilities by $0.6 billion, and fully drew on both facilities

Entered into a $2.35 billion 364-day senior secured credit facility with an option to extend (secured by 28 ships with a net book value of approximately $12 billion as of March 31, 2020)

Obtained a $0.8 billion, 12-month debt amortization and financial covenant holiday from certain export-credit backed facilities

Amended its non-export-credit backed bank facilities to incorporate a 12-month financial covenant holiday

Agreed with its lenders that it will not pay dividends or engage in stock repurchases.

“As of May 5, 2020, expected debt maturities for the remainder of 2020 and 2021 are $0.4 billion and $0.9 billion, respectively.

The Company estimates its cash burn to be, on average, in the range of approximately $250 million to $275 million per month during a suspension of operations,” RCCL said. 

“The Company is considering ways to further reduce the average monthly requirement under a prolonged out-of-service scenario and during start-up of operations,” RCCL pointed out.

 

All doors open to improve RCCL’s liquidity position

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 08 May 2020 08 May 2020

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping company, says all options are option to increase the group’s liquidity, while operating expenses of its fleet that is in lay up is about $150 million to $170 million per month.

"Since late January, we have undertaken several proactive measures to mitigate the financial and operational impacts of COVID-19." said Jason T. Liberty, executive vice president and CFO, said in a statement. 

"Our focus is on bolstering liquidity through significant cost cutting, capital spend reductions, and other cash conservation measures.  In addition, the Company is considering additional financing sources.  We continue to evaluate all options available to us to further enhance liquidity."

As of April 30, 2020, the Company had liquidity of approximately $2.3 billion all in the form of cash and cash equivalents. 

On May 4, 2020 the company increased the 364-day senior secured credit facility and drew $150 million, further enhancing the Company's liquidity profile.

The company has taken significant actions to reduce operating expenses during the suspension of its global cruise operations. Significantly reduced ship operating expenses, including crew payroll, food, fuel, insurance and port charges.

The company's ships are currently transitioning into various levels of layup with several ships in the fleet transitioning into cold layup, further reducing operating expenses.

The company estimates that its average ongoing ship operating expenses and administrative expenses is approximately $150 million to $170 million per month during the suspension of operations. RCCL may seek to further reduce this average monthly requirement under a prolonged non-revenue scenario.

 

RCCL says bookings, prices lower than year ago

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 08 May 2020 08 May 2020

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping company, said that both bookings and prices are lower now than a year ago as a result of the cOVID19 crisis.

Prior to the outbreak of COVID-19, the company started the year in a strong booked position and at higher prices on a prior year comparable basis.  “Given the impact of COVID-19, booking volumes for the remainder of 2020 are meaningfully lower than the same time last year at prices that are down low-single digits,” RCCL said in a statement. 

Due to the suspension in sailings, booking trends reflect elevated cancellations for 2020 and more typical levels for 2021 and beyond.  Although still early in the booking cycle, the booked position for 2021 is within historical ranges when compared to same time last year with 2021 prices up mid-single digits compared to 2020.

The company has instituted several programs in order to best serve its guests: for cancelled cruises, guests are offered the choice of future cruise credits valued at 125% of the initial cruise fare paid in lieu of providing cash refunds.  As of April 30, 2020, approximately 45% of the guests have requested cash refunds. 

For non-cancelled cruises, the company has implemented a "Cruise with Confidence" policy.

As of March 31, 2020, the company had $2.4 billion in customer deposits.  This includes approximately $0.8 billion of future cruise credits related to previously announced voyage cancellations through June 11, 2020.

The company also continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.