What will the coronavirus do to cruise ships

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With the horrific debacle of the Diamond Princess dominating headlines and cruise ships losing customers and canceling trips due to the coronavirus, it’s no wonder stocks of those companies have dropped some 20% year to date.

It’s certainly not the best of times for the big three publicly traded cruise ship companies: Carnival Cruise Line (CCL)—which operates the Diamond Princess—Royal Caribbean (RCL) and Norwegian Cruise Line (NCLH.) Still, reports of their demise, or even being in dire straits, are exaggerated I think.

To be sure Wall Street has soured on the stocks. “Uncertainty is one of the reasons we downgraded shares of cruise companies,” says Tuna Amobi, analyst at CFRA. “Norwegian, we have a strong sell. Royal we have a sell. Carnival we have a sell. We think this overhang will dampen investor sentiment.”

And yet here is the indefatigable Richard Branson launching a brand new cruise ship line, named predictably, Virgin Voyages, in the teeth of the maelstrom. Branson’s first ship, the Scarlet Lady—carrying 2,770 passengers and 1,160 crew—will reflect the usual Virgin hipness and will address some of the sustainability concerns that vex the business. All ships in Branson’s planned fleet of four will be carbon neutral and will shun plastic and wasteful buffets.

Does Branson know something Wall Street doesn’t? Could be.

Branson believes that the coronavirus, or more precisely COVID-19, is a temporary thing, and is so confident of that, he didn’t even delay the launch, which he could have easily done.

Cruising is business with wind at its back, too. Before the coronavirus, some 32 million passengers were expected to set sail in 2020, two times the number of customers in 2009.

I find cruise ships to be super-cool, and I say that having never been on one. (Some day, some day.) Maybe it was watching The Love Boat when I was young, but really it’s the scale of the ships that I find so appealing. The biggest ships—some 300 of these behemoths sail the seas—are over 1,000 feet long and 200 feet wide, weigh over 200,000 tons and carry 6,000 passengers, with the most luxurious having a like number of crew.

No stranger to disasters

The companies are fascinating too. Did you know that both Norwegian—which isn’t really Norwegian—and Carnival were founded by the same man, the late Ted Arison? And that Carnival, dually listed on the London Stock Exchange and the NYSE, is the only company included in both the S&P 500 and the FTSE 100? The Arison family has made a fortune from Carnival, the biggest of the three companies with a market cap of some $30 billion. Ted’s son Mickey, former long-standing CEO of Carnival and owner of the Miami Heat, is worth $7.8 billion, according to Forbes.