Are cancellation of sailing a thesis breaker for Royal Caribbean?
May 18, 2021
Royal Caribbean (NYSE: RCL) has suffered another setback. The company has canceled its summer Odyssey of the Seas sailings out of Israel due to unrest in the region.
This hurts the company’s bottom line in the short-term as these sailings were likely well sold as Israel has one of, if not the, highest rates of vaccination in the world. Basically, these cruises have been canceled because it’s not smart to sail a cruise ship in a region that’s in an active armed conflict. The company’s statement said that as gingerly as possible.
“Odyssey of the Seas was to resume operations beginning June 2nd, 2021 out of Haifa, Israel. However, due to the unrest in Israel and the region, we have not been able to complete the preparation required to operate and as a result, sailings out of Haifa will be canceled,” Royal Caribbean posted on its website.
The cancellation of these sailings hurts in the short-term, but Royal Caribbean will likely return to Israel next summer assuming that tensions in the region have lessened. There’s, of course, always a risk when it comes to sailing from the Middle East, but the company should be able to enter the market at some point.
Adding part-year ports including Israel, Greece, Nassau, Barbados, and Bermuda will give the cruise line added revenue opportunities in the coming years. Add that to Royal Caribbean’s purchase of a resort in Freeport, Bahamas and its plan to develop a private beach destination on Paradise Island in the Bahamas and you can see that the company will have new options for customers in the year ahead.
In the short term, the company has sent Odyssey of the Seas — its newest ship — to Florida. It has not announced plans for the ship, but it’s very likely that it sails out of Florida during the summer season assuming that cruises from the United States resume in July.
The company may be able to use that added capacity to deal with pent-up demand which may be exacerbated if early sailings operate with limited capacity, Royal Caribbean also accelerated the move of Navigator of the Seas to Los Angeles with the ship now making the move in early fall instead of winter.
That caused it to cancel some reservations while moving others to sister ship Freedom of the Seas. Having the added capacity of Odyssey — a new ship that in normal years would command premium fares — gives the company flexibility to move customers around if needed while also being able to sell late bookings at premium prices.
Royal Caribbean has learned an awful lot about adjusting on the fly during the past year. Losing these sailings out of Israel represents another test, but it’s one the company seems fully capable of handling. This is a short-term blow as the company had geared up to sail from Israel for the summer and it likely would have made a good impression on that market.
That will still happen, just not this year. For now, Royal Caribbean has a huge asset — the newest cruise ship in its fleet — available to operate in a market that may quickly go from closed to high demand.
[su_button url=”https://7investing.com/subscribe/?marketing_id=90127″ target=”blank” style=”flat” background=”#96C832″ color=”#000000″ size=”6″ center=”yes” radius=”0″ icon=”https://7investing.com/wp-content/uploads/2021/04/7Investing-3.png” icon_color=”#000000″]Sign up with 7investing today to get access to our 7 top stock market recommendations every month![/su_button]
Already a 7investing member? Log in here.