There's disagreement within the cruise industry about whether ships can sail profitably with fewer passengers.
Though it may not have been their intent, airlines have started competing on safety protocols. Delta and JetBlue have blocked out middle seats, while American Airlines announced that it would be walking back its limit on passenger capacity.
United Airlines never had such a limit in the first place—CEO Scott Kirby calling blocked seats a PR move—although the brand arguably engaged in a publicity motivated move of its own, announcing a partnership with Clorox to incorporate the cleaning brand’s logo products into the traveling experience. Nearly all airlines now require masks for guests, even without the support of a federal law mandating them.
In the cruise industry, the conversation about safety is beginning to drift toward what passenger capacity will be when ships are allowed to resume sailing. Unlike airlines, which were never grounded, cruise lines haven’t been able to welcome guests since the Centers for Disease Control and Prevention instituted a No Sail Order in March.
Virgin Voyages—which hasn’t even held its first cruise yet—was among the first brands to lay out its Covid-19 protocols in June, saying it would limit passenger capacity but declining to share exact figures.
Although the company won’t be sailing until at least October, Carnival’s Aida brand, which caters to European audiences and is headquartered in Germany, is expected to set sail the first week of August. Guests will be required to stay 1.5 meters apart (about 5 feet) and will only have to wear a mask when social distancing isn’t possible, and not outdoors or in dining rooms.
Passenger capacity will be “adjusted.”
“We’re going to start slow,” said Arnold Donald, Carnival’s CEO and president, during the brand’s earnings call last week. “Initially, we’ll probably start at less than 50% occupancy as we work out the details.”
The company noted that a ship’s break-even point is somewhere between 30% and 50% capacity. Even with less than half of its normal passenger count, Carnival could still make a “significant” amount of money, according to Donald.
“That gives them a lot of room to fine-tune the occupancy numbers to what may be acceptable to regulators,” said Paul Golding, an analyst at investment firm Macquarie.
A Carnival spokesperson said no specific passenger limits have been set yet, and that capacity concerns had not been part of Carnival’s discussions with the CDC.
Carnival’s optimism isn’t shared by the entire industry. Last week, Frank Del Rio, the CEO of Norwegian Cruise Line, told The Financial Times that lowered capacity would be a “severe blow” to the business. Royal Caribbean CEO Richard Fain, in a talk with travel advisers, said his cruise line would reduce capacity to some degree. The two brands have partnered to lead a health and safety panel for the industry, with findings and recommendations to come.
“I don’t see how having fewer people on the ship really makes that much of a difference,” said Bob Levinson, CEO of CruiseCompete, a booking site that specializes in the cruise industry. “You can spread out dining times, you can spread out tables, but at the end of the day, I think it’ll be driven by negotiations with the CDC.”
Levinson believes concerns about capacity will only last for a short period of time, with a vaccine potentially coming in the new year. Realistically, most cruise lines would like to run at some capacity during the holiday season with time to ramp up before Spring Break.
“By the time we get rolling, we won’t be in the situation we’re in today,” he said. “Demand isn’t the issue, it’s making the CDC happy.”
On Thursday, the CDC extended its No Sail Order, which had been set to expire on Friday, until Sept. 30. (The cruise industry’s trade group, Cruise Lines International Association, had already extended its voluntary suspension of service until Sept. 15 back in June. Carnival set its own return even further down the road, at Sept. 30.) The CDC also has the regulatory authority to make masks mandatory or to set limits on capacity.
A spokesperson for Carnival said consumers are expecting the company to take care of safety concerns: “Our customers are extremely loyal cruisers, and they expect us to implement protocol on our ships that will help keep them safe and healthy, just as we have done in the past.”
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.