(News Bulletin 247) – Since the beginning of the year, the major listed groups in the sector have recorded very significant growth, benefiting from vigorous demand with volumes that are expected to be higher than those prior to the pandemic.

The jump in demand for travel and leisure shows no signs of abating, despite the persistence of inflation and the risks of recession. In Europe, the stock market performance of airlines illustrates this very well: the Stoxx Europe Total Market Airlines index, which summarizes the performance of the sector (with the shares of Air France-KLM, Lufthansa and Wizzair) wins over 35%

since the beginning of the year, much more than the main equity indices.

But this great rebound in tourism obviously does not only concern airlines. Another sector that has suffered enormously during the pandemic is exploding on the stock market: cruise operators. Norwegian Cruise Line (which, as its name does not indicate at all, is based in Miami) has taken 78.4% since the start of the year on Wall Street, Carnival (which notably owns Costa and Seabourn) 132% and Royal Caribbean Group 106%.

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Volumes that leave

Obviously with such rebounds there are corrective phases. Earlier last week Carnival’s fiscal second quarter financial results, although above expectations in terms of adjusted net loss, were coolly received by investors, with the stock falling 7.6%. which brought in its wake Norwegian Cruise Line (-5%) and Royal Caribbean (-2.5%). Profit taking took place while Carnival, beyond the results, was especially disappointed on the outlook for its third quarter in terms of earnings per share.

But the Carnival title, like those of other cruise lines, then rebounded strongly. These three groups entered the Top 10 of the largest increases in the S&P 500 in the first half, according to a count by Business Insider.

Because the outlook has greatly improved for the sector. This is evidenced by figures from the Cruise Lines International Association, the international professional federation of cruise lines, for 2023. The volume of cruise passengers is expected to reach 31.5 million this year, or 106% of the level of that of 2019, the last year before the outbreak of the pandemic, which had forced cruise lines to drastically reduce their capacities, due to health restrictions. In 2020 and 2021, the volumes of passengers transported thus represented only 19% and 16% of the level of 2019, a percentage which had risen to only 69% in 2022, according to data from the association.

An unfulfilled demand

Above all, it seems that the “pent-up demand”, that is to say the unsatisfied and frustrated demand for travel which was built up over this period, is only now being reduced among cruise passengers.

According to Bloomberg, over the whole of the years 2020 to 2022, this unserved demand represented a total of 58 million passengers in total, of which one can imagine that at least some have postponed their trips. And are now fueling reservations and business volumes.

“We knew that demand for our business was strong and building, but we were pleasantly surprised by how quickly demand accelerated further, well above historical trends and at higher rates,” he said. said Jason Liberty, chief executive of Royal Caribbean, during the company’s quarterly results presentation in May.

On this occasion, the group had raised its forecasts for adjusted earnings per share for the current financial year in 2023, also anticipating a record adjusted gross operating profit (Ebitda) and higher than that of 2019. Much better prospects while the company has swallowed more than 12 billion dollars in losses between 2020 and 2022. Sums which are even more colossal at Carnival (25 billion dollars), a company admittedly about twice as big on the basis of the 2019 revenues ($20.8 billion versus $10.9 billion for Royal Caribbean and $6.5 billion for Norwegian Cruise Line).

Note that if Royal Caribbean and Norwegian Cruise Line expects a return to profits this year, this is not the case of Carnival which anticipates a loss of 250 million to 100 million dollars this year.

A sector in debt

To return to demand, it has so far withstood the deterioration in the economic situation. The general manager of Norwegian Cruise Line, Harry Sommer, had also explained in May that even in March, during a mini-banking crisis which affected the markets and the economy, his company had not recorded any wave of cancellations. unusual over the period.

It remains to be seen whether this resilience will hold over the second half of the year and especially next year, when the “pent up demand” is likely to run out of steam and the macroeconomy is not proving to be very encouraging. In addition, it will be necessary to monitor whether the rise in interest rates will not end up worrying investors in a sector which is crumbling under a mountain of debt (with a long-term debt of 21 billion dollars at Royal Caribbean and 32 billion dollars for Carnival). For now, analysts seem to be rather optimistic. Quoted bywall street journal

, JPMorgan recently raised its price targets on the three cruise lines, moving also to buying on Carnival. The bank’s analysts noted, in the light of their discussions with the leaders, an absence of slowdown in the reservations and observed that the demand widened beyond the faithful of the cruise, to newcomers.

More broadly according to the consensus of investing.com, 73% of analysts are buying on Royal Caribbean, 55% on Carnival and 44% on Norwegian Cruise Line.