Carnival Corp. CEO shares thoughts on the future of cruising

Jun 19, 2020

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How much longer will Carnival Cruise Line fans have to wait to get back on a ship?

The head of the giant line’s parent company says it’s still unclear.

“I wish I could give you a date (for a resumption of cruising), but we can’t, because it’s a regulatory matter”, Carnival Corporation CEO Arnold Donald told The Points Guy on Monday during an exclusive, hourlong interview that was streamed live on the internet. “I learned a long time ago not to try to forecast regulatory dates”.

Speaking with The Points Guy founder and CEO Brian Kelly, Donald suggested that regulatory agencies such as the U.S. Centers for Disease Control and Prevention (CDC) would drive the timetable for a return to cruising for his company’s nine brands, which include Carnival Cruise Line, Princess Cruises, Holland America, Cunard Line and Seabourn.

The CDC has issued a no-sail order for cruise ships operating in U.S. waters that is scheduled to expire on 24 July but could be extended. Authorities in many other countries from Canada to Australia also have put cruising on hold for the time being.

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While a single German river ship restarted cruises in Germany a few days ago, and a few more small ships may resume cruising in isolated pockets around the world in the coming weeks, most cruise lines have cancelled all sailings through at least the end of July. Some lines have gone much further, cancelling trips into late September or even October or November.

Echoing what other top cruise executives have told TPG in recent weeks, Donald suggested the timetable for a cruising comeback also depends a lot on how society’s view of the risks of gathering in groups changes over the coming months.

“Cruise at its essence is social gathering, so when society is starting to social gather again, then we can begin to talk about cruise”, Donald said.

Donald noted that some parts of the world where the number of COVID-19 cases has dropped significantly are seeing big social gatherings again.

“In New Zealand, there (recently) were like 90,000 at a rugby game. So that’s social gathering starting to happen again”, Donald said. “That’s fantastic when you think about it in this context. Clearly, they are becoming more comfortable with social gathering”.

As Donald noted, New Zealand is ahead of the United States in tamping down the coronavirus outbreak. The country has had almost no new cases since late May.

Donald said there’s growing talk about restarting cruising in Germany, Italy and Spain, where new COVID-19 cases also have dropped significantly in recent months. All three countries are far ahead of the United States in bringing new cases down to low levels.

Donald talked with TPG’s Kelly via Zoom for the first episode of The Future of Travel with Brian Kelly, a new webinar series that will feature travel industry thought leaders.

Carnival Corp. is the world’s largest cruise company. Its nine brands account for around 45% of all cruises taken worldwide.

Here’s what else Donald had to say about the future of cruising.

Onboard changes

Some cruise lines in recent weeks have unveiled plans for new onboard policies designed to slow the spread of coronavirus. Norwegian Cruise Line, for instance, recently said it would implement social distancing and temperature checks for passengers when it restarts cruising. But Donald said Carnival Corp. brands were waiting to see how the situation evolves before committing to specific measures.

“The science is evolving, the knowledge is evolving”, Donald said. “In a matter of weeks, I think, more than months, we’re going to have a lot more knowledge so we can develop protocols and regimens that mitigate the risk of (coronavirus) spread both shoreside and then, of course, that can be transferred to a cruise”.

The Princess Cruises ship Grand Princess. (Photo courtesy of Princess Cruises)
Princess Cruises, a division of Carnival Corporation, has canceled most of its sailings through October. (Photo courtesy of Princess Cruises)

What cruising will look like when it resumes will depend a lot on how the science evolves and the course of the virus, Donald suggested.

“At this stage, it could look like a lot of different things”, he said. “Some people talk about (reducing) density on the ship. Obviously, if you’re in a cabin, you are socially distanced already. So it’s not the idea of how many people you have per cabins. It’s much more the public spaces on the ships”.

Donald suggested the company might implement a social distancing requirement on ships, but it also might not. It depends on the situation at the time ships resume operations.

If there is a social distancing requirement, it would affect areas like the theatres on ships, where capacity would be reduced, he said.

“Instead of maybe two shows in a night, you may have four shows, a little bit shorter, and so you are able to accommodate everybody in the shows with proper social distancing”, he said.

Similarly, in ship buffets, Donald said passengers could be looking at social distancing rules for the lines where passengers wait to collect food. Ship staff would serve the food instead of allowing passengers to touch serving utensils.

Donald suggested that nothing was on or off the table just yet.

“Are you going to wear a mask? What if you have a preexisting condition and you’re elderly, are you even going to be allowed on a cruise ship because you’re particularly vulnerable to COVID-19? … again, we think in many instances, medical experts and others will guide us in those things”, Donald said. “You may have to have a certification from a physician saying that you are medically okay to cruise. We aren’t trying to predetermine all those things”.

A slow return to cruising

When cruising does come back, it’ll come back at a measured pace, Donald suggested. Not every ship will resume sailing right away, and not every itinerary will be available.

“Every destination is not going to (reopen) at the same time, and so at the beginning there will be fewer ships by a lot than there were when we shutdown”, he said. “It’s going to take us some time to get back to the level of cruising where we were before”.

That said, Donald was upbeat about the future of cruising, noting that just 30 million people in the world took a cruise last year. By comparison, there are about 500 million people in the world that take a vacation annually, he said.

“Even at our peak (before coronavirus), we were growing very well, but we were still tiny”, he said, noting that the growth of the cruise industry as a whole was constrained by capacity limits. “There will be a lot of demand when the time comes”.

Some ships will never come back

Still, despite good prospects for demand long term, the short-term fallout of the coronavirus could include the disappearance of some older vessels that are nearing the end of their useful lives, Donald suggested.

“There will be an acceleration of retirement of ships, there’s no question about that”, Donald said. “I’d go so far as to say it’s highly probable that you are going to see some ships actually scrapped as opposed to just moving to secondary or tertiary markets”.

In addition, cruise ships on order will be delayed, if only because the shipyards where they are being built have experienced shutdowns in recent months, as have their suppliers.

Carnival Corp’s Princess brand already has announced a delay for the arrival of its next ship, Enchanted Princess. The 3,660-passenger vessel is under construction at a Fincantieri shipyard in Italy. It had been scheduled to debut this month but now won’t arrive until at least August.

During the interview, Donald made news by saying the newest ship for the company’s Carnival Cruise Line brand — the 5,282-passenger Mardi Gras — would be delayed, too.

Under construction at a shipyard in Finland, Mardi Gras will be one of the biggest cruise ships ever built and famously will have a roller coaster on its top deck — a cruise industry first.

“There will definitely be delays in the arrival of the new ships. We have several coming this year — Enchanted Princess in our Princess line, Iona in our P&O line, (and) of course, Mardi Gras for our Carnival line”, Donald said. “Those ships all are going to be delayed”.

Mardi Gras is scheduled to debut in November, but for the past few months, the first 19 departures of the vessel scheduled through 20 March 2021, have disappeared from Carnival’s website. When asked in April about the disappearance of the sailings from the Carnival website, a spokesperson for the Carnival brand told TPG that all the sailings were still on.

The spokesperson said the first 19 Mardi Gras sailings had disappeared from the website because the company placed a capacity limit on them that resulted in them all showing as “sold out.”

An apology for delayed refunds

In recent months, TPG has been flooded with complaints from cruisers about the time it’s taking for cruise lines to issue refunds for cancelled cruises. Some readers say they’ve been waiting months to get money back for trips that were cancelled way back in March or April.

When asked about the delays, Donald acknowledged them and offered an apology.

“If it’s involving any one of our lines … first of all apologies, and I mean that sincerely”, he said.

“The reality is, of course, nobody was prepared for this”, he explained. “With the level of cancellations and the total pause of cruise, it’s a huge amount of volume that we’ve never seen before. Our systems weren’t set up to handle it”.

Donald said Carnival Corp. brands have been making progress in processing refunds of late.

“We methodically went after it, and … I know in a number of cases, we are caught up, and in other cases we’re catching up”, he said. “We are committed to getting people who want refunds their money back, and we are committed to ensure that the people who choose future cruise credits are clear that they have it and that we can facilitate them rebooking”.

Don’t expect crazy deals

If there’s one thing that many cruisers are sure about right now, it’s that deals galore are on the way. But Donald says that’s not necessarily the case.

Since the industry is expecting a slow comeback for ships, the supply of cabins initially could be constrained, keeping upward pressure on pricing, he suggested.

“I would not count on a lot of deals”, he said. “When we start sailing again, more than likely because there is going to be fewer ships out, and people are … anxious to cruise, there is going to be more demand than supply initially”.

Donald suggested would-be cruisers take advantage of any good pricing they see now for future cruises as it might not get any better.

“That’s an opinion, not a fact or a forecast, but I think the facts stack up that way”, he said.

Donald said he couldn’t discuss current booking volumes due to the rules governing financial disclosures by public companies. But he reiterated what the company has said in recent financial disclosures filed with the U.S. Securities and Exchange Commission: Bookings still are coming in for the coming year.

“The reality is we are getting bookings for (2021), and it’s at a great pace”, he said.

Donald also assured cruisers that the company has enough cash on hand to survive for many months without a resumption of cruising.

“We went out and got additional financing to ensure that we had a runway that we could weather if there was no revenue for an extended period of time”, he said, referencing the more than $6 billion the company raised in stock and bond sales in April. “As we’ve publicly stated that runway takes us into November and potentially beyond that, and we’re working hard to lengthen that”.

Donald said the large players in the industry were well-positioned to “weather the storm” until cruising could resume, whenever that might be.

“We’re anxious to get people back on our ships”, he said. But only “when it’s the right time and when we can do it confidently from a public health standpoint”.

Feature image courtesy of Carnival Cruise Line.

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