Q – Help me understand the economics of the cruise industry. They will easily be out an entire year of income while maintaining ships costing, say, over $100 Million a month for the larger fleets. Now, it looks like they will not be generating any income for the first five or six months of 2021. And even then, they may not be allowed to operate at full capacity.
In my business, trucking transportation, this is the kind of burn that few corporations can absorb. Someone has to be loaning these cruise lines money and I wonder who would be foolish enough to do that? And wouldn’t any financial institution that loans or invests in a cruise line these days be strung up to hang on Wall Street by its investors? Something I am missing here? I mean we’re Regent loyalists. I understand how they make money – or made money. But I just don’t understand how they are borrowing money under these circumstances. Do they know someone at Quicken Loan? Keep up the good work!
A – There is a piece missing from the media reporting. You are correct about that. This is, we think, the missing piece:
One of the most prominent cruise line CEO’s told us that he recently say down and was offered a $5 Billion loan from one of the largest financial houses. “But if I had wanted it, they would have given me ten Billion”. He explained that when you look at cruise industry financial performance over the course of the last decade you see steady growth and increasing and substantial profits.
“And we haven’t even scratched the surface of those potential cruisers out there who meet our demographic profile”.
The other thing to remember is there is an unimaginable amount of pent-up degree partially due to the extremely high repeat and loyalty factors we see in cruise products. Then you have to add in tens of thousands of cruisers who have Future Credits they must utilize. And finally, think about more than a year without travel or restaurant dining expenses. Savings among potential cruisers are at an all-time high. So, taken together, and factoring in an amazing two decades of extraordinary profits, many of the major investment firms see cruising as a solid, long-term bet.