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Cruise stocks weaken amid high fuel costs, lower pricing

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Yahoo Finance Live anchors discuss the outlook for cruise stocks.

Video Transcript

JULIE HYMAN: Somebody else or another entity, type of entity, that's paying higher prices for energy is the cruise industry, right? High levels of inflation are also affecting those companies. And they are, in turn, turning around and charging more, right? Royal Caribbean, Norwegian, Carnival. They all saw slowing demand for ticket sales from May into June, according to research from Bank of America. Rough waters, perhaps. That's where we find Sozzi's Take today. And they're seeing that slowing demand, again, at a time where they're paying more for things like fuel.

BRIAN SOZZI: Well, ticket prices were going in the right direction for a lot of these cruise lines when they reported about a month and a half ago, two months ago. But now, no mas, according to folks at Bank of America. They noted from June, early June, relative to May, there were price declines of 1% to 3%. That's pretty notable for the cruise line industry in terms of ticket prices. The largest company that saw the largest decline in ticket prices, Carnival Cruise Line, down 2.6%, so not a good thing there.

B of A also seeing weakness in cruise prices for 2023 and 2024. Of course, cruises are usually booked out well in advance. And you're starting to see the pressure on these stock prices. I look at Norwegian Cruise Line, down 14% so far in June. Royal Caribbean down 15% so far in June. Carnival down 16%. And you're really getting the sense the next couple of quarters for cruise lines could be pretty darn weak. And then, of course, now, this is excluding just the impact on their bottom line from these higher fuel costs.

BRAD SMITH: Right, and so that's fuel and, well, ticket prices, number one, but then there's also the service once you're on board the cruise line as well. How does that price impact some of the ticket sales, even beyond just the passenger fare to get onto the trip?

BRIAN SOZZI: It is interesting because we asked Carnival Cruise Line CEO Arnold Donald about that a couple of weeks ago. On-board spending on the cruise seems to be holding up for now. But prices for everything on cruises is also going up pretty significantly.

Wi-Fi, I know a couple of cruise lines have started to push through price increases for Wi-Fi. Now, you really have no choice once you're on the ship. It's not like you're going to trade down to private label goods on a cruise ship. It just is what it is. But still, do you go out there and drink as much as you normally would if the drinks are costing you more?

JULIE HYMAN: And I'm curious also, when you talk about potential price weakness going forward, is pricing right now back to where it was pre-pandemic?

BRIAN SOZZI: Not that I know of.

JULIE HYMAN: OK, so it's not as though it's coming down from elevated levels.

BRIAN SOZZI: Yeah, this is not a robust environment for cruise lines. And then also, too, a lot of the cruise lines are also seeing just pushback because of the testing requirements. You have to get a COVID-19 test two days before getting on the ship, not just-- it's kids, it's adults. And well, it's good, but still, it's an impediment to taking a cruise.

JULIE HYMAN: Well, now, there are some reports that the administration is very close to taking away the testing requirements for international travel-- air travelers. I don't know where they are in the cruise line, but maybe if that gets removed, then cruise lines could be close behind.

BRAD SMITH: Well, especially because cruise lines were going through such a massive re-engagement campaign to make sure that people knew that that trip, that voyage that they wanted to take or were booked for, it was going to be safe when they came back because this was one of the first major industries to get impacted and have cases on there.

JULIE HYMAN: I mean, I-- my one cruise I took, I was sharing with you guys in the break, I got norovirus, which is infamous on cruise ships. I've not been on another cruise. I can't imagine if I went on a cruise and got COVID.

BRIAN SOZZI: Well, ticket prices are getting cheaper. Now is your time.

JULIE HYMAN: No. Not worth it. Thank you.