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CDC Delivers Good News for Royal Caribbean, Carnival, Cruise Industry

The Centers for Disease Control and Prevention has lifted its conditional sailing order and its director actually had something nice to say about the cruise lines.

The pandemic hit the cruise industry about as hard as it hit any business segment. Ships were docked or out at sea with skeleton crews for more than a year as the Centers for Disease Control and Prevention made it illegal for Royal Caribbean (RCL) - Get Royal Caribbean Group Report, Carnival (CCL) - Get Carnival Corporation Report, Norwegian (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report, Disney (DIS) - Get Walt Disney Company Report Cruise Line, and the industry's other players from sailing as Covid raged.

While that was happening, the industry went to work, hiring top infectious-disease doctors, upgrading air filtration, and creating protocols to make cruising viable during a highly contagious pandemic. 

Those efforts were somewhat rewarded in July when the CDC started allowing some sailings from U.S. ports under its conditional sailing order.

Strict Standards Were Put in Place

The standards were strict and the major cruise lines have sailed with limited (albeit rising) passenger counts, 100%-vaccinated crews and vaccination requirements for all passengers old enough to be vaccinated. 

In addition, masks have been required to varying degrees, with omicron leading to all passengers -- even those who are vaccinated -- being required to wear face coverings except while they are eating or drinking.

It has not been an easy time for the industry and the CDC has not always been a willing partner. 

That's partly because Royal Caribbean, Carnival, Norwegian, and even Disney cruise ships are not registered in the U.S. That gave them few rights, so the CDC kept cruise lines closed while concerts, sports, theme parks and other crowded events returned with few, if any, restrictions.

Now, however, even as omicron rages, the CDC has not only lifted its conditional sailing order, its director had some praise for the steps the industry has taken.

CDC Drops the Conditional Sail Order

In October 2021, the CDC said it would let the conditional sail order expire on Jan. 15. With that day just a few days away, CDC Director Rochelle Walensky told Congress on Tuesday that the Covid-19 regulations would move from mandatory to voluntary on Jan. 15, Matt Hochberg from the Royal Caribbean Blog reported.

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"I think the conditional sailing order and the fact that the industry has stepped up and is now interested in doing and exceeding, as you know, the compliance with the sail order without the order even necessarily needing to be in place, is a real testimony to how well that has worked and how we've worked collaboratively with the industry," she said.

The CSO was originally called the "no sail order" and it shut down the cruise lines for longer than a year. The major cruise lines have all kept their Covid protocols in place, and even tightened them, despite the CSO expiring on Jan. 15.

"Royal Caribbean and other cruise lines have already committed to follow the CSO regardless of if it's required or not. Cruise lines first indicated they would follow the CSO following Florida's legal victory against the CDC in summer 2021," wrote Hochberg, whose blog is not affiliated with Royal Caribbean.

What's Next for Cruise Lines?

Omicron has increased the number of positive cases among fully vaccinated crew members. 

This has led Royal Caribbean to cancel a handful of cruises and delay the return of service for Serenade of the Seas. Instead, that ship will be used as a sort of hospital ship for quarantined crew members. That allows the cruise line to keep infected crew members away from their uninfected crew mates, which should minimize transmission.

Various cruise-line executives have gone out of their way to point out that protocols may not be able to stop transmission, but they can help contain outbreaks. Royal Caribbean President Michael Bayley shared in a recent Facebook post that infection rates on board are well below the rates on land.

'With a typical sailing having anywhere from 95% to 98% fully vaccinated on-board population and all guests tested before boarding and all crew tested weekly with front-of-house staff now being tested every three days and everyone wearing masks the vast majority of the time, along with social distancing, sanitizing, etc.," he wrote. "We now have a positivity rate way below the national rate and way below our big homeport states such as Florida, California, Texas, etc., and way below Broward and Miami-Dade in Florida, the two counties which are home to our biggest homeports of Miami and Port Everglades." 

Going forward investors (and people booking cruises) should expect continued protocol changes and the occasional cancellation. The end of the conditional sail order changes little, but it's still an important milestone for an industry that was sidelined for more than a year,

Daniel Kline has long-term positions in Royal Caribbean and Walt Disney.

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