How Hurricane Matthew Will Hit Carnival, Royal Caribbean Stock

As Hurricane Matthew scrapes the east coast of Florida with storm surges, extreme winds and heavy rains, more than a dozen cruise lines under cruise giant Carnival Cruise (CCL)  have made itinerary changes to steer clear of the dangerous impacts likely to be produced by the storm's brute force.

The Category 3 storm (initially a Category 4 as it hit the Caribbean) has thrashed the Florida coast with howling winds as high as 107 mph and caused hundreds of cruise passengers to change their travel plans and six U.S. cruise ports to shown down, according to Cruise Critic.

"We have a hurricane working group on duty 24/7 monitoring the storm and managing route adjustments as needed. The storm is impacting not only some of our itineraries but also some of our homeport operations based on port closures in places like Miami, Port Canaveral, etc.," said Carnival's public relations manager Vance Gulliksen. Carnival announced Wednesday that it would reroute a number of ships.

"As far as ports in the Caribbean and the Bahamas, we are maintaining close contact with our port agents and local officials in each impacted area to understand storm damage after it passes through," Gulliksen said.

Several contact centers for cruise companies including Princess Cruises and Disney's   (DIS)  Disney Cruise Lines have closed due to anticipated dangerous weather conditions associated with Hurricane Matthew in Florida. Royal Caribbean Cruises (RCL)  is also being affected.

Shares of Carnival dipped 1.8% Friday to $47.92 while Royal Caribbean fell less than a percent.

 

Historically, the cruising industry has been significantly affected by natural disasters like hurricanes. It was only five years ago when Hurricane Irene which made its way to the east coast, prompted cruise lines to alter routes and scramble for ports to dock. Last year, Hurricane Joaquin led to similar chaos and setbacks in the airline, cruise, land transportation and travel industry.

Some analysts predict that with Hurricane Matthew, the reroute of cruise lines plus the inevitable offers of discounts and refunds to customers will negatively affect the financial performance of cruise companies like Carnival while the exact extent of damage imposed on the cruising industry remains to be seen.

"It's obviously going to hit them and quite likely hit the stocks near term. But cruise demand is solid and they will recover," said one industry analyst. "Carnival Cruise Line said in their last quarterly announcement that their advance bookings were quite strong and they were able to raise prices.They were actually running out of capacities so they didn't do as much booking as they wanted. I think they will rebound."

"It's a large untapped market and it's self-believed to be pretty economical compared to traveling over land, staying over in a hotel for however many days," said the analyst.

Others believe that cruising companies have done well in setting up emergency plans and alert systems to mitigate the damage. Meanwhile, positive factors like favorable demographics - the aging, older and more affluent population who are taking more cruises, and the historical evidence of cruise company stocks bouncing back, won't deter faithful investors.

"It's just a bump in the road. I think there are investors who are not going to be deterred and will even see it as a buying opportunity. It could be the time to get in on the weakness," the analyst said. 

Carnival cruise passengers can also view specific changes on its website and sign up for text alerts to stay informed on what is happening with their specific voyage. 

Others believe that cruising companies have done well in setting up emergency plans and alert systems to mitigate the damage. Meanwhile, positive factors like favorable demographics - the aging, older and more affluent population who are taking more cruises, and the historical evidence of cruise company stocks bouncing back, won't deter faithful investors.

"It's just a bump in the road. I think there are investors who are not going to be deterred and will even see it as a buying opportunity. It could be the time to get in on the weakness."



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