Coronavirus challenges $45 billion cruise industry

Coronavirus concerns have pushed the $45 billion cruise line industry to cancel trips and reroute ships as it struggles to contain the impact from fearful travelers. But experts say the industry will bounce back after the outbreak is contained.

“Business is soft, people are scared to travel,” Frank Del Rio, CEO of Norwegian Cruise Line Holdings Ltd.,told investors Thursday. He predicted the trend would continue, “until we see the leveling off of new cases.”

Carnival Cruise Lines, Norwegian Cruises, and Royal Caribbean Cruises all together recently announced they’d canceled nearly 40 cruises and rerouted over 40. Shares are down across the three major cruise lines from 10 to 16 percent since January.

Carnival told investors if travel restrictions continue through May, it could lead to a 14 percent reduction in share price. Royal Caribbean said additional cancellations could lead to a roughly 12 percent decrease in earnings this year.

Earlier this over 600 passengers Carnival’s Diamond Princess were forced to remain on their ship in "chaotic conditions" after testing positive for coronavirus. Some described their 10-day quarantine like being held “hostage.” Two passengers later died after leaving the ship.

The cruise lines have announced additional cleaning and safety measures to address the coronavirus issue. Several cruise lines are denying boarding to passengers who have visited infected regions, and extra screenings for anyone who appears sick or may have come in contact with travelers to affected regions.

“The industry is really erring on side of caution to reduce the risk of introducing virus on board this ship,” Brian Salerno, spokesperson for Cruise Lines International Association trade association, said.

China is a growing market for cruise lines and currently makes up roughly 10 percent of the market, according to Salerno with the Cruise Lines International Association. North America makes up about 50 percent of the market and Europe accounts for 25 percent, he said.

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Rising number of coronavirus cases on the Diamond Princess
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Rising number of coronavirus cases on the Diamond Princess
Journalists work near the quarantined Diamond Princess cruise ship sitting at the Yokohama Port Monday, Feb. 10, 2020, Yokohama, Japan. The operator of the ship said Monday that an additional 66 cases were found aboard. That is in addition to 70 reported earlier. (AP Photo/Eugene Hoshiko)
The quarantined cruise ship Diamond Princess anchors at the Yokohama Port, Monday, Feb. 10, 2020, Yokohama, Japan. Japan’s health ministry said Monday that about 60 more people on the quarantined cruise ship have tested positive for a new virus. (AP Photo/Eugene Hoshiko)
Officials with protective suites prepare work around the quarantined cruise ship Diamond Princess in the Yokohama Port Monday, Feb. 10, 2020, Yokohama, Japan. Japan’s health ministry said Monday that about 60 more people on the quarantined cruise ship have tested positive for a new virus. (AP Photo/Eugene Hoshiko)
Officials with protective suites walk from the quarantined cruise ship Diamond Princess in the Yokohama Port Monday, Feb. 10, 2020. Japan. Japan’s health ministry said Monday that about 60 more people on the quarantined cruise ship have tested positive for a new virus. (AP Photo/Eugene Hoshiko)
Passengers stand on the balcony of the cruise ship Diamond Princess anchored off the Yokohama Port in Yokohama, near Tokyo Monday, Feb. 10, 2020. China reported a rise in new virus cases on Monday, possibly denting optimism disease control measures that have isolated major cities might be working, while Japan reported dozens of new cases aboard the quarantined cruise ship. (AP Photo/Eugene Hoshiko)
Some banners are hang by passengers of the cruise ship Diamond Princess anchored off the Yokohama Port Monday, Feb. 10, 2020. China reported a rise in new virus cases on Monday, possibly denting optimism disease control measures that have isolated major cities might be working, while Japan reported dozens of new cases aboard the quarantined cruise ship. (AP Photo/Eugene Hoshiko)
An official with protective suites walks near the cruise ship Diamond Princess anchored off the Yokohama Port in Yokohama, near Tokyo Monday, Feb. 10, 2020. China reported a rise in new virus cases on Monday, possibly denting optimism disease control measures that have isolated major cities might be working, while Japan reported dozens of new cases aboard the quarantined cruise ship. (AP Photo/Eugene Hoshiko)
Members of the Japan Self Defense Forces prepare the truck to connect with the cruise ship Diamond Princess anchored off the Yokohama Port in Yokohama, near Tokyo Monday, Feb. 10, 2020. China reported a rise in new virus cases on Monday, possibly denting optimism disease control measures that have isolated major cities might be working, while Japan reported dozens of new cases aboard a quarantined cruise ship. (AP Photo/Eugene Hoshiko)
The cruise ship Diamond Princess is anchored off the Yokohama Port in Yokohama, near Tokyo Monday, Feb. 10, 2020. China reported a rise in new virus cases on Monday, possibly denting optimism disease control measures that have isolated major cities might be working, while Japan reported dozens of new cases aboard a quarantined cruise ship. (AP Photo/Eugene Hoshiko)
In this Feb. 9, 2020, photo, a passenger stands at the balcony of the cruise ship Diamond Princess anchored off the Yokohama Port in Yokohama, near Tokyo. Japan’s health ministry said Monday, Feb. 10 about 60 more people on the quarantined cruise ship have tested positive for a new virus. (AP Photo/Eugene Hoshiko)
Fire department members gather at the entrance of the cruise ship Diamond Princess which anchors off the Yokohama Port Sunday, Feb. 9, 2020. Japan on Saturday reported three more cases of the coronavirus aboard the Diamond Princess for a total of 64. There are 3,700 passengers and crew on the Diamond Princess who must remain on board for 14 days. (AP Photo/Eugene Hoshiko)
A passenger stands on the balcony of the quarantined cruise ship Diamond Princess anchored at the Yokohama Port in Yokohama, near Tokyo Sunday, Feb. 9, 2020. Japan on Saturday reported three more cases of the coronavirus aboard the Diamond Princess for a total of 64. There are 3,700 passengers and crew on the Diamond Princess who must remain on board for 14 days. (AP Photo/Eugene Hoshiko)
A man with wearing a protective suit walks down levels of the qurantined cruise ship Diamond Princess anchored in the Yokohama Port Sunday, Feb. 9, 2020, Yokohama, Japan. Japan on Saturday reported three more cases of the coronavirus aboard the Diamond Princess for a total of 64. There are 3,700 passengers and crew on the Diamond Princess who must remain on board for 14 days. (AP Photo/Eugene Hoshiko)
The quarantined cruise ship Diamond Princess is anchored in the Yokohama Port Sunday, Feb. 9, 2020. Japan on Saturday reported three more cases of the coronavirus aboard the Diamond Princess for a total of 64 . There are 3,700 passengers and crew on the Diamond Princess who must remain on board for 14 days. (AP Photo/Eugene Hoshiko)
Members of Japan Self Defense Forces walk into the quarantined cruise ship Diamond Princess in the Yokohama Port Sunday, Feb. 9, 2020, in Yokohama, Japan. China's death toll from the new virus outbreak has risen to over 800, surpassing the number of fatalities in the 2002-03 SARS epidemic, as other governments stepped up efforts to block the disease. (AP Photo/Eugene Hoshiko)
Passengers stand on balconies on the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
Passengers stand on balconies on the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
Passengers stand on balconies on the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
Passengers stand on balconies on the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
People wearing protective suits walk from the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
An ambulance carrying passengers drives away from the Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
The Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, is seen anchored at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Around 60 more people on board the quarantined Diamond Princess cruise ship moored off Japan have been diagnosed with novel coronavirus, the country's national broadcaster said on February 10, raising the number of infected passengers and crew to around 130. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
The Diamond Princess cruise ship, with around 3,600 people quarantined onboard due to fears of the new coronavirus, is seen anchored at the Daikoku Pier Cruise Terminal in Yokohama port on February 10, 2020. - Six more people on a cruise ship off Japan are found to have the new coronavirus, the government said February 9, bringing the number who have tested positive on board to 70. (Photo by CHARLY TRIBALLEAU / AFP) (Photo by CHARLY TRIBALLEAU/AFP via Getty Images)
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But Chinese travelers who fly to Europe then board a cruise back to the mainland make up a larger slice of customers, about 14 percent. This slice of customers is directly impacted by cruise lines’ travel restrictions, said Salerno.

The cruise industry has previously faced and recovered from health outbreaks before, including norovirus and chickenpox.

“If you look at prior outbreaks what you see is kind of short-lived duration impact on booking trends in the cruise space followed by a return to normalcy over the subsequent months,” said Sharon Zackfia, an equity analyst with William Blair.

“The cruise industry is really resilient and I don’t expect we’ll be talking about this in 2022,” she said.

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