October 13, 2019

Sudden change to Cuba travel rules hits cruise line earnings

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By Richard Danielson From

Ship photographer Andrea Castillo makes a photo of guests Jim and Francisca Frye of San Antonio, Texas before they board the Empress of the Seas for a 7-night cruise that included a stop in Havana in 2017. Royal Caribbean, which offered cruises from Tampa to last summer but stopped in the fall, this week projected lower earnings per share after the Trump administration announced new rules immediately restricted a popular form of travel to . LUIS SANTANA | Times (2017)

Royal Caribbean and Norwegian, which have operations at Port Tampa Bay, cut earnings projections after the Trump administration banned “people to people” travel with one day’s notice.

TAMPA — The Trump administration’s new restrictions on travel to Cuba are expected to hit the bottom line of the cruise ship industry, including two cruise lines that sail out of Port Tampa Bay.

Royal Caribbean and Norwegian Cruise Lines both lowered their projections this week for the earnings their stockholders can expect to see this year.

Royal Caribbean, which offered cruises from Tampa to Cuba last summer but stopped in the fall, on Thursday cut 25 to 35 cents per share from its previous projection of $9.65 to $9.85 per share for the year.

On Friday, Norwegian, which sails to Cuba from other Florida ports, forecast a bigger hit: 35 to 45 cents off earnings per share that it had projected last month at $5.40 to $5.50 for the year.ADVERTISEMENT

It’s not the size of the business at stake that hurts. Sailings to Cuba amount to only about 3 percent of each line’s business.

Instead, it’s the timing and lack of warning. The Trump administration announced on Tuesday that the popular “people to people” category of group and educational travel to Cuba would be illegal as of Wednesday. In response, cruise lines changed itineraries for ships already at sea. St. Petersburg Mayor Rick Kriseman was aboard a Norwegian cruise to Havana that was diverted to the Bahamas after the announcement.

“The extremely short notice period for this high-yielding destination amplifies the earnings impact,” Royal Caribbean executive vice president and chief financial officer Jason T. Liberty said in announcing the earnings adjustments.

Norwegian said making those abrupt changes, as well as offering substantial discounts to guests to remain on cruises they had booked, accommodating cancellations, changing reservations, spending more on marketing in response to the news and protecting travel agent commissions would all have an impact.ADVERTISEMENT

Meanwhile, Port Tampa Bay says the end of Cuba travel is not expected to change business as usual. At the time the new rules were announced, only one ship, the Carnival Paradise, was calling on Cuba intermittently on sailings from Tampa, according to port vice president of marketing and business development Wade Elliott. That accounted for less than 5 percent of the port’s cruise passenger traffic, which is on a pace to exceeda million passengers again this year.

“Carnival advised us they do not expect this new Cuba ruling to impact their sailings or passenger volumes from Tampa,” Elliott said in an email to the Tampa Bay Times on Friday.

The U.S.-Cuba Trade and Economic Council in New York City this week estimated the new rules would have a $700 million impact on gross revenues for the cruise ship industry.

Council president John Kavulich said Friday that the changes also would ripple out to airlines that fly cruise passengers to the port cities where cruises begin, as well as hotels, restaurants, entertainment businesses and transportation firms that cater to them on their way to the dock.

The council expects that maybe 10 to 15 percent of travelers who booked cruises between a Florida port and Havana might cancel their trips and demand a refund rather than agree to go to an alternate port, Kavulich said. For passengers booked on cruises previously scheduled to go to Havana and other ports, the cancellation might be in the 5 percent range. But the council will watch to see how those numbers pan out.

“If those numbers are significant, then that gives energy to the travel industry to demonstrate that going to Cuba was more important (to those passengers) than going anywhere else,” Kavulich said.

For more on this story go to; https://www.tampabay.com/business/sudden-change-to-cuba-travel-rules-hits-cruise-line-earnings-20190607/

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