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Cruise Analyst's Take on Swine Flu's Effect

April 27, 2009 By: David Eisen


The following just broke from Wachovia cruise analyst Tim Conder concerning the swine flu's effect on the cruise industry. 

"We believe there could likely be on-going headline risk to the cruise industry surrounding the swine flu outbreak in Mexico as 24-25 percent of all cruise itineraries have at least one port of call in Mexico (assuming half of all Caribbean itineraries go to Mexico plus itineraries focused specifically on Mexico). We would note that the media created a significant amount of negative headlines for a couple of months in 2002 surrounding the Norovirus outbreak when in reality it was generally the stomach flu. This resulted in only a marginal detectable impact to consumer cruise demand during the few months the Norovirus issue was in the headlines.

"We feel that it is remote that there will be any material short or long-term impact (beyond short-term headline risk) to cruise industry demand. However, some investors could potentially use the swine flue headlines as an excuse to book short-term profits."

This sounds like good news, if there is any to come out of a predicament such as this.

The swine flu is beginning to reawaken unhappy memories from 2003—the year of the SARS pandemonium. Both the hotel and cruise market are already feeling the swine flu's sting, particularly in the wallet. On Europe's FTSE, Carnival Corp.'s stock price is down 7 percent. Said one analyst, Nigel Parson, quoted by The Guardian, "This time Carnival is the most immediately vulnerable stock as the first call of many Caribbean itineraries are to Mexican resorts and there is a public perception that ships are vulnerable to the spread of infections. If the flu spreads, then the most vulnerable hotel stock is InterContinental Hotels.

"In 2003 the hotel stocks dropped 15-20 percent and then recovered strongly as the disappearance of the threat of SARS coincided with an economic recovery. At this moment both the biological and economic recovery are uncertain."

Carnival subsequently released this statement hoping to mitigate fears:

"The swine flu is a respiratory disease caused by type A influenza viruses. It is observed regularly in pigs and is uncommon in humans, although human infection can occur in rare instances.

Fortunately, there currently is no evidence of a swine flu pandemic and there have been no reports of guests exhibiting symptoms of swine flu on Carnival's ships.

Please be assured that Carnival enforces the highest of standards for cleaning and sanitation on all of our ships to prevent the spread of infectious diseases. We are monitoring the situation in Mexico and maintain regular contact with the Centers for Disease Control. We do not anticipate that your cruise experience will be impacted by this type of illness."

Let's hope so. If your clients are currently on or about to embark on a cruise, reinforce the benefit of washing hands thoroughly. Most ships have hand sanitizer disposal units as well. Use them.

According to Bloomberg, in Europe, TUI Travel, Europe's largest travel company, lost 4.1 percent on its stock price; InterContinental Hotels Group declined 4.8 percent.

Star Cruises, a parent owner of Norwegian Cruise Line and Asia's biggest cruise operator, declined 7.9 percent to 93 Hong Kong cents.

News on how swine flu affects cruise and hotel operators here at home will be made available as the day wears on so make sure and check back in.


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