Home / Shipping News / Port News / Uncertain Return to Cruising Pressures US Port Revenues

Uncertain Return to Cruising Pressures US Port Revenues

Recently updated cruise guidance from the Centers for Disease Control and Prevention (CDC) provides a more concrete path to potentially resuming some US cruises in July, which would help stabilize cruise port financial performance and ratings, Fitch Ratings says. Port revenues from cruise operations declined sharply over the last year in the US, with cruise ports recovery at a standstill.

Cruise ports have not been collecting revenues from normally stable cruise operations for over a year now. While other leisure and travel sectors started to recover from coronavirus-driven slumps, the CDC moratorium on cruises prevents a recovery in the US cruise sector. Liquidity and diversification from cargo revenues provided some cash flow relief but protracted delays in the resumption of cruising add pressure to port performance the longer they continue.

Should cruise activity not resume until July or later, port revenue streams from cruise-related activity will remain stalled into a second cruising season. Ports with diversified operations are under less pressure, as cargo port operations performed strongly through the pandemic.

The ratings of Florida ports with 30% or more of revenues from cruise operations, namely PortMiami, Canaveral Port Authority, and Everglades, respectively the first-, second-, and third-busiest cruise ports globally, are most vulnerable to further delays in the return to cruising. Fitch downgraded Canaveral, which has the largest exposure to cruise revenues, to ‘A-’ with a Negative Outlook in November. The ratings of both PortMiami and Everglades, which have significant cruise operations but with sizable cargo activities to mitigate declining cruise revenues, remain at ‘A’ with a Negative Outlook.

The inability to depart from traditional US homeports during the pandemic led to several cruise lines operating from non-US ports. Resumption of full US cruise operations under an accelerated timeline depends on compliance with updated guidance to the CDC’s Framework for Conditional Sailing Order, which replaced the No-Sail Order.

Much of the revised CDC plan is predicated on high rates of vaccination in crew and passengers. Previously, the CDC order necessitated test voyages before full operations but now ships can bypass this requirement and jump to sailings with paying passengers if 98% of crew and 95% of passengers are fully vaccinated.

Many major cruise lines stated they will require all crew and passengers to be fully vaccinated. However, Florida’s governor recently signed into law a prohibition on business requiring proof of vaccination. Some lines indicated they may avoid Florida ports if they are not able to verify vaccination status.

Reviews of Fitch-rated cruise ports in late 2020 contemplated a resumption of 20% of 2019 cruise activity in 2Q21. Given the delayed cruise restart, this now appears unlikely, with the downside case of reaching 20% of 2019 levels by the end of 3Q21 seeming more probable. Longer-term we expect cruising to return to 2019 levels of operation by 2024, consistent with our rating case.

Florida and Alaska filed a lawsuit to overturn the CDC’s Framework, and Florida is also seeking an injunction to halt the order. Cruise companies have not joined these lawsuits. The updated CDC guidance may make these legal actions moot. Florida’s governor proposed allocating $258 million of Florida’s direct aid under the American Rescue Plan Act to Florida cruise ports but this would need to be approved by the Florida legislature.

Other provisions in the updated guidance to the Framework, namely faster review of cruise line applications, updated testing and quarantine requirements, and allowing a cruise ship operator to enter into a multi-port agreement, would help support a return to full cruise operations and cruise port revenue recovery.
Source: Fitch Ratings

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping