Hurricane “Beryl” approaches Yucatan, cruise-related stocks turn on the defensive

A major hurricane traverses the Caribbean Sea, and since the Yucatan Peninsula and its popular tourist destinations Cancun, Playa del Carmen, Cozumel, etc. are the next targets, cruise-related brands have been under pressure since Monday. Hurricane Beryl has already landed on Kariakou Island in Grenada in the Caribbean Sea as a dangerous category 4 storm, and the National Hurricane Center is warning of the “extremely dangerous” situation of the third named storm this season.

Due to the course of the hurricane, major cruise companies have already been forced to change their itineraries, starting with Royal Caribbean (RCL), which currently has 3 ships in its path. The company warned that it would change routes to the Eastern Caribbean due to high waves and strong winds.

Hurricane preparedness and itinerary changes are nothing new for the cruise industry, but investors are nervous that this summer may be a tough summer for the cruise industry due to the seriousness of the storms that occurred early in the hurricane season. In addition to Beryl, there is also a storm that is hundreds of miles behind and may have developed by following the same path to the islands in the southeastern Caribbean, and it is already the fourth named storm since this season began. According to past NHC data, the fourth famous storm usually occurs by 8/15, and the National Oceanic and Atmospheric Administration predicts that 17 to 25 famous storms will occur during the 2024 hurricane season, which will greatly exceed the average.

Fortunately for passengers, cruises are rarely cancelled due to storms, but itineraries may change if the storm is affecting the port where it was planned, especially the port where the bid was made. Cruise routes are sometimes changed depending on the course of the storm, such as ports of call in the eastern Caribbean moving to ports of call in the western Caribbean and ports of call in Bermuda moving north to Canada. Cruise ships can move faster than most storms, so there is little chance that the ship will get caught in the middle of a hurricane or stay in port for long enough to overlap with landings.

Even so, the industry is facing headwinds not only from storms, but also from indications that prices have peaked and began falling in June. According to a BofA Securities survey, prices have softened for 40% of cruise itineraries compared to 33% in May. Analysts have analyzed that the increase in the supply of cruises to the Caribbean Sea and Alaska due to failures in the Red Sea is part of the softening factor.

Among the major stocks in this category, Norwegian Cruise Lines (NCLH) is suffering the biggest loss, with a 6.5% decrease. Carnival Corporation (NYSE: CCL) depreciated 5%, followed by Viking Holdings (VIK) falling 3%. The stock price of Royal Caribbean (RCL) fell 3%.