Norwegian Cruise Line Holdings Ltd (NCLH)

[Scooter McCabe]

I think 2022 will be a limp year for cruise lines for sure. The thing that has to be remembered about cruise lines during COVID was the COVID horror stories at the start of the pandemic. That and the cruise line horror stories when there is a general outbreak of whatever onboard.

Right now the perception is you are in a tube with a lot of other people, some of whom don't take precautions and even get irrationally angry at those that do because "freedumbs." The only way out of that mindset of "I'm booking a trip on a plague ship" is for COVID to become a non-issue.

Well what do we know about viruses? They like to spread quickly and effectively. So most viruses tend to not intentionally kill their host, and when that tends to happen the virus mutates to be less lethal and more transmissible. We've seen a steady decline in lethality and a steady increase in transmissibility.

So here is what is going to be important to signal a turn around. First what comes after Omincron. To date it's the weakest and most transmissible. If the next variant is weaker or Omnicron is the end of the line we are headed for COVID being a common cold style annoyance. The next indicator is what happens in South Africa. First country to be hit with Ominicron and basically now the canary in the mine shaft for the rest of the world. A lot of policy and disease modeling will be based off the data that comes out of there.

We also have signals from other areas of the hospitality industry that the expectation is business will be back to normal sooner than later. A great example of this is Disney with their new Star Wars hotel attraction. Whether it's a good idea or not and priced right to attract families and tourists isn't what I am looking at. What I am looking at is Disney's decision to go ahead with the project. Disney has a history of knowing when to attempt something, and has learned the hard way about poorly thought out attractions during the Eisner years. So for Disney to be confident in moving forward with this 2 night hotel is a signal.

Then of course Disney also operates its own cruise line.

https://disneycruise.disney.go.com/cruises-destinations/list/

What I find interesting is that they are confident enough to book into Halloween of 2022 and are advertising Halloween At Sea. That means they feel it will be safe enough to plan not just the cruises for that time but the special events that go along with the Halloween holiday period. Those are extra costs being sunk in.

The thing to remember about Norwegian is it's debt structure which is currently better than the other cruise lines. Their strong partnership with Caesars Entertainment and relaxed atmosphere. They are usually competitively priced with other lines and have good ports of call.

Any additional debt issues are more likely to be renegotiated than anything. COVID is a temporary problem versus a complete mismanagement of the company. No one is going to want to find themselves in control of a defunct cruise line with a bunch of boats they have to scrap for pennies on the dollar. They can merely extend the life of the loans and wait for operations to continue.

I just see the proposed analysis of doom and gloom as something I would hear on the 700 Club or OANN and not sound financial advice.