The ongoing spread of the coronavirus continues to wreak havoc on all aspects of the travel industry. Airlines around the globe are on a downward trajectory. Millions of passengers have cancelled their travel plans and new bookings have all but disappeared. Most companies have closed or ordered their employees to stay home. Yesterday, #United warned it may have to lay off thousands of workers and #Delta predicted its second-quarter revenue will be down 80% or $10 billion from the same quarter just one year earlier. Governors from California, Connecticut, Illinois, Nevada, New York and Pennsylvania (about a third of the nation's population) have ordered residents to shelter in place while the Department of State on Thursday advised US citizens to avoid all international travel. Domestic air carriers alone are claiming losses in the billions of dollars and may be on the receiving end of approximately $58 billion in collateralized Federal Government loans. But it’s not just the airlines getting hammered.
The Diamond Princess, a subsidiary of #CarnivalCruise, was one of the first ships affected by the new virus. Once it was reported in February that a number of passengers on board were infected with the virus, the ship had a difficult time finding a port to accept it and eventually found its way to Yokohama, Japan. Government officials there forced the ship to contain all 2,700 passengers and 1,000 crew members in quarantine on the ship. That, along with several missteps on the cruise line’s part, actually helped to make things worse. The New York Times later reported that the line’s top doctor and his team didn’t see a passenger’s email informing them of their infection. Even after they later discovered it, the physicians compounded the problem and “played down the risk of infection, ignored best medical practice for evacuating passengers, and activated only low-level protocols for dealing with outbreaks.” The US Government, along with others, eventually evacuated citizen nationals but not before at least 700 passengers became infected with the virus. Eight of those people have since died from COVID-19.
An eerily-similar situation occurred aboard the Grand Princess. This ship was carrying over 3,500 people on board a Hawaiian cruise and 21 initially tested positive for the new coronavirus. For several days in early March the ship found itself circling the waters off the California coast near San Francisco while the US Government decided how best to deal with the passengers. Eventually she was permitted to dock at a commercial port in nearby Oakland. From here, in a painstakingly slow, days-long process, the American evacuees were sent into quarantine at military bases in California, Georgia and Texas. International travelers from Canada and the United Kingdom boarded charter flights to take them home.
The Cruise Lines International Association (CLIA) is the leading voice of the global cruise line industry. Late last week they announced that all CLIA ocean-going cruise lines would be voluntarily and temporarily suspending cruise ship operations from US ports of call for 30 days as public health officials and the US Government continue to address the impact of COVID-19. “CLIA President and CEO Kelly Craighead stated “This is an unprecedented situation…we hope that this decision will enable us to focus on the future and a return to normal as soon as possible.” The suspension took effect at midnight on March 14. The cruise industry is a vital artery for the US economy, supporting over 421,000 American jobs and contributing nearly $53 billion to the economy. Cruise activity supports travel agencies, airlines, hotels and a broad supply chain of industries that stretches across the country. The very nature of cruising is one which is “tailor made” for the new virus. It spreads more easily between people in closer quarters such as those aboard ships, thereby increasing the risk of infection to passengers and crew on these vessels. The US Department of State has since advised citizens not to travel on cruise ships. But wait, there’s more. Another important player in the worldwide travel industry‘s getting slammed right now too.
Hotel executives have claimed that travel pullback is having a devastating impact on their industry as well, resulting in closures and mass layoffs. USA Today reported that Chip Rogers, CEO of the American Hotel & Lodging Association, in a call with reporters this week said the virus has “already had a more severe impact on the hotel industry than 9/11 and the 2008 recession combined.” He later voiced concern that half the nation’s hotels might close their doors. Occupancy rates are trending toward zero as public health officials have advised against non-essential travel. Major conferences, trade shows and conventions have been cancelled or postponed. “Our 33,000 small business hotels across the country are facing the difficult decision right now to close their doors and lay off millions of people over the next several days,” Rogers said. “Not weeks. Not months. But days.” For the first time in history, business at major hotel chains is rapidly grinding to a halt. #Marriott, the largest hotel company in the world, is reeling and ready to furlough tens of thousands of workers. #HiltonHotels plans to shutter their properties in most major US cities as occupancy rates have all but vanished. In a meeting on Tuesday with the Trump Administration, hotel executives made their plea for $250 billion from the government. Of that, $150 billion would allow their owners to continue making loan payments and support employees. Another $100 billion would go to their suppliers, from recreational providers to retailers.
Is it all doom and gloom? While we’re in a very serious situation, I received a mailing dated March 16 from Renaissance Investment Management’s Michael Schroder that helped my mood somewhat. He’s one of their managing partners and chief investment officer. Schroder pointed out that “collapsing oil prices and historically low interest rates are both positives for US consumers and business, which should eventually be significant positives for stock prices as well.” He goes on to mention the Federal Reserve lowering short-term interest rates to near zero and the likely possibility of a $1 trillion economic stimulus package for individuals and businesses. “While these measures are not a cure for the coronavirus, they are actions that should mitigate the worst effects of the economic weakness.” We can only hope this is true in the longer term and look forward to better days ahead. In the meantime, let’s all do our part to help mitigate the spread of COVID-19 so that this industry, along with our entire country and indeed our world, gets back on its feet.
Until next time…stay safe.
Nice overview George - keep up the information stream...
Beautifully written and just the right tone we need right now.