Is the Alaska cruise season not totally dead for 2021?
During Royal Caribbean Group's first quarter earnings call on Thursday, Royal Caribbean Group Chairman and CEO Richard Fain was asked about the prospect of return to Alaska for this year, and while "slightly complex", he did not rule it out.
The Alaska cruise season faces two hurdles: the U.S. Centers for Disease Control and Prevention (CDC) ban on cruise ships, as well as Canada's own ban on cruise ships from its waters.
Mr. Fain said even if the CDC relents on its ban, they would need would need a waiver from the Passenger Vessel Services Act (PVSA), or Canada would have to allow at least technical stops.
The Passenger Vessel Service Act (PVSA) of 1886 requires foreign flagged cruise ships to call on a foreign port if sailing a closed-loop cruise form the United States.
This means, cruise ships cannot sail from Seattle and only visit Alaska ports. It must make a stop outside the country, and Canada is the only place between Seattle and Alaska for that.
The justification for both the PVSA is to protect the U.S. Merchant Marine (the licensed (officers) and documented (trades) personnel on the ships) and to protect U.S. shipyards that both build and repair the ships.
Mr. Fain said during the earnings call that Royal Caribbean and "others" are working on resolving the issue with the CDC and Canada, "we're working on both and others are working on both, but we can't be certain where that will end up."
"I think given the momentum, there's reason for some hope, but that's a sufficiently complex and confusing situation that I don't think we're going to put odds on it one way or the other."
"But as to Alaska specifically, while we're optimistic and we're working to make that happen, there are these other factors."
"We do think that will be in time for the Alaskan season. And we're obviously hopeful that we'll be able to solve the issue with Canada in either one of these two ways."
U.S. Senators Lisa Murkowski and Dan Sullivan, both R-Alaska, introduced a bill in late February 2021 that proposes alleviate the Passenger Vessel Services Act (PVSA) restrictions for cruise ships transporting passengers between the State of Washington and the State of Alaska.
The Alaska Tourism Recovery Act (H.R.1318) was introduced in the House on February 24, 2021 and was referred to the House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation the next day.
When the bill was introduced, Royal Caribbean International President and CEO Michael Bayley posted on social media in support of the bill, "If passed, this would represent a step in the right direction for the Alaskan communities that depend on the tourism industry."
"If you support the bill, please reach out to your representatives to make your voice heard!"
So far, that bill has not moved past that point.
Besides Royal Caribbean's lost cruise revenue, the state of Alaska is facing dire consequences for a second cancelled cruise season in a row.
Alaska Governor Mike Dunleavy (R-AK) said over the course of the lost 2020 and 2021 cruise seasons, Alaska will have a $3.3 billion loss in Alaska, "that's in a state with about a fifty six billion dollar GDP, so it's going to be significant."
"We're going to lose millions of dollars in local revenue for our communities, especially along the coast. Unemployment rates will remain stubbornly high when we can actually lower them through this process."
Royal Caribbean Group Chairman and CEO Richard Fain started off his call with Wall Street analysts with extremely positive news regarding a new update from the U.S. Centers for Disease Control and Prevention (CDC).
Mr. Fain said the letter is an example of "a significant improvement in the extent and the quality of our dialogue with the CDC."
According to Fain, the CDC has recently significantly increased its efforts in terms of improved communication between the cruise industry and the federal agency.
The updates were described as "very constructive clarifications and the amplifications" which addressed many issues Royal Caribbean had with the Conditional Sale Order (CSO). These are the same instructions that were described by the cruise industry as "unduly burdensome, largely unworkable" when they were first announced.
Mr. Fain sees the new update from the CDC as a major step forward, "We believe that this communication really helps us to see a clear and achievable pathway forward to a safe and healthy cruising in the near future."
While the news very welcomed by the cruise industry, Mr. Fain was quick to point out there are still questions to sort out.
"There are still a great many details to be provided in the future and others that need to be resolved. We need to be cautious about all of those. Nevertheless, we now have high hopes that these details can be resolved quickly."
However, Mr. Fain did not rule out a July restart, "It could be possible to restart cruising by mid-July."
"I would also emphasize that the restart does not mean that we will immediately go into full operation. We are hopeful about restarting. That restart will be gradual and deliberate."
Another positive outcome from this letter is what Mr. Fain sees as a shift in how the CDC treats the cruise industry.
Fain was happy with the tone of the letter, and the CDC's increased communication, "We are pleased that the CDC letter really does reflect an intention to treat us similarly to other industries in similar circumstances."
"Our goal throughout this pandemic and then to make a cruise ship where we can control the environment safely and Main Street, USA. We've already demonstrated our ability to do that, and we are now eager to resume life, as so many other businesses are doing."
What about kids?
While the CDC has opened up the possibility for cruise ships to restart this summer, many cruise fans realized requiring 95% guests to be vaccinated means little to no children onboard in the short term.
During the earnings call with analysts, Royal Caribbean International President and CEO Michael Bayely spoke about what to expect as it relates to kids.
Both he and Mr. Fain cautioned the letter is new, and there are follow up questions to determine, but Bayley felt kids are not out of the question, "We really do have to sit, study and and discuss with the CDC and understand all of these these different nuances."
Mr. Bayley believes the age restriction for kids, which now stands at 16, will be lowered shortly, "We've been told that in the coming weeks and months that that age limit will likely drop to 12. And and we're encouraged by that."
So what about kids below 11?
Mr. Bayley said that age range is not enormous, "obviously we carry a lot of kids 11 and under, but relatively speaking, as a percentage of our total guest counts, it's quite a small number. So we're not overly concerned with that."
Royal Caribbean Group Chairman and CEO Richard Fain shared a very positive message to start everyone's week.
For many months, Richard Fain has shared quick video updates with the travel agent community to keep them abreast of what is happening, and his own thoughts on the state of cruising.
In his latest video update, Mr. Fain shared an incredible amount of optimism that cruises will be allowed to sail in the United States sooner, rather than later.
Mr. Fain alludes to positive discussions with the U.S. Centers for Disease Control (CDC), as well as talks with the federal government, and even goes as far as to say summer cruises to Alaska are still possible this year.
In short, positive news regarding the treatment of Covid-19 and the vaccine rollout, coupled with strong data from cruise ships around the world that new health protocols on cruise ships are effective have given the cruise lines a compelling dataset to use in discussions with the CDC and other health authorities.
"Based on that data, over 30 countries have already granted permission for cruising. And we're optimistic that the CDC will too."
"Based on the advances in science and the data provided by our experiences abroad, the CDC is engaging in a constructive dialogue with us in the industry to enable a return to service in a safe and healthy manner."
In regard to summer cruises, Mr. Fain said that the possibility still remains for there to be a summer cruise season this year.
"We're also pleased that the science and the data have advanced so far in just a few months. The CDC has publicly stated that this could enable cruising to restart as early as mid-July."
"We agree with that assessment and we're more optimistic than ever that a realistic path forward can be achieved in that time frame. That would enable a summer season in Alaska and elsewhere."
Mr. Fain says the final decision on when cruises will be able to restart lays with the CDC, "as they should be, and I caution you that we can't prejudge their decisions."
"The new leadership seems ready to have the kind of dialogue that could lead to a constructive outcome."
Part of the optimism for this forward progress in having productive conversations with the federal government comes from the support the travel community has shown recently.
Mr. Fain points to the public statements of support for cruise lines have, "demonstrated that there is a strong desire to see cruising treated like so many other businesses and allowed to operate under safe guidelines."
"That loud voice has been clear and it seems to be being heard in Washington and in Atlanta."
Mr. Fain's comments follows a groundswell of public support recently for cruise ships to be able to sail again.
Leading the charge has been the Cruise Lines International Association (CLIA), who has spearheaded a campaign to tell lawmakers people want cruise ships to be able to resume service.
In addition, a series of public statements (and even a lawsuit) from local officials, as well as bills in Congress have been introduced with the singular goal of compelling the CDC to allow cruise ships to sail again.
Cruise ships have been shutdown in the United States since March 2020, when the cruise industry volunteered to stop cruising in the early days of the global health crisis. Since then, the CDC instituted a ban on cruise ships.
Since then, many other aspects of travel have either not been halted, or been allowed to restart, including airlines, hotels, theme parks, and casinos.
Royal Caribbean Group Chairman and CEO Richard Fain compared the year-long shutdown of cruises to a basketball game, where the most activity occurs at the end of the game.
In a new video update, Mr. Fain talked about the major milestones happening right now, and how it all correlates to getting cruise ships back into service.
"Like the frenetic last minutes of that basketball game, and I think that there are signs that we are approaching the end," Fain said in his remarks. "We all want the same thing, safe and healthy cruising."
Included in his comments was mention of the U.S. Centers for Disease Control (CDC) recent update to its Framework for Conditional Sail Order (CSO), which Mr. Fain characterized as, "tougher restrictions on cruising out of U.S. ports."
He talked about the fact the CDC said they see a way to restart in the U.S. as early as July, which he added Royal Caribbean Group is "eager to work with them towards that goal."
"My fondest desire is that we can follow President Biden's target of July 4th as a major reopening milestone. The evidence is that we can do it. Now is our opportunity to work together towards that common goal."
"We look forward to such a constructive dialogue with the CDC and others to make that success even broader."
Positive signs happening now
Richard Fain sees a lot of key milestones happening now that point to the fact things are moving in the right direction.
First, he sees the fact almost 45% of eligible Americans have already received at least their first dose of the vaccine is exciting.
Second, the cruises Royal Caribbean Group has been able to carry out abroad has provided a lot of valuable data for crafting a safe way to offer cruises going forward.
"We're able to see what actually happens and draw conclusions based on empirical evidence rather than random hypotheses. And that empirical evidence is overwhelmingly positive."
Third, combination of widespread testing and effective contact tracing gives Mr. Fain the confidence that they can, "reduce the risk of an outbreak on a ship to levels below that on land."
Fourth, people are frustrated with the restrictions of life right now due to the virus.
Ever since the cruise industry shutdown in March 2020, executives have been looking for ways to restart cruises safely, but there is one concern that is at the top of everyone's mind.
During a webinar with travel agents this week, Royal Caribbean Group Chairman and CEO Richard Fain spoke on a variety of topics, including how the cruise line is working with governments to ensure everyone onboard and in the communities they visit safe.
In his discussion, Mr. Fain touched on the one question that he says everybody is concerned about: an outbreak on a ship.
Between Royal Caribbean, the Healthy Sail Panel, and government officials, Mr. Fain said the issue of how to handle a case onboard is at the top of the list of tasks associated with cruises restarting.
"We don't want to have a situation where somebody has a case, because you don't go anywhere without somebody having a case on land or sea, but where somebody can have a case and infect other people."
"You end up in a situation where you have an outbreak and that disrupts the vacation of everybody on board."
"We had preplanned programs for taking care of that...we have contact tracing of amazing sophistication, so we're able to catch the case early, isolate it, and not disrupt either the vacations of the other guests, but also not cause a problem to the local community."
This plan that Mr. Fain refers to has been a success so far with local governments, and he believes the buy-in from government is allowing more ships to return to service this summer.
"It's been very successful. And you can see this, the momentum is building. It is very much speeding up. More and more places are seeing the value of this and seeing that the system works. And so we're moving forward."
Role of vaccines in cruises this summer
While Royal Caribbean says it has not made a determination on if the Covid-19 vaccine will be required across the fleet, ships that have been announced to restart cruises this summer all require it.
Will vaccine be required for all sailings in the future or simply those specific international homeport?
Mr. Fain said right now it depends on the port.
"It's determined on a case by case basis in cooperation, in dialogue with the local authorities."
However, the role of vaccines today, June, or later this summer could change.
"As the science continues to progress, I think we will change and we will adjust to that. And I think we're now trying to predict the future. Remember, these cruises don't start till June. And so we're starting on this basis that they will require vaccines, but that could change tomorrow."
"We do respond to the facts and the evidence, and so we started out on the new cruises that we've announced and they are going to require initially vaccines. But we don't know how long that will be a feature."
What about the CDC?
The road to cruise ships restarting in the United States runs right through the U.S. Centers for Disease Control (CDC) and Mr. Fain spoke about the status of things with the CDC.
Taking a slightly different tone than previous comments about the CDC, Mr. Fain called the current situation with the Conditional Sail Order as "pretty unworkable".
Fain cited the fact four and half months after the Conditional Sail Order was announced, cruise ships are still in phase one.
"You can see that's pretty unworkable for us and for the CDC. And we think that that the science is simply moved ahead of the Conditional Sail Order."
"It's now out of date. And we, and the Healthy Sail Panel, and I think others in the industry, feel that the time is to move on in light of the dramatic changes we've seen in three areas, the vaccine, the testing and the contact tracing."
In fact, Mr. Fain teased that more sailings from places outside the United States will be coming soon.
"It all reinforces the view that there's an enormous amount of pent up demand eager to cruise again. I expect that we will soon be announcing more such itineraries."
In addition, Mr. Fain highlighted the fact across the Royal Caribbean Group of brands, over 100,000 people have sailed with just ten positive cases.
"This is really our objective: few infections and certainly lower than would be expected in the surrounding community, all handled smoothly without ruining everybody's vacation, protection of guests and the surrounding community from a big spread of the virus."
"In essence, we've just had a hundred thousand test cruisers and demonstrated that the process works."
Addressing the hot topics
The bulk of the video is dedicated to hitting some of the common questions he has been asked.
Here is a breakdown of these questions, and his responses.
When will cruises restart?
"The answer is, as I said before, we already have. Hundreds of thousands of happy cruises in various parts of the world. And it's fast growing with recent announcements of more such cruises, including the Caribbean."
"By the way, on average, our ratings on these cruises are seven points higher than our ratings were pre pandemic. Clearly, our guests are loving the experience."
Will vaccines be required to cruise?
"The answer to that is we don't know. We have announced three cruises that will require inoculations for all adults, and there are likely to be more."
"But each circumstance is different. And I would note that the cruises we are currently operating are operating without requiring vaccines. But the vaccines set the stage for whatever we do. And all of our efforts are designed to make our cruises safer than walking down Main Street, USA."
"The situation changes every day and we will be guided throughout by the science as it evolves and gets better and more accurate."
What about the CDC's Conditional Sail Order and when will their next technical rules be issued?
"That's more complicated, but it's still very important."
"The CDC issued the Conditional Sail Order last October in an effort to provide a path for cruising to reopen in the United States. The CDC has an amazing responsibility throughout the United States, and we all know they're working incredibly hard to balance the risks of the disease while limiting the pain and suffering to society."
"As most of you know, the order called for several phases and for the CDC to issue detailed technical rules for each phase. The first of such technical rules was scheduled to be released in December, and many of you was asked when we expect to receive them. In fact, I would answer that the pace of science has simply overcome that process."
"When the Conditional Sail Order was written, there were no vaccines. The disease was on an upward trajectory and headed towards a terrible peak. Testing was less available and more costly and therapeutics were limited. In general, the situation looked very bleak back then."
"What a difference five months makes."
"Today, the vaccines and other measures have changed the trajectory from a steep climb to a dramatic fall. The pandemic isn't under control, but it is getting there and society is beginning to open up."
"I was thrilled when the CDC said that now that I'm vaccinated, I could play with my extraordinary grandchildren without a mask. I was over the moon when they said it was safe for schoolchildren to sit three feet apart instead of six. So we're making important and impressive progress."
"Last October, preparing for resumption of service based on extensive protocols made good sense. But today, a vaccine approach makes much more sense than this old protocol based approach."
"The vaccines are bringing down the incidence of Covid-19 in society. The testing enables us to catch cases early, and the preparation we're doing allows us to handle individual cases safely and simply."
"We don't know what the CDC is contemplating to address this very different set of circumstances. But just as they and other public health officials are doing elsewhere, we expect they will all adjust to the changes that have been and are taking place today."
"The Conditional Sail Order was a very positive step at the time, but that time has passed. We look forward to a constructive dialogue with health officials in the United States and elsewhere for the path forward under these new circumstances."
Royal Caribbean Group Chairman and CEO Richard Fain posted a new video update talking about a variety of topics, including if passengers will be required to get the Covid-19 vaccine to sail.
The debate among cruise fans of if cruise lines will or will not require a vaccine to cruise has been a hot topic, and it comes on the heels of Royal Caribbean announcing Odyssey of the Seas will sail from Israel this summer and require all guests to have the vaccine.
"Whether we will require vaccines of all of our guests on all of our ships hasn't been decided yet, but we are prepared to go where the science leads us."
The overwhelming message in his eight minute long video is not to prematurely start going back to normal and let a resurgence in the virus disrupt all the progress that has been made so far.
"These are the most hopeful days we have had in a long time. But as we get closer to our goal, we inevitably also get more impatient to reach it."
"I know that we thought we were closer to the end before, but the vaccines really have changed the game. And despite all the blows our industry has taken, it is clear that there will be a huge demand when we open our doors."
Mr. Fain sees "a rapid and dramatic decline in cases and fatalities", which he alluded to in his November update.
"It's exactly what we need to reopen society. However, this is the current trend and we need to be careful that we don't screw it up."
Mr. Fain sees the key to getting cruise ships sailing again is getting the disease under control, and the vaccines are the "ultimate weapon" to reach that goal.
Speaking of ships restarting, Mr. Fain reiterated cruise ships will be phased back into service slowly, instead of the entire fleet coming back at once.
"You will hear a growing cacophony of happy vacationers who can finally leave their homes as we gradually phase in more and more cruises."
So far Odyssey of the Seas is the first ship to require the vaccine for its sailings from Israel. Cruises on Quantum of the Seas from Singapore do not require the vaccine.
None of the other major mainstream cruise lines have committed to any decision on requiring a vaccine either, although some are also requiring their crew members to be vaccinated.
Royal Caribbean Group Chairman and CEO Richard Fain provided a new video update where he talked about the current state of affairs related to the global health crisis, as well as addressing cruises resuming.
Mr. Fain has produced a number of video updates during the cruise industry shutdown that are produced for travel agents, but they provide insight for the public.
Towards the end of this new video update, he tackled the question he is most commonly asked: "when cruising will resume in strength?".
His answer is no one yet knows for certain.
"My answer is consistently, I don't know. But more recently, my answer has been, I don't know, but that's the good direction to be going in."
Mr. Fain sees promise in the fact Quantum of the Seas has been able to restart operations successfully in Singapore for a few months, and other cruise lines have been sailing in Europe.
"It's going to take a while and we just need to be patient."
"But it is happening and these early cruises are going to give us information that will help inform how we can operate safely and that's going to give us all confidence in an earlier and safer restart."
Mr. Fain sees the vaccine and new health protocols as a key component to moving towards a restart, and in the short term, protecting crew members who are still working onboard their cruise ships.
"The vaccines and other steps we are taking are also important to protect the crew. In the beginning, it was really very difficult to ensure that the crew members were virus free. But the new vaccines, testing and other steps are giving us the opportunity to protect them as never before."
Despite the obstacles the cruise industry faces, as well as an extremely long shutdown, Mr. Fain believes there is tremendous demand for cruises.
"People clearly have pent up demand and we can't wait to satisfy it."
"Every day we see signs that people want to get out and away. That pressure will help us once we can reopen and restart."
Royal Caribbean Group Chairman and CEO Richard Fain shared a new video with travel partners that answers the question of how can he be hopeful for the near-term future when we are inundated with terrible news every day.
"We are approaching the point where we can run out the clock on this terrible disease."
Mr. Fain has been releasing video updates every few weeks that share his thoughts on what is happening currently with the global health crisis, as well as providing hints at cruises being able to restart.
This week's video focuses on projections of estimated infections, and how over the course of the spring and early summer, a combination of vaccine rollout and other rule changes could bring the daily count down.
Mr. Fain started out the video by saying he believes, "2021 will end up in a very good year for us all."
The projections come from the Institute for Health Metrics and Evaluation (IHME), which is an independent global health research center at the University of Washington.
Their stats indicate infections and fatalities will peak at the end of January, and then rapidly fall from there.
IMHE's projections are based on the fact 22% of the U.S. population has already had the virus, along with the growing number of vaccinated people, as well as people wearing face masks.
"They project that by the end of April, we can expect levels 20 times lower than today's peak and the lowest they've been since early last year."
Mr. Fain conceded virus mutations could affect the projections, along with possibility increased vaccine rollout could make it better.
The current events reminded Mr. Fain of hurricanes in Florida, with the anticipation, preparation and constantly changing updates associated with a storm.
"The TV rightly shows the winds howling in the trees, bending during the storm, and it is horrific. But we also look at the projections to see where the storm will be a little later on. It takes some pretty sophisticated modeling and a lot of experience, but we can get a good indication of the path of the storm."
"Not perfect, but pretty good. And I think the covid tempest is similar. We're in the midst of the worst part of the storm and it is horrific. "
"But we need to consider the likely direction over the next few months, and that's why I'm so positive."
Royal Caribbean Group Chairman and CEO Richard Fain has a new outlook on cruises restarting, and it is a significant departure from his outlook in the past.
Mr. Fain shared a video update with travel partners on Monday that acclaimed the approval and imminent distribution of new vaccines that he believes will be the primary way to get cruise ships sailing again.
His tone was still upbeat, but he now thinks the key to cruises resuming will be the arrival of a vaccine, and not only new health protocols.
"Previously, we expected cruising to resume based on creating a virtual bubble of safety on a ship, even if the rest of the country was experiencing significant spread," he admitted to viewers.
"Today we envision that the key, but not the exclusive factor, will be the vaccines rather than purely the protocols."
The nearly year-long cessation of operations has resulted in an enormous amount of waiting, and much more than anyone predicted, "We've waited a long time for this," Mr. Fain admitted. "We never imagined that it would take this long and we never imagined that we could survive with such a lengthy shutdown."
However, Mr. Fain believes cruises will be able to come back faster than previously thought due to the impact vaccines will have.
"Although the first cruises will be later than we expected, the resumption of cruising will ramp up faster and be more robust."
It is the first time Royal Caribbean has openly spoke about what happened last week, and it appears the situation that played out on Quantum of the Seas proved the importance of new protocols.
"The protocols and collaboration with the Singaporean authorities resulted in swift containment of any potential covid threat, some guest inconvenience, and a recognition that working together our cruises can operate and deliver great experiences."
The experience on Quantum of the Seas allowed Royal Caribbean to run through a real-world situation that luckily had no repercussions.
"The false positive gave us a real world chance to test our procedures, and they performed well."
"Such experiences really allow us to test our processes and prepare better for a full operation."
Mr. Fain also believes that once the public health threat is reduced because of the arrival of a vaccine, demand for travel will surge.
Many travel experts believe there is a lot of pent up demand by the public to get back to the fun things that so many people gave up on in 2020.
Mr. Fain said "demand will grow quickly" once cases begin to fall and cruises begin to open back up.
"People are tired and frustrated, and they want to get away from this Groundhog Day experience. The demand for new experiences will blossom."