Viking post Covid-19

[Captain_Morgan]

37 minutes ago, DaveSJ711 said:

 

Rose colored glasses, indeed.

 

How does the cruise industry (including Viking) deal with stories like this?  The word "deathtrap" stands out.

 

https://www.washingtonpost.com/world/asia_pacific/people-just-didnt-care-how-the-ruby-princess-cruise-ship-became-a-death-trap/2020/04/10/058ab45e-7a33-11ea-a311-adb1344719a9_story.html

 

Denial....plain and simple....and when that doesn't work, try to change the narrative/focus

[InDaPast]

3 hours ago, deec said:

I would like to see Viking keep scooters to a minimum!  There were a few on our WC but have not seen them on other cruises that we took.

 

Wow....until joining this forum, I had no idea scooters & service dogs where allowed. I guess that shows how long it;s been since my last cruise.

[Heidi13]

 

6 hours ago, Jim Avery said:

How about this, I agree with both you and Andy.  The industry will face a major shakeout.  They were heading for overcapacity with all the contracted and under construction ships even before this.  Some lines will fail.  Some will get through it though in what form is yet to be determined.  Lines that have mostly old ships will not survive.  Some shipyards will fold as well and you don't just start a shipyard easily.  All speculation at this point but I also hope for the best for Viking and their wonderful crews.

So true Jim,

 

Although we have never seen this degree of a shut-down, we have seen numerous cycles in the Marine Industry, as a whole. If this drags on for up to a year, ships currently on the ways that have ground to a halt, will be delayed. Once they are delayed, the progress payments stop, as milestones aren't achieved.

 

These contracts also have significant per diem charges for delays, so some very interesting negotiations will be ongoing with the S/Y's, which may also include delays/cancellations of already ordered tonnage. So totally agree, some S/Y won't make it, which has happened many times before.

 

Also agree regarding owners of older tonnage, since they bought older ships, so still have a mortgage, but also have the higher maintenance requirements and higher operating costs of older tonnage. I would expect to see older ships heading to scrap, if this last 6 to 12 months, but as usually happens, when scrapping numbers increase the price per ton plummets. If current prices are strong, it may encourage some owners to act early, rather than wait.

 

With respect to the Mega Lines and independents like VO/VR, only time will tell, at least with publicly traded companies, they must publish financial results and are beholding to shareholders, so with some reading you can make an informed opinion. With Viking, they have no requirement to publish financial data, so it is purely speculation.

 

Again, I would anticipate older tonnage heading to scrap, as I don't see much of a 2nd hand market in the short/medium term. However, this is also no different than what happens every cycle in the industry. Remember P&O laid up and then scrapped some fairly new ships, as they couldn't get cargoes.

 

 

[ClevelandKid]

For anyone hopping on the tail end here, just a recap -

 

Several people think the cruise industry is going to contract, perhaps more so among the cruise lines that cater to 10 trillion people onboard at any one time.  

 

There is some concern about Viking because its base are older people who would be more at risk to the cornovirus than younger people. 

 

European countries, which depend on tourism, but not to the extent that Caribbean or South American countries do, may either restrict cruise lines or ban them all together.  That would put a major cramp in Viking's River Cruises.

 

Viking is a private company, and is not required to produce financial documents, and as such there financial health is unknown, but people who have knowledge of their current operations say that they are going the extra mile to keep their employees.

 

And a final thought of my own - I would not be surprised if a lot of ocean cruises will have itineraries that feature more days at sea than they have in the past at least for the first couple of post covid years.

 

[OnTheJourney]

For those who absolutely LOVE sea days, I can see it now....the average 14-day cruise featuring 2 ports and 12 sea days! Awesome for the ship casinos. OR...how about half the cruise spent at the same port (since there might well be, as has been suggested, far fewer ports that will want to accept pax) and the other half at sea?  Just kidding...hopefully. 

Edited April 11, 2020 by OnTheJourney

[Ragnar Danneskjold]

The cruise industry will come roaring back on the heels of an effective vaccine, and goosed by free booze packages.

[Captain_Morgan]

An important thing to remember as well when comparing mega ships (2500+ pax) to smaller ships (400-1000 pax) is that the mega ships don't rely on the fare to see them through as they're heavily invested in onboard revenues like bars, casinos, photos, shops, WiFi, etc.

Where the likes of Seabourn, Silversea and to a lesser extent Viking will 'struggle' is in convincing people to spend multiple thousands of dollars for an 'all inclusive or 'semi inclusive' cruise when the majority of people are hurting financially due to lost income or as a result of watching their retirement savings get flushed in the market.

 

An example of why the large lines will succeed is as follows based on very rough math estimates in a side by side comparison:

Ship #1 - Carnival Whatever holds 3000 passengers and does 7 day cruises with an average fare of $750 per person.  While onboard those 7 days the average person then spends an additional $1000 on bars, casino, photos, shops, WiFi, tours, etc.

The crude math suggests that the fares alone will bring in approx. $2.25 million and the onboard spend another $3 million totaling approx. $5.25 million per cruise which when multiplied by 4 x 7 day cruises per month equals $21 million dollars per month for ONE ship, and this is no doubt on the low estimate side of things.

 

Now compare that to Viking, which based on their website offers the cheapest non re-positioning cruise for $5600 per person on the high end for a 13 night trip in the Caribbean with airfare included which the cruise line will have paid for.  As there's virtually little additional onboard spend outside of a beverage package at $20 per day, that's an additional $260 for the cruise.  So even if all 930 paid the price mentioned (and we know there's always people who get a discount or deal) that works out to just over $5 million dollars per cruise or $10 million per month.  

 

Some might think $10+ million per month is nothing when comparing mega ships and the likes of Viking, but which line do you honestly think is going to bounce back the quickest and has the largest room to maneuver when it comes to cutting costs, reducing fare prices long term, and maintaining a level of service people are accustomed to?  Carnival doesn't claim to be anything but 'fun ships' and as such they attract a particular demographic, whereas Viking has carved its own niche in appealing to a seemingly more mature demographic who aren't interested in the 'bells and whistles'.  When you factor in the costs to operate at a seemingly higher standard with the current and future restrictions on cruising (i.e. latest CDC directive mentioning a further 100 day cessation of cruising) and its not going to land at the feet of some lines (Viking included) with a soft touch, but more of a resounding thud!

[Richard2]

7 hours ago, Captain_Morgan said:

Viking has carved its own niche in appealing to a seemingly more mature demographic who aren't interested in the 'bells and whistles'.  When you factor in the costs to operate at a seemingly higher standard with the current and future restrictions on cruising (i.e. latest CDC directive mentioning a further 100 day cessation of cruising) and its not going to land at the feet of some lines (Viking included) with a soft touch, but more of a resounding thud!

"Those who have knowledge, don't predict. Those who predict, don't have knowledge"
Ancient Chinese proverb

I could make an argument for the exact opposite conclusion about Viking, one that is equally worthless. Viking has a large percentage of retirees. Retirees have not lost jobs. As a retiree who remembers the 1970's oil crisis, early 1980's inflation, Black Monday, the Dot-Com bubble, and the Great Recession, my retirement income is well-positioned for our current situation. I expect many others are in the same position, at least among the lucky percentage of our population with the assets to take Viking cruises. The Viking demographic will be back long before the Carnival demographic.

Pick whichever story helps you sleep at night.

[Dukefan]

You can look at revenue forever but if you don't understand expenses you will never get to profit.   

 

Vikings ships are all relatively new meaning they will have lower operating costs not only because of their size (smaller than Carnival Whatever) but because of their age.    Vikings smaller ships have a smaller crew also resulting in less costs to operate.   There are a lot of little things to also consider (such as, shorter cruises cost more because of disembarking and embarking costs per cruise than longer cruises - in other words, a ship that is averaging 7 day cruises has a greater cost per day than one than a ship that is averaging 10 day cruises).  You also have the cost of your ship's financing to consider.   Also I would argue that smaller ship is easier to fill than a larger ship. When money is tight people still cruise but don't typically spend as much for drinks, upscale dinning, excursions, casinos, etc so your large ship business model is hit harder. Since Viking's business model does not include many of these things it is less impacted.  Viking has fewer ocean ships than these other cruise lines to fill to make their profit.  Your 3000 person Carnival Whatever takes more passengers to fill than have of Viking's Ocean fleet.

 

These are just a few factors to consider off the top of my head.   I haven't even included that fact that since many of these other cruise lines are publicly held companies and currently pay stock holders a dividend each quarter that comes off the top. 

 

My bottom line is that if I was a betting man, I would bet on Viking coming out of this cruise industry crisis faster and in better shape than the cruise lines that are publicly held with more and larger ships.    But without knowing the true fixed and variable expenses and the true revenue of each company only time will tell how this really shakes out.  

[lackcreativity]

11 minutes ago, Dukefan said:

My bottom line is that if I was a betting man, I would bet on Viking coming out of this cruise industry crisis faster and in better shape than the cruise lines that are publicly held with more and larger ships.    But without knowing the true fixed and variable expenses and the true revenue of each company only time will tell how this really shakes out.  

I certainly hope that Viking comes through this, and with two future cruises still on the books with them I suppose I am betting on them doing so. In addition to the revenue and expense considerations, time is the crucial factor. Any prediction about how long Covid-19 will continue to have a major impact on our world is at best an educated guess at this point.

 

I feel certain that cruising in general will survive, but what type of cruising and which cruise lines and how long it takes to return remain to be seen. Small ship, adult focused cruising is what I personally seek, so fingers crossed for Viking. 

[Captain_Morgan]

I have absolutely no doubt that Viking's ships are more efficient than older models being run by the likes of Carnival, etc. but that said I can also say that Carnival owns the majority if not all of their ships outright which I don't think can be said for Viking, hence their heavily leveraged position as has been mentioned multiple times.

 

 

[Dukefan]

22 minutes ago, Captain_Morgan said:

I have absolutely no doubt that Viking's ships are more efficient than older models being run by the likes of Carnival, etc. but that said I can also say that Carnival owns the majority if not all of their ships outright which I don't think can be said for Viking, hence their heavily leveraged position as has been mentioned multiple times.

 

 

I believe you were the one that estimated Viking's debt to equity ratio as 0.73. and in another responding post another poster quoted from Moody's the debt to equality ratio's as follows:

Carnival Corp had a ratio of 0.38 

Norwegian Cruise Line Holdings had a ratio of 0.93

Royal Caribbean had a ratio of 0.74

From this limited data in appears Carnival has significantly better debt to equity than any of the other cruise lines, Viking's debt to equity appears to be competitive with every other cruise line accept Carnival.  However, the Carnival portfolio of companies has been hardiest hit of any of the companies by the negative publicity of this virus situation as they have had significantly more cases of the virus and deaths from the virus than all the other cruise companies put together.  I believe this concern is one of the reasons behind Carnival's recent borrowing of approximately $5 billion which is not included in its debt to equity ratio above,   Again, I'm still betting on Viking.

 

 

[duquephart]

I think most people will think it very unwise to cruise uless/until a solution to the pandemic is found, widely distributed, and universally deemed a thing of the past. I also think that's at the very least a year from now. That's a loooooooooooooong time for the cruise companies to hold on and investors to remain faithful. It's an efficacy issue.

[Captain_Morgan]

1 hour ago, Dukefan said:

I believe you were the one that estimated Viking's debt to equity ratio as 0.73. and in another responding post another poster quoted from Moody's the debt to equality ratio's as follows:

Carnival Corp had a ratio of 0.38 

Norwegian Cruise Line Holdings had a ratio of 0.93

Royal Caribbean had a ratio of 0.74

From this limited data in appears Carnival has significantly better debt to equity than any of the other cruise lines, Viking's debt to equity appears to be competitive with every other cruise line accept Carnival.  However, the Carnival portfolio of companies has been hardiest hit of any of the companies by the negative publicity of this virus situation as they have had significantly more cases of the virus and deaths from the virus than all the other cruise companies put together.  I believe this concern is one of the reasons behind Carnival's recent borrowing of approximately $5 billion which is not included in its debt to equity ratio above,   Again, I'm still betting on Viking.

 

 

 

The data quoted is from open source information so its not like I've got inside knowledge of who's got what on/off their books.

That said, I believed Carnival raised the billions through a mix of debt and equity with the most recent sale of 8% to the Saudis which experts estimate puts them in the best position of the major players to weather the storm for the next 12-15 months with no revenue.

Of course with no publicly available information as it relates to Viking short of what Moody's has published its all a guessing game but their ratio is definitely better than Carnival's based on the information available.  Will it change with prolonged cessation in cruising?  I can't see how it wouldn't, as lets not forget Viking's grand ambitions to grab market share with all of their new builds which won't be happening any time soon I wouldn't think.

 

 

[CharTrav]

On 3/29/2020 at 8:03 PM, Jim Avery said:

Ok, I have washed, waxed, detailed our cars and even ironed the pillow cases so I will jump in.  Good question.  Imho, I think, at least at first, there will be some real deals.  Viking's passenger base is extremely loyal so I don't think Viking will be long before the ships are full again.  This, of course, assumes a relatively short event and Viking surviving financially.  All the best Viking...🍸

Ironed your pillow cases???😃

[Jim Avery]

2 minutes ago, CharTrav said:

Ironed your pillow cases???😃

Haha, all this "at home" time means I have an extensive to do list....😳

[CharTrav]

23 minutes ago, Jim Avery said:

Haha, all this "at home" time means I have an extensive to do list....😳

I haven't ironed pillow cases in years! I smooth them out with my hands on the ironing board, one on top of the other, leave them stacked up like that for a few days, give them each a final snap and fold them. Does the job. Unless you enjoy ironing? 🤪

[Jim Avery]

That's it.  I actually learned how to iron my shirts in college.  Only ruined a couple.  Don't mind it at all.  Hold my beer and watch me iron....😎

[CharTrav]

6 minutes ago, Jim Avery said:

That's it.  I actually learned how to iron my shirts in college.  Only ruined a couple.  Don't mind it at all.  Hold my beer and watch me iron....😎

You're talking to a gal who used to iron her T-shirts on her desk in college.  😉  Over the years, fairly quickly too I might add, my ironing "fetish"  went away. But if you find ironing a calming activity - a way to maintain your inner zen - have at it. 😊

Edited April 11, 2020 by CharTrav

[Baron Barracuda]

3 hours ago, Captain_Morgan said:

 

The data quoted is from open source information so its not like I've got inside knowledge of who's got what on/off their books.

That said, I believed Carnival raised the billions through a mix of debt and equity with the most recent sale of 8% to the Saudis which experts estimate puts them in the best position of the major players to weather the storm for the next 12-15 months with no revenue.

Of course with no publicly available information as it relates to Viking short of what Moody's has published its all a guessing game but their ratio is definitely better than Carnival's based on the information available.  Will it change with prolonged cessation in cruising?  I can't see how it wouldn't, as lets not forget Viking's grand ambitions to grab market share with all of their new builds which won't be happening any time soon I wouldn't think.

 

 

Only a small portion of the recent CCL offering was equity and even that had to be sold at a 33% haircut from the then $12 market price.  Not a sign of confidence from the financial community.  The $6B will buy them some time but it came at a high price.  The Saudi purchase was an open market transaction from which CCL received no new cash. 

 

From my perspective Viking relies more on veteran cruisers who will come back sooner that CCL's younger, less seasoned customer base.  Several of the CCL brands have also experienced significant reputational damage this year which might leave newbie cruisers wary of them.  To fill those ships they will need to be extremely promotional.  And once aboard ship customers who have taken a hit to their portfolios and whose jobs may be in jeopardy will be more careful in purchasing specialty dining, beverage packages, photos, etc..

Edited April 11, 2020 by Baron Barracuda

[Ragnar Danneskjold]

Vaccine available + trillions in stimulus sloshing around = Dow over 30,000

 

Plenty o’ retirees will have cash to take luxury cruises after it is safe to do so (vaccine widely available).  As long as they didn’t panic and sell at the bottom...

 

 

[rbslos18]

“It’s tough to make predictions, especially about the future.” Yogi Berra.

”To expect the unexpected, shows a thoroughly modern intellect.” Oscar Wilde

 

None of us know where this is headed or where it will end up. Based on the aftermath of 9-11, the industry will be challenged and changed. Viking has the advantage of a private owner who is a disrupter in the industry with a very loyal, well-heeled clientele. How long will Hagen be willing to hold out? Will he need to take on new investors? Will he even be able to preserve his concept and maintain its level of quality? Stay tuned!

 

This is a life-threatening illness for the vast majority of Viking’s Boomer passengers. The scary reality is a symptom-free individual can be a carrier and innocently infect an entire ship.The game changer will be a vaccination or inexpensive testing. Until that time, my best guess is the industry is on hold...likely and sadly for all of 2020.

RB

Edited April 12, 2020 by rbslos18

[OnTheJourney]

5 hours ago, rbslos18 said:

“It’s tough to make predictions, especially about the future.” Yogi Berra.

”To expect the unexpected, shows a thoroughly modern intellect.” Oscar Wilde

 

None of us know where this is headed or where it will end up. Based on the aftermath of 9-11, the industry will be challenged and changed. Viking has the advantage of a private owner who is a disrupter in the industry with a very loyal, well-heeled clientele. How long will Hagen be willing to hold out? Will he need to take on new investors? Will he even be able to preserve his concept and maintain its level of quality? Stay tuned!

 

This is a life-threatening illness for the vast majority of Viking’s Boomer passengers. The scary reality is a symptom-free individual can be a carrier and innocently infect an entire ship.The game changer will be a vaccination or inexpensive testing. Until that time, my best guess is the industry is on hold...likely and sadly for all of 2020.

RB

 

Great post, which I think pretty accurately sums up the situation. I'm one of those boomers, so even when cruising reopens, there can (and probably will) always be that doubt and worry passengers that might be asymptomatic. As you said, a vaccine could well be the largest determining factor as to how the industry fares. 

Edited April 12, 2020 by OnTheJourney

[rbslos18]

1 hour ago, OnTheJourney said:

 

Great post, which I think pretty accurately sums up the situation. I'm one of those boomers, so even when cruising reopens, there can (and probably will) always be that doubt and worry passengers that might be asymptomatic. As you said, a vaccine could well be the largest determining factor as to how the industry fares. 

 

Without a vaccine or testing, I can’t imagine most cruisers taking the risk. I am in Parent Lockdown and have not been in a store in three weeks. I am not giving up on our December Viking Cruise, but have to temper my enthusiasm with a dose of reality. Since I bought insurance I have no risk. The larger question is how long can Viking and other privately-owned cruise lines hold out—a year? 18 months? The odds are good that by 18 months thee will be a vaccine.

To date Viking has played their hand perfectly and ethically. They have risen to the challenge. As the loses mount, we will have to see. I can imagine their taking on a partner or two to ease the pain. We are in uncharted territory.

RB

[ClevelandKid]

There are a lot of unknowns behind most of these assumptions - without accurate testing, we are guessing what the death rate is.  What happens if it is no worse or slightly worse than the seasonal flu? That is the direction that the updated modeling is heading towards.  How does that change people's calculations?

 

It would take 18 months to develop a vaccine, but that is in the US with clinical trials, double blind studies, and other measures that are in place that make sure the vaccine works and is not worse than the disease.  But if another country (let's say China) develops a vaccine, skips the tests and distributes the vaccine and it works.  

 

And finally, we don't know how many people may use this as an excuse to retire.  There is always churn in the retirement age group - and there may be a large bump of the newly retired (and relatively healthy) people looking for something to do (assumes the stock market does bounce back in some fashion).