'A large cruise seller in China tells us they have been given verbal notice to stop selling cruises to Korea,' UBS said in a research note Monday. 'It sounds as if cruises that are already sold will remain unchanged, and the cruise companies are considering modifications going forward, though there is no official update yet.'
The brokerage added this travel seller thinks it highly likely those cruise itineraries will be shifted to Japan.
While UBS analyst Robin Farley expects cruise stocks to react negatively to this news after a strong wave season—and shares in Carnival Corp., Royal Caribbean and Norwegian Cruise Line Holdings were all down Monday morning—she reminded investors that China cruises still represent a small percentage of deployment.
According to UBS, China accounts for 9% of RCL and 6% of CCL itineraries this year, and after NCLH introduces Norwegian Joy there in June, it will comprise 4% to 5% of the company's itineraries in 2017 and around 8% going forward.
Farley pointed out the news will not affect all cruises from China. She reminded investors that the drop in South Korea travel following the 2015 MERS outbreak later reversed. The brokerage's Nov. 7, 2016, survey of more than 3,000 Chinese travelers indicated Korea and Japan were the two countries most wanted to visit.
While Beijing's action in discouraging South Korea travel may disrupt short-term demand, UBS continues to see China as a growing market over the long term, given the emerging middle class and the focus on tourism/travel as one of the government's economic pillars.
At midday CCL shares were trading at $55.51, off 22 cents. RCL was at $94.56, down 92 cents, and NCLH was at $49.55, down 56 cents.