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Wells Fargo: Fears of Zika impact on cruise sales 'overblown'

Wells Fargo: Fears of Zika impact on cruise sales 'overblown'

In an analysis of cruise and population statistics, Wells Fargo Securities concluded fears of the Zika virus impacting cruise bookings are 'overblown.'

The US Centers for Disease Control and Prevention is advising pregnant women consider postponing travel to areas where Zika virus transmission is occurring. In the Western Hemisphere, those regions include Mexico, Central and South America (particularly Brazil), Puerto Rico and most eastern Caribbean islands.

The virus is spread mainly by the Aedes mosquito, and there have been reports of birth defects in babies whose mothers were infected with the Zika virus while pregnant.

If pregnant women do travel, the CDC advises consulting a doctor first and taking steps to avoid mosquito bites.

In a research note, Wells Fargo analyzed cruise travel figures—more than 24m people globally in 2014—and the most recent, 2014 preliminary data from the National Vital Statistics System, CDC and National Center for Health Statistics. Those indicate 62.9 births per 1,000 women aged 15 to 44. For ages 20 to 24, the numbers go to 80 births per 1,000 women, ages 25 to 34, 100 births/1,000 women, ages 35 to 39 52 births/1,000 women and ages 40 to 44 about 11 births/1,000 women.

Wells Fargo's worst-case impact scenario would see global cruise demand potentially impacted about 6%—1.449m cruisers of 24m. This assumes 24m cruisers, 48% women, 62.9 births/1,000 women and each 'pregnant' cruiser brings along (or not) one companion.

However, the brokerage noted the 48-year median age of women cruisers (and assuming the US median for global) is higher than the 15 to 44 age group with 62.9 births/1,000 women and noted birth rates for women above 35 are much lower. Substituting 50 births/1,000 women, the global impact drops to 4.8% and 25 births/1,000 women it goes down to 2.4%.

What would cut these estimates by at least one-third, Wells Fargo said, is the fact that cruise industry policy generally prohibits women who are 24 or more weeks pregnant at the beginning or during any part of their cruise from embarking.

Bottom line, Wells Fargo analyst Tim Conder told investors: 'We believe the ultimate net impact of Zika on cruise bookings and travel in general will be materially less than feared and, in hindsight, will be grouped with other disease "scares," for example, Ebola and norovirus.'

Though not mentioned in the brokerage note, some cruise lines are allowing pregnant women with concerns about the virus to reschedule. Royal Caribbean, for example, is providing alternate itinerary options. This may include a future cruise credit valid for two years so travelers can re-schedule their voyage for a later date, with no penalty.

And Norwegian Cruise Line noted the only passengers who are advised not to travel to affected areas are expectant mothers and said it is making accommodations for 'those very few affected guests to reschedule their cruise for a future date or change their itinerary to non-affected destinations.'

Also, for travelers who have opted to purchase a travel protection policy, cancellations are covered under the 'cancel for any reason' portion of the policy, Norwegian said.

 

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