Dr. Gary L. Deel, Ph.D, J.D., Faculty Director, School of Business and
Dr. Robert Gordon, Program Manager, School of Business
Cruise lines across the world stopped sailing during the pandemic. In this episode, Dr. Gary Deel talks to APU business professor Dr. Robert Gordon about the safety measures cruise lines are implementing to keep passengers and crews healthy as well as the short- and long-term impacts COVID-19 will have on the industry. Learn about the experience of European cruise lines that have returned to service and when US cruises may start sailing again.
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Dr. Gary Deel: Welcome to the podcast, Intellectible. I’m your host, Dr. Gary Deel. Today we’re talking about the effects of COVID on the cruise line industry. My guest today is Dr. Robert Gordon, Program Director at American Public University in the areas of military management, reverse logistics and government contracting and acquisition. His academic background includes a Bachelors of Arts Degree in History from UCLA, a Master’s of Business Administration, and a Doctorate of Management in Organizational Leadership from the University of Phoenix.
He also has many years of experience with supply chain and industry, including Disney Cruise Line, Crystal Cruises, The World, and Viking Cruises to name a few. He was a travel partner for a few years working with a cruise travel specialist company.
In addition to this business experience, he has also traveled extensively all over the world and has taken dozens of cruises on several different cruise lines worldwide. Robert, welcome to Intellectible and thank you for being our guest today.
Dr. Robert Gordon: Thank you, Gary, it’s good to be here. It’s always exciting and interesting to talk about the cruise industry. As you know, there’s a lot going on.
Dr. Gary Deel: Absolutely. I appreciate your time. So, for the sake of our listening audience and some folks who may very well listen to this long after it’s been recorded, we’re actually recording this in October of 2020.
This is dependent on when you started counting somewhere around month nine, eight or nine, of the COVID pandemic in the United States and, obviously, the cruise line industry has been one of the hardest hit by this.
But, just to set the proper stage for the discussion we’re about to have, can you tell us a little bit about the cruise line industry pre-COVID? Where were we in terms of economic prosperity and what was the industry up to, what did it look like before COVID hit?
Dr. Robert Gordon: Before COVID, the cruise industry outlook was great. Every major line had a new building program, ships were getting larger, even Royal Caribbean were even expanding upon the size of the Oasis class, which is the largest series of vessels out there, passenger vessels in the world, and at that point, the big thing there was economies of scale, and the cruise industry was really gearing and ramping up towards larger ships, larger amenities.
You started seeing things that were more on the extreme side, like ice skating rinks on board, go-kart tracks, huge facilities for theaters, dining and banquet halls, holding thousands of people. Full-range Broadway shows onboard ships, because ships are just getting larger. And as that occurred, there’s a large competition between the major lines to offer more, and more, and more.
Although some lines had kind of started to explore with different smaller vessels and smaller venues, really, the large part of the growth pre-COVID was on the large-ship side and it was getting to a point where some of these large ships were so large, and so many going to these smaller islands, that they were starting to wonder if there would suddenly be restrictions about how many passengers can be going into a different country or a small island at a time, which is also kind of putting extreme pressure on the infrastructure of these smaller countries and islands.
So, it was a lot of growth, it was a lot of positive things happening, people were again, enjoying the cruise experience and what I’d say is probably in, pre-COVID, the last five years was really a time where truly cruising had gone mainstream.
I’ve been in the cruise industry now for over 30 years and when I first started, people kind of always thought cruising was kind of a bit of a niche but now, it’s pretty much a vacation option. It was no longer, “Well, maybe I’ll take a cruise,” and in the beginning there was the concept that cruises were for either very old or for newlyweds and that’s the only people that took cruises.
As the different lines have retooled and built newer and more interesting ships, they truly became a destination unto themselves. So, from that regard, pre-COVID, you were looking at bigger ships, more amenities, a lot more options and the ship being a destination more so than maybe the islands or the different countries they were going to.
Dr. Gary Deel: Absolutely. My family and I cruise regularly obviously. We’ve used Royal Caribbean more or less exclusively, and I’m not necessarily plugging for them but I say that only to say that we’ve sailed several times on the Oasis class vessels which to the best of my knowledge at this point are still the largest in the world. Something like 220,000 tons, I believe.
So, with that in mind, I had often spoken with Royal Caribbean staff and with other experts about, how much bigger can ships get? How much bigger will they get and apparently the laws of physics don’t really prohibit much in terms of growing bigger.
To your point earlier, I think the biggest limitations, correct me if I’m wrong are the ability of the destinations to handle the populations that are coming in off of these ships but also the physical infrastructure of the ports themselves. If the docks are not long enough to support these giant ships and if they’re not deep enough to where the draft of the ship can fit in port, this requires major changes to the infrastructure, to be able to support these massive ships if they were going to get any bigger than that.
Dr. Robert Gordon: Very true, Gary, and one more thing to add is that, with the larger number of passengers coming on and off the ship, that made for some logistical challenges of embarkation and disembarkation. Again, it’s a challenge if a ship pulls into a port, and 3,000 people are trying to get off all at the same time, it does create some challenges.
Plus, when you’re returning to the ship, having sailed as well on a number of ships, there would be often long lines waiting to get back on board the ship as they’re processing people and checking bags and going through the security checkpoint. So, it did make for some delays that were not the best customer experience.
I’ve been on a number of different ships. Interestingly enough, I’ve actually never sailed on the Oasis class. I’ve toured many times. My family, since we’ve been on a lot of cruises, we tend to be on the, what’s kind of called the small-to-medium range ships, things like Disney, Crystal, some Royal Caribbean, some Celebrity, The Worlds, Viking.
So, we tended to a little bit smaller, and part of that was my wife’s preference to a smaller venue. Although I personally really enjoyed the feel of a large ship, my wife wanted a little bit more intimate experience in smaller venues. So, it’s a personal preference and my children they grew up that way and so that’s kind of also become their personal preference. Again, there’s a lot of options.
Dr. Gary Deel: From the value perspective, I have to admit, I can’t seem to find a way to argue that you can really be cruising in terms of what you get and we have two little kids as well and we take full advantage of the onboard amenities for childcare and babysitting and the kids’ areas. And having that, to some extent, included and even when it’s not included, the fees are usually reasonable for those kinds of services. And it’s hard to book a vacation, doing virtually anything else and still get the same bang for your buck that you get there.
I can certainly empathize with the challenges that exist around the crowd management and the lines that you described. Particularly on the Oasis class having sailed, I want to say, two or three times now, I know we’ve been on Oasis and we’ve been on Allure and I think we’re going on Oasis again, provided there aren’t any further delays to the return of cruising in the United States, we may be back on in the next few months.
But I’ve often wondered if that’s just a product of the design of the ship being such that they’re trying to, understandably so, cram as many guest cabins as they possibly can into the infrastructure, because that increases the profitability per sailing but, unfortunately, then you’re putting more people on and fewer places for people to go and access on and off of the ships.
So, I’ve often wondered if they sort of reduced the cabin count by even just two or 3% and then, provided more areas for people to get on and off and more options for say, food and beverage, for example, so that the buffet isn’t as crowded at peak dinner time, and so on and so forth. If those kinds of challenges could potentially be alleviated from an engineering standpoint.
Do you think that’s the case or are they just kind of at the limit of the fact that there’s just too many people and too limited in infrastructure?
Dr. Robert Gordon: I think that they can at one of the points you’re making, there is kind of why I ended up on the small to medium ships is because when you have fewer passengers on board, in general, and you have a higher passenger-to-space ratio, the lines do tend to be smaller, I can’t have 1,000 people in front of me, if there’s only 600 people on the ship in a buffet line.
So people are going to be spread out more. Now, yes, there are things that cruise lines are doing to try to improve crowd management. I know Disney had done a number of things, for example, by having adults only area and children only areas and trying to divide up a ship so that way you could change the flow patterns of individuals.
Then also, by the actual programming of certain items and functions. Sometimes people are like, “Well, I wanted to do the wine tasting and I wanted to do the piano concert that was happening, but they’re at the same time.” Part of that is by design because cruise lines know well, if you stagger everything so everyone can do everything, not every venue is going to be able to support all the people.
In a traditional cruise line, you also see that in the two-seating dining. Some cruise lines have gone away from that but in the traditional sense, at the end, to conserve space, if you make the dining room half the size to cover only half the people, you can then kind of help spread people out and move things around and have a better flow.
So I know, NCL, for example, they’re a freestyle cruising. You can kind of go to any venue that you want except for some of the alternative restaurants where you have to make a reservation. So, that kind of opens up different things.
Now, it turns out people kind of gravitate towards different places anyways. When you go to a theme park, not everyone goes to the line for the newest roller coaster. Yes, a lot of people go, some people say, “Oh, that line is too long, I’ll take a different option,” or you’ll find a fast pass or do something else.
So, people kind of do move around. However, on the larger ships, you do just have that technical space limitation when it comes to having people in so much space and kind of going back to a little bit to COVID, again, it becomes even more complicated when you’re trying to socially distance people as well in these venues.
Dr. Gary Deel: Yeah, I think one of the most important points you’ve raised there is the point that, at least I didn’t appreciate until I started sailing on the bigger ships and that is that the space-to-people ratio is not the same. It’s not one to one, when you go from a small ship to a big ship. You’re increasing the size of the ship but you’re increasing the population of passengers by a much greater amount. So, that’s where you end up with those massive lines.
Well, good, so we have a proper baseline here of sort of where the industry was pre-COVID and now, to address sort of the elephant in the room, where are we in terms of COVID? Again, to reiterate, we’re in October 2020. My understanding and my best recollection is that the cruise industry stopped all embarkations going back to I believe, late March or early April, and has not continued.
They’ve been trying to bring them back and I, in particular, because I had several cruises scheduled for this year, was waiting with anticipation to see if we would resume again in the summer and in the fall and now, it’s looking like at best maybe late winter but perhaps more conservatively 2021. So, walk us through the timeline of what’s been happening with that.
Dr. Robert Gordon: Okay, the timeline started back, like you said back in March, April, where COVID outbreak started happening. There was a number of cruise vessels that did have some outbreaks and issues. So, at that point, it was not fully understood what was happening and then at that point, the cruise industry as a whole started essentially canceling cruises and rescheduling cruises.
Parallel to that you also had when the CDC put out the order indicating that cruising was considered very hazardous, it was considered a more hazardous thing and to be avoided at all costs. Then, later on the CDC gave guidance that they were not going to allow cruise ships coming in and out of US ports.
So, to kind of understand, part of the driver there is that, again, the majority of cruise passengers come from the United States and the majority of cruise ships are coming in and out of US ports. So, when the CDC essentially closed up US ports from cruise ships, it clearly made the industry take a pause and close up and kind of figure out what the next moves were.
Initially on, the response was just like in other times that has impacted the cruise industry, where there have been other issues like, for example, with Legionnaires’ disease, a number of years back and certain other CDC outbreaks that have occurred on ships just because you are in some confined areas.
The cruise industry in the beginning really did not see this as going to be a long-term thing. They really did foresee it as being a short-term thing, but as COVID progressed and more was understood about the disease, the CDC continued to keep the guidance of saying cruise ships aren’t allowed in and out of the US. There was a number of operators that had issues getting into port and discharging guests to return home.
Worldwide, a number of ports were closing themselves off from different cruise ships from disembarking passengers. There were some times where they were allowed to disembark, but then they were taken out and flown home.
Then, you had a mix of people that had COVID, didn’t have the COVID. So, that whole logistical movement of moving people that might have been exposed and people that were exposed and people that weren’t exposed, became quite the challenge for the cruise industry.
After that point, there was the realization that the cruise industry was going to have a longer term issue. Certain cruise lines went out and explored different options for additional funding sources in order to survive this period of time because, obviously cruise lines not having revenue for months and is going to certainly have an impact.
Other operators started moving to position their ships into dock with the theories, if they had a docking scheduled next year— just so you know, cruise ships are more or less required by law and by ruling class to have two dry dockings every five years. So, rather than do the docking, for example, if they had it scheduled for next year, do it this year when the ship is out of service anyways and then that way, they can have more revenue days when the ships returned to service.
Dr. Gary Deel: That’s smart.
Dr. Robert Gordon: Yeah. So there was a lot of movement. Some ships, were also utilized to repatriate crew, one certain port started closing off to non-citizens, some cruise ships then repositioned and moved crew to take them home because there was no airline movement, they couldn’t land them into another country and get air support to get an airline to carry them.
So, there’s a lot of logistical challenges that the cruise industry had to do. And I would like to point out that although there were no passengers on board, the cruise industry still had to support the officers and crew that were onboard, logistically with food, water, services, everything that goes with it and then continue to operate and maintain the vessels as they were going about.
Dr. Gary Deel: Yeah, it seems it certainly caused a nightmare scenario for the industry and I can see the reverberations already, because we had a cruise scheduled on a medium-sized vessel with Royal Caribbean to take a transatlantic repositioning cruise to the Mediterranean next April, and that has been canceled, despite the fact that we’re still not sure whether we’ll be cruising at that point but I think that cancellation is more product of the company repositioning itself, in hopes that these ships will be better utilized when the time comes. So, the schedules for repositioning and ocean crossings and whatnot probably have been dramatically shifted by all this.
I guess we’d be remiss if we didn’t mention that a lot of the hype and concern around, or the public visibility, around the cruise line industry and exposure to COVID therefrom came from the Diamond Princess, which if memory serves was coming out of Japan, if I recall correctly and then, ended up on the coast of Southern California, San Fran, if I’m not mistaken, and that that sort of fiasco and the way that that was handled, which some would argue was not the best mandatory quarantine of passengers on the ship rather than allowing people to disembark and potentially isolate and sort of segregate those that are healthy from those that were exposed.
We can Monday-morning quarterback that all we like, it’s hard to say this decision would have been better but I distinctly remember that being a sticking point, and probably something that I would imagine drove a lot of people away from cruising, if the rest of the evidence wasn’t already enough. Would you agree?
Dr. Robert Gordon: I would agree. I think that the initial handling because of just ignorance of what the expectation was, and exactly how the disease transmitted and what steps could be taken to mitigate it, it wasn’t fully understood and because of that, I felt that because of the ignorance, certain steps were taken that probably should have been a little bit more careful and they should have moved maybe a little more cautiously. But you don’t know what you don’t know.
So, the problems that happened in those early days, in March and April on certain ships, the cruise industry had certainly learned those lessons now. I see a completely different industry now and really standing up and taking notice on a particular guidance and, in fact, stronger guidance than I would say that is happening more so than landside in some cases. They do understand the nature of cruising and the fact that you’re having a lot of people in close contact on a regular basis, there are certain challenges that come with it.
Dr. Gary Deel: I wanted to ask on that, because, as I was obviously an anticipated passenger that never got to go on any of these 2020 sailings, I was curious to know because I know you talked about the CDC, setting moratoriums on cruises, departing and embarking from US ports, but it seemed that several of the push backs in the timeline to resuming cruising, which as of yet, still it doesn’t have a definite deadline here, it seemed to be almost self-imposed by the Cruise Line Industry Association or the CLIA, at least in the information that I had read from Royal Caribbean and their public notifications to their customers about, this is why we won’t be hosting your sailing that you had scheduled on X date.
It almost seemed like it was self-imposed through their affiliation with this industry association rather than a government agency saying, you can’t do that and therefore they’re sort of forced to comply. Was it a little bit of both?
Dr. Robert Gordon: It was a little bit of both. CLIA did put together some guidelines and some timelines and some recommendations and CLIA does work with the US government, along with state governments, in order to kind of help facilitate the industry, within the government structures of different states and within the United States in general.
In their guidance, initially, they were planning, and the hope was that the industry would adopt some new guidelines, the CDC would publish new guidelines, and the anticipated plan was that the cruise industry as a whole would be returning to United States ports as of October.
However, that met some resistance, the CDC was still not comfortable with that particular date. Right now, the guidance and the belief is that it’s going to be resuming as of January 1. There was some pushback by the industry. However, several of major lines have already gone on record and stated, yes, they are going to wait until January.
However, I would like to point out that, although I know a lot of times we look at the domestic side, on the international side, as of August, MSC and Costa did resume cruises over in Europe and have been continuing to operate with reduced passenger load, with heightened cleanliness protocols, additional mask wearing, social distancing.
For now, they seem to be doing pretty well and successful in not having an outbreak. It is important to note that Costa for example, is a main provider of cruises to Italy and Italy they were hit very strongly by COVID and there was a lot of issues and problems that they had early on. However, with a lot of the country working together, trying to get it under control, they have brought the numbers down and things are better.
Just so you know, although yes, things are improving and there are some cruises that are available in Europe, not necessarily to US because we still have some restrictions on where we can go to in certain countries, but they are still required to have like COVID tests prior to embarking on the ship.
Crews are going to be required to be in quarantine prior to joining a vessel and there’s a number of steps they’re going to be taking your temperature, they’re going to be staggering time slots for boarding. At least one of the cruise lines is also keeping 10% of their staterooms reserved for isolation if there is an outbreak. So, there are a lot more protocols and safety measures that have been taken by these European lines in order to maintain a safe and healthy environment.
Dr. Gary Deel: That’s interesting. I wasn’t aware that that had been gone already. Have they seen any issues of outbreaks or resurgences?
Dr. Robert Gordon: Some have. There have been some smaller cruise lines that have had outbreaks and I’m not saying like thousands, I’m talking, 10, 20, but nonetheless, as we all know, being on a cruise ship, you are in close quarters and so, you just need to be careful and mindful of it.
In addition, it’s also important that you see that the cruise line then take steps to improve because whatever the problem that allowed that to happen needs to be corrected. It seemed that the problem from the ones that I’ve heard, the limited data that comes out on it, it seems to be more of a human error, meaning protocols were not being followed. Protocols were set and if people weren’t following them, then that can allow the virus to enter into the ship and spread.
So far, I’ve not seen the safety and health protocols fail. I’ve seen people don’t follow them and then there are problems. So in my mind, that is a good sign because it’s saying that okay, these protocols work and if you follow them, you can keep everyone safe.
Dr. Gary Deel: Now, do you think the decision by MSC and Costa to resume cruising was a product of their willingness to roll the dice that we, just frankly, are not here in the States or among other companies or is it a product of the fact that the countries from which they sail from, in Europe, managed the virus in a better way such that it allowed them to get started sooner?
Dr. Robert Gordon: I don’t think any cruise line is going to roll dice in something like this, because now that they understand the impact and understand the awareness, it would be detrimental for any cruise line to go forward and take a chance like that.
I believe that because they have been successful in these countries to bring down the numbers, they understand what works. They’re willing to take a smaller number of passengers on board. They’re willing to maintain control.
For example, some of the things that may change, that people may find, that they might not like, for example, in these European cruise operators, is that you can no longer be an independent when you go ashore, meaning you either go on one of the cruise line-sponsored tours or you don’t go ashore, because they want to maintain control of the individuals. The minute you’re an independent, wandering around in an Italian city, no one knows what you’ve done or where you’ve been.
So now, you can inadvertently expose yourself and then bring it onboard. The problem with COVID is unlike some other diseases, you can not exhibit signs of the disease but be contagious and cause other people to get sick, long before you would pop positive on a COVID test.
Dr. Gary Deel: So, in light of that, would you argue that that model would be appropriate for US ports and for US sailing companies today, or is our situation as it pertains to COVID, and the handling of the pandemic in our country so different?
Dr. Robert Gordon: It will be interesting to see, I’m not sure if that would happen in US ports. I am certain if you were to go taking US citizens to a foreign port, they’re going to want to exert greater control over the passengers, just from a safety standpoint.
I’m not certain, you can control a US citizen having access to a US port, I don’t think you can control that. But you certainly when they’re in another country, you can require that they need to be under some kind of cruise line managed and health and safety reasons, kind of a tour or guide or going ashore.
The problem is, a single person can expose so many people on a cruise ship. So, it just takes one person who may not even realize they’ve become infected and can cause problems. So, the cruise line knows that once it comes on board, they become liable for everyone who gets sick and I don’t think anyone is going to want to take that kind of risk or liability from a cruise standpoint.
Dr. Gary Deel: Sure. Perfect. So, when we left off, we were talking about the fact that some cruise lines have elected to resume operations specifically in Europe and that seems to be working to a certain extent that there have been some cases of outbreaks but they haven’t been so severe that it would provoke a resumption of the moratorium.
I did want to ask before we took the break, Robert, you talked about the Legionnaires’ disease as sort of a historical precedent that cruises have had to face and that’s something that isn’t unique necessarily to cruising.
It’s caused by the Legionella bacteria and it’s common in water systems, particularly where you have water that isn’t maintained at certain temperatures 125, 130 degrees where you can kill that Legionella bacteria. If it becomes waterborne or airborne and exposed to human beings, you can get pretty sick from it. It can be fatal. It was first discovered in a hotel in Philadelphia where several people died as a result of exposure to the Legionella bacteria in their lungs.
Another one that I thought about was norovirus, because I’ve heard of this on cruises, I’ve seen news. In fact, if I remember correctly, it was last year, that Oasis of the Seas, one of the ships we talked about earlier in this hour, had an outbreak of norovirus that required quarantining on the ship of guests and similar protocols.
I guess I wanted to ask, Robert, in terms of the similarities, are we really talking about apples and oranges here? Are there any comparisons or is COVID so much more contagious and transmissible and deadly that we have to throw all points of comparison out the window?
Dr. Robert Gordon: The problem becomes that it’s the fact that many people can be asymptomatic. That can spread the disease and if you never exhibit symptoms, or you never appear to be sick and you’re still spreading the disease.
The other thing is remember that the average age on cruise ships tends to be a little higher and so with this particular disease, it does seem to be more deadly or more long-term effects on individuals that have pre-existing conditions, older and things of that nature.
It is a much more dangerous disease than other ones. The other thing is that this has become a worldwide issue. With norovirus, you’re talking about one ship, maybe two that had an incident and then they had a quarantine and it went away. Legionnaires you had one ship, they knew what they needed to do, they do some deep cleaning, they purged the water system. Everything is okay.
Everyone was getting it, it was worldwide. So now, everyone coming to the ship, be it passenger or a crew now could be suddenly an invisible carrier, and then they get sick and all the people that they’ve had contact with suddenly also can become sick. So, it isn’t a slightly different animal and that’s what I think the whole world has been struggling with because even though it’s called kind of a flu, it really exhibits characteristics that are unlike a normal flu that we are accustomed to. Coupled with the fact that since this is a novel virus, it indicates that no one has any inherent resistance to it. Unlike other diseases that are out there, or even the flu in general, if you get the flu shot every year, you’re probably going to have some level of coverage and protection from a flu outbreak.
Dr. Gary Deel: Right. In terms of airborne transmissibility, I don’t know much about the ventilation systems for circulating air within cruise ships but I would imagine that a lot of it is circulated and recycled, but I’m just wondering if you have any perspective on, is there a way to let enough fresh air into the decks, in the cabins of ships to help with that?
Is there a way to sanitize through either UV lighting or some other treatment for ventilation that would not necessarily be a guarantee of anything, but would potentially help if you do have an outbreak of avoiding it, going from one cabin to the next cabin.
And in such closed spaces, as we know, if anyone who has cruised before knows that, you’ve got tight corridors and you’ve got tight cabins, and it’s easy to see how something like that could spread pretty quickly, because everybody’s kind of breathing the same oxygen?
Dr. Robert Gordon: Well, it’s a mixed bag. The thing is, depending on the ship design, again, there’s advantages to having recirculated air and there was advantage of having fresh air. Some ships are designed to take in more fresh air and then, some are designed to have more recirculated air.
It becomes a much more challenging thing, when it’s a much larger ship. We talked about Oasis earlier. I recall that Oasis has that huge atrium, so you’re having all this air that’s in there, moving and the air exchange can become quite the complicated matter, because now you’ve got to have air coming in and then, the air exchanging out, it’s going to bring cold air in, taking warm air out.
Sometimes you have the challenge of where the ship is based, coming out of. For example, if it’s going to be operating year round in the Bahamas, you can expect most of the time it’s going to be hot, humid air outside, then it needs to be treated and then gets circulated potentially inside the ship, as opposed to maybe a ship that’s further up north or designed for expedition type cruises.
They may opt for more recirculated air just because you don’t want to bring in frigid air, having to heat it, treat it and then send it out again, and keep bringing in fresh air. So, it just depends on the design of the ship and I wish I could tell you that one is better than the other, but it really comes down to how the ship was designed and that’s often difficult to be able to know.
Now as per the UVC, I have seen data showing that yes, it can kill off the virus. However, again, the virus seems to be able to survive in the air and on items for an extended period of time and the challenge with UVC light is you need to make sure that the air is going through there and being exchanged and goes through that UVC light to be cleaned.
Dr. Gary Deel: Yeah, you need an awful lot of points of contact with UV light. I know just from home AC system, some of them have equipped UV lighting system that can help to disinfect to a certain extent the air going through your home AC, but to do that on such a large scale, I’d imagine would be complicated.
Dr. Robert Gordon: It does become complicated, but I just want to point out, like you said, on the home level, I recently had to change my HVAC system and I did add a UVC system to it. Just simply because I kind of thought, “Well, you know, I think in the very worst case, it may not do as much as it could,” but also the opinion like, “Well, they are not so expensive that it becomes unrealistic,” and if it does help protect my family, since we’re all working from home a little bit more, I’m all for that.
Dr. Gary Deel: Even if it provides only a little bit of protection, it’s better than nothing and to your point, the cost is not tremendous.
Again, we’re sitting here in October of 2020 and the future is uncertain, but if you had to wager a guess as to, when we return and how we return, what does that look like? How soon do we get back to cruising in the US and what does that look like in terms of comparison to what we’re all used to? Is it very different?
Dr. Robert Gordon: The major cruise lines have pretty much said that they want to resume cruising as of January of 2021.
I will give an interesting counterpoint to that because that means cruising ceased approximately in March, so maybe about nine months out of service. I saw a headline today showing that Broadway shows have been closed since March and will not resume until May 30 of 2021.
So, the fact that a land-based industry, theatrical performances are not going to resume until ’21 in May, is kind of an indicator in my mind of, well, it represents a large groups of people being together. I’d like to believe that the cruise industry will resume January 2021. I also know that they will have enhanced protocols, like you mentioned CLIA.
Dr. Robert Gordon: There will be guidance out by CDC and there will also be internally to the organization. I know that the cruise industry as a whole is looking at different safety protocols. I know that Genting was the first to publish safety protocols that they were going to take. I know that other cruise lines will do similar or pull together.
I know that there have been some discussions between cruise lines, trying to come to an agreement on safety protocols that they would all follow. I think that an industry safety protocol level would be very helpful. I also think that the guidance from the CDC will also be important.
Dr. Gary Deel: Does any of this hinge on the development and distribution of a vaccine, or do you think that’s more of a sort of nice to have, but not really essential either way?
Dr. Robert Gordon: I think right now the industry is looking at it. Yes, the vaccine would be nice to have, but it’s not essential. Although, yes, many of us have been on lockdown and many of us had not been able to go maybe on quite the vacations we’re planning, but still people have been traveling to some degree.
We know how to keep people safe, if you follow the safety protocols and the guidance put out by the CDC. So, your risk becomes relatively low.
I also think that there’s been this discussion and this belief, this pent up demand, and I see it, you’ve mentioned already yourself, you’ve wanted to take a vacation. You knew the risks but you were still willing to go and it’s not for lack of trying, it’s just lack of availability.
I think that people are like that, they’re like, “Well, you know, we haven’t traveled, we haven’t taken a vacation. It’s something that I think as human beings we enjoy, we like to interact with other people. We like to travel. We like new experiences,” and so, it’s something that we’re looking forward to.
Dr. Gary Deel: I think that’s absolutely accurate. There’s a lot of pent up energy that people who were looking forward to vacations or just traveling in general, and certainly, don’t get me wrong, I value my safety and the safety of my family, but we certainly loved that aspect of our leisure time to be able to go cruising and visit different destinations and enjoy that time together. So, I’m looking forward to seeing it back when it’s safe to do so.
I wonder, tell me if you share any thoughts on this in terms of the permanent lasting effects of—even if we have a bulletproof vaccine tomorrow that completely eradicates the virus—I wonder if any aspect of the cruising industry will change rapidly as sort of a result of this experience?
I was talking withthe Associate Dean for UCF in Orlando, and we were discussing how the wearing of masks which has been somewhat pointlessly controversial among some in our society, for safety purposes.
There are societies, I’m thinking of China and places in the East where when people are sick, regardless, they just wear a mask. It’s a very customary common accepted practice and it makes me wonder in our society now that people have acclimated to this practice, something that was very foreign to American culture, prior to COVID.
If this protects me or adds a layer of protection, then it just becomes a staple of society, no different than we carry our keys and our cell phone around with us when we go out? Do you see anything like that happening in the cruise line industry where there are lasting effects?
Dr. Robert Gordon: The lasting effects, let me kind of touch on two. One, like you’re saying on the mask wearing, I think that’s going to be much more ingrained upon our culture and it’s going to stick around for a while. I don’t know if it’ll become a permanent fixture like you had indicated in other countries, but I do feel that it’s going to be something that will be with us for a while.
I also feel that the stigma of wearing it, particularly if you are older or at risk, going out in public, I think will kind of go away as well because trying to protect yourself and being careful, I think is going to be understood more than maybe than in the past.
As for lasting effects, I’d like to point out that Carnival Company has sold off 10 ships this year. Now, all of them were in the 20-plus year range of age, but they’ve sold 10 ships. Now, there’s two things to see that are happening there.
One, the fact that these were 10 ships that they were not intending to sell and release from their fleet, pre-COVID. So, that is a point of interest.
The second point is you will notice that certain cruise lines are going to begin to shed older tonnage. That’s not to say that they were bad ships, most cruise lines maintain their ships at a very high level and these ships can last easily 30-plus years.
The fact that one of the major cruise lines is shedding themselves of older tonnage is a signal, in my mind, that they’re saying, “Okay, demand will not be as strong. We will work with newer tonnage that can potentially have maybe more health and safety elements built into them,”
And that the industry as a whole is going to change because just watching what’s happening in Europe and how they’re changing, how things are happening in embarkation, disembarkation, temperature checks, COVID tests, I think that overall, this is going to be something that is going to be here to stay just because it will make the experience safer and healthier.
Really, at the end of the day, I go to the local pizza place and they check my temperature every time I go in. So, it’s not that inconvenient. It’s not something that’s making me, “Oh, my God, this is something I don’t want to do,” and I’ll go somewhere else. If they’re consistent about it, I feel better because I’m going, “Okay, that means they’re checking everyone and turning away anyone who’s not well.”
To me, I also see there’s an ancillary effect that will happen in this country, because in the United States, there is the kind of opinion and belief and work ethic of, “Oh, I’m just a little sick, I’m going to go to work today. I’m not feeling a little well, I got a temperature, but you know, maybe I’ll go in and I’ll do a half day.”
I kind of think that as Americans, we’re going to kind of stop doing that, or companies are going to start really being stronger about enforcing the “if you’re sick, please stay home. Don’t come into work and make everyone sick.”
Dr. Gary Deel: Right. Yeah, I think that that’s probably accurate. It’s interesting, you were talking about the sale of ships among the cruise lines, and I had read something different into that and I may have been mistaken but I thought, in reading that about Carnival, that it was more about solvency because of the lost revenue from all of this time, without any business and it’s interesting to me because a lot of these companies, most, if I would guess at least, are headquartered overseas.
So, they’re in tax havens, where they’re not paying income taxes on US-earned income. It’s all foreign income, so for example, Royal Caribbean, I hold a few shares and they were trading at $130, give or take, before COVID.
They dropped to $30, and then in the last, I want to say three to six months, they’ve been hovering back at $60, $65 which is amazing to me in some respects, because they still haven’t been doing anything in terms of business, but I guess that’s all predicated on the optimism of a return at some point.
They’re headquartered in Liberia, so I say that only to say that there’s probably little hope that if there was ever any kind of government bailout, that it would come from the US given that they’re not contributing to the tax base here in that direct way. So I thought when I saw those ship sales, that that was a product of them just trying to consolidate what capital or what leverage they have to sort of weather the storm through however many remaining months we have of this.
Dr. Robert Gordon: I’m not saying that the cash infusion doesn’t help, but bear in mind that, I agree, yes, they sold 10 ships, but the fact that they sold ships that are 20 years and older, to me, indicates that they’re trying to position for the future more so than maybe cash in the short term.
Sure, cash helps but they have gotten cash infusions, particularly Carnival from other avenues and certainly, they still do have to maintain a base level of people and individuals in ships. I’m sure that that’s a large number, millions and millions, tens of millions of dollars to maintain these.
The fact that if they truly were, let’s say, trying to get out of the business or try to maximize their revenue from sale of ships, you would think that they might have considered selling some of the newer ships which would have a much higher value.
Dr. Gary Deel: Sure, that would stand to make sense. Well, we’re about 10 minutes from the end of our hour here and I appreciate your thoughts on this, I feel like we’ve really explored the COVID situation thoroughly.
I just wanted to ask, since I’ve got you here on the line with time to spare, there are two other it seems—and this is obviously pre-COVID—criticisms of the cruise line industry that they’ll need to address, if not, today then tomorrow after the pandemic has subsided.
I may be oversimplifying this to say that there’s just two, but in my view, it seems that there are two prominent ones. It seems to be the human rights issues and treatment of staff and payment and compensation.
The fact that employees are frequently solicited from parts of the world where they have to pay very little and can sort of minimize the extent to which they have to provide for their employees. The second is the environmental impact that stems from the fact that most ships of a cruise nature are still propelled by internal combustion engines of some kind on massive raw fuel oil and diesel engines.
So, I know there have been talks about this and I’ve read a little bit into, for example, alternatives like nuclear power, but it seems that people are so turned off by that over the Chernobyls and Fukushimas of, “I don’t really want to be riding on a cruise ship where I have to don a dosimeter everywhere I go to make sure that I’m not exposed to harmful radiation.”
Do you see sort of any light at the tunnel for those issues on the cruise line industry, assuming that we kind of get past this hurdle with the industry intact?
Dr. Robert Gordon: Well, let me answer your second question on the environmental impact first, because I think that one has a little clearer path than the other one.
When it comes to ships, there have been changes in legislation and in the global requirements when it comes to admissions for vessels. This has been changing over time and what’s happened is that ships are now required to either burn a much cleaner fuel or they’re required to have devices onboard that remove these more harmful emissions through scrubbers.
Dr. Gary Deel: Giant catalytic converters, so to speak.
Dr. Robert Gordon: Kind of, they perform similar to, but they’re they generally tend to be more water-based, meaning the diesel emissions are going to go through kind of the filters and water, which will then take out the particulates and the more dangerous substances, particularly sulfur.
So, that’s what’s happening in the industry and that’s a requirement. In addition, there’s the increase of more areas being SECA, which are a more environmentally protected area. So, when you are operating in the SECA range, in SECA areas, you are required to not only burn a much lower sulfur fuel but you need to prove it and the local authorities have the ability to audit your books out of your fuel and observe what’s happened.
Also, keep in mind with changes in technology and enforcement, there’s a lot more ability for governments to monitor what’s happening, and to see what’s happening.
In addition, when you have to open up your fuel records, it’s harder to show that you’re burning a lower sulfur fuel, you need to show that you bought it somewhere. The emission sign has gotten better. I agree that it’s been a challenge in the past and I agree that it will continue to change.
Dr. Gary Deel: So, do you think that long term future is still fossil fuels and combustion engines or is there a light at the end of the tunnel for an alternative fuel source, whether that’d be renewables or like I mentioned earlier in nuclear, because we have, obviously, a lot of our naval fleet runs on nuclear?
Dr. Robert Gordon: I think nuclear is probably a no go. If you were to ask me going forward, the ones that people would look at, I would say the two would be LNG and possibly hydrogen fuel cells.
Dr. Gary Deel: Perfect and so, the other side of it is—and I’m only gathering this from stories I’ve read and exposes—I’m not sure if you saw this, but Hassan Minhaj, the comedian has a show on Netflix called Patriot Act and I believe he did an expose on the cruise industry and focused heavily on the worker side of it. And how the industry frequently underpays and the conditions are not great of living aboard and working aboard, the hours and exposure to that side of it. So, is that something that you think we’ll see another magnifying glass on it, after we get past the pandemic?
Dr. Robert Gordon: Maybe. But I kind of want to explain a little bit of how the dynamics work. You tend to see kind of two groupings of individuals that work on cruise ships.
For the most part on most cruise ships, the officers are going to be Europeans. So, they’re going to be used to a much more comfortable way, much more in lined with what Americans will make. In addition to that, they’re also going to be having socialized medicine in their country and other social benefits.
Also, there have been changes in the laws, when it comes to the treatment of seafarers and there are certain things now like a required minimum wage, a maximum length of service.
Another one in the past that was an issue was that people literally could have been working onboard a ship for two years. Now, that is no longer possible because there have been international laws that have now been passed that protect workers working on ships.
Another one that would happen, that would be very detrimental was, if, for example, a ship owner were to go bankrupt, suddenly, the crews would not get paid and they would be stranded in whatever country that ship happened to stop in at the time.
Now, there’s insurance required for owners to carry to repatriate and to pay crew in the event of some kind of adverse situation. So, there have been steps that have been taken to improve conditions on board and to improve the condition of seafarers. I think this is an overall positive direction.
Now, the other piece that you speak about is that, it is a situation where people are being hired from nations that have a much lower minimum wage and are being paid less than perhaps an American or a European would be paid.
Now, it’s kind of a two-edged piece there. One, these international workers that do end up on ships are being paid much more than they are being paid in their home country because they will be paid in a foreign currency, like a euro or a dollar or a pound, rather than maybe a currency at their home. They will also be performing functions that in their home country would be paid much less.
So, it’s kind of a tough mixed bag there. It’s strange to me because sometimes people think, “Oh, yes, they’re being paid less than they might be in a comparable US job,” but back home, they’re wealthy.
I’ve spoken to crew members that are performing tasks, that are not as well regarded in the United States but they have two homes and are well to do and their kids are in private school, because although they’re not being paid a comparable wage, that would be in the US, it’s being paid in a hard currency. That translates to a lot more wealth in their nation.
Dr. Gary Deel: Sure, that makes sense. Obviously, I think if cruise lines, it’s safe to say if they were asked to pay everyone US minimum wage or higher or a abide by practices that we’re accustomed to here that some of those costs, at least, would be passed on to the passengers in the form of higher fares and whatnot. So, in a certain way, it trickles down on the other side.
Dr. Robert Gordon: Yeah. Not to say that there aren’t US operators out there with US ships. There are some. They tend to be on the smaller side, and they tend to be a slightly different experience but they are going to have higher labor costs for sure.
Dr. Gary Deel: Sure. Well, perfect. We’ve covered it over an hour. This was a great conversation. Any other topics you wanted to cover, anything else you wanted to add, before we conclude, Robert?
Dr. Robert Gordon: No, I appreciate the time. It’s been great. I thought we had a great exchange here. I’m hoping that the audience finds the information valuable and I look forward to cruise ships coming back into operation in January. I, for one, am planning a cruise vacation as soon as I can. I’m hoping that other people do the same.
Dr. Gary Deel: Absolutely. Me too and I certainly found the information valuable and the conversation enjoyable so thank you. I want to thank you for sharing your expertise and perspectives on these topics and thanks for joining me today for this episode of Intellectible.
Dr. Robert Gordon: Thanks.
Dr. Gary Deel: Thank you to our listeners for joining us. You can learn more about these topics and more by visiting the various APU-sponsored blogs. Be well and stay safe everyone.