What:Shares ofNorwegian Cruise Line Holdings Ltd. were riding a high tide in the cruise industry in March, gaining 12% according to data from S&P Global Market Intelligence. As you can see from the chart below, the three major cruise ship companies all rose in tandem as excitement built for the opening of Cuba. The stocks also surged toward the end of the month on a strong report byCarnival Cruise Lines.
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So what:President Obama became the first sitting U.S. president to visit Cuba in nearly 90 years last month, marking a watershed moment in relations between the Cold War-era adversaries. Among the American constituents that stand to benefit from the opening is the American travel industry, especially hotels and cruises. Airbnb has already begun listing properties in Cuba, andStarwood Hotels & Resorts is in talks to build three hotels in Havana. Not surprisingly, the cruise industry is also excited about this opportunity as the Caribbean is the most popular cruise destination for Americans. Last month, the federal government removed Cuba from its list of insecure ports, clearing a major hurdle for cruises.
Carnival Cruise has already set up its first voyage to Cuba this May, and Norwegian has applied for licenses to sail to Cuba as well. Norwegian CEO Frank Del Rio is especially bullish on the impact of the island being open to Americans, noting the proximity of the island to Florida, its unique history, and the pent-up demand to visit it.
Now what: Cruise stocks had fallen sharply in the early market sell-off as the companies are closely connected to the macroeconomic environment, but the stocks have recovered soundly as the market has bounced back. Low fuel prices have also helped to improve earnings and the stock jumped when Carnival reported nearly doubled first-quarter earnings figures. The industry also seems to be resisting the kind of discounting that can hammer profits during boom times.
Toward the end of the month, Norwegian also said it ordered a new ship for its Seven Seas Cruises brand, its first new order for that brand in 14 years. Expected to be completed in 2020, the new ship shows a further sign of bullishness from the company.
If recession concerns remain sidelined and oil prices stay low, profits should continue to soar for the cruise industry, pushing stock prices higher.
The article Why Norwegian Cruise Line Holdings Ltd. Shares Rose 12% Last Month originally appeared on Fool.com.
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