Why the carnival stock continues to decline

What happened

For the second consecutive day, Carnival (NYSE: CCL) (NYSE: CUK) the stock is sinking. After falling 1.6% from Friday’s close on Monday, shares of the cruise ship operator were down another 2.5% as of 11:11 a.m. EDT on Tuesday.

It’s not hard to see why.

So what

Monday, The Miami Herald reported that in an effort to keep its ships free of the novel coronavirus – but also to comply with a Florida law prohibiting cruise lines from requiring passengers to present proof of vaccination against it – Carnival has decided to require that vacationers buy “special COVID-19 travel insurance” if they want to board its ships.

In theory, Carnival, like its rival Royal Caribbean (NYSE: RCL), wants all passengers to be vaccinated because, according to the US Centers for Disease Control, a cruise line that requires 95% of its passengers to be vaccinated can obtain a “conditional navigation certificate” without needing to complete a “simulated sail” beforehand. Florida, however, has stepped in to ban vaccination requirements – and will fine any operator who demands it.

To achieve its goal without breaking the law, Carnival will allow passengers who do not show proof of vaccination to instead purchase travel insurance covering at least $ 10,000 in medical expenses and $ 30,000 in medical evacuation costs. emergency and pay a fee of $ 150 for a COVID-19 Test to prove that they are not currently infected.

Now what

So why is this bad news for Carnival stock (and also for Royal Caribbean, which has instituted a similar policy)? Quite simply because the additional fees and the requirement to purchase travel insurance make the company’s services more expensive, potentially deterring customers from browsing, and without adding anything to the income that Carnival will collect from additional expenses.

This is bad news for the stock, but it is necessary to stay within the limits set by the Florida government.