Viking post Covid-19

[ClevelandKid]

Here is a question that can help while away the time - 

 

Once Covid-19 has run its course and Viking is back in business, do you think they will up their prices to make up for lost revenue, offer deals to entice people back, keep their prices unchanged, or some variant of all three?

[Jim Avery]

22 minutes ago, ClevelandKid said:

Here is a question that can help while away the time - 

 

Once Covid-19 has run its course and Viking is back in business, do you think they will up their prices to make up for lost revenue, offer deals to entice people back, keep their prices unchanged, or some variant of all three?

Ok, I have washed, waxed, detailed our cars and even ironed the pillow cases so I will jump in.  Good question.  Imho, I think, at least at first, there will be some real deals.  Viking's passenger base is extremely loyal so I don't think Viking will be long before the ships are full again.  This, of course, assumes a relatively short event and Viking surviving financially.  All the best Viking...🍸

[blacksmith]

Viking and every other cruise line will do exactly what they always do. They will charge the highest fare they can and still be competitive. Their prices will be dictated by what it takes to fill their ships. 
I suspect that many will attempt to cut operating costs and hope nobody notices. Risky.

[Jim Avery]

I have to agree with you.  Most cruise lines follow the disastrous airline model: "more buttocks in more seats"...

[ClevelandKid]

13 minutes ago, blacksmith said:

Viking and every other cruise line will do exactly what they always do. They will charge the highest fare they can and still be competitive. Their prices will be dictated by what it takes to fill their ships. 
I suspect that many will attempt to cut operating costs and hope nobody notices. Risky.

One area that isn't given a lot of thought, is Viking is only partially in the cruise business.  In a very real sense, they are also in the banking business.  They collect their fares in full 6 to 8 months in advance, and then they invest those funds (or at least I assume they do - they may just use those funds to pay the expenses that hit today).  So there may be a lot of incentive to fully book as many cruises as possible once things get back to normal.

[Hanoj]

Viking is not in the banking business, at least not in the sense of leveraging deposits into new lending. Viking is leveraging customer deposits to expand their fleet as a source of interest free financing. Things got lopsided a few years ago and Viking’s insurers (there are specific terms used for this in maritime operations that presently escapes me) demanded the company strengthen its balance sheet, which it did by granting equity to a Canadian pension fund, among others, for capital infusions. This was reported in the media and I think a recent Forbes article recounted some of this. Prior to the outside equity investment, Viking’s financial position was weak and considered too risky for the insurers. How is this possible? It has to do with international accounting standards. When Viking collects the full fare 12 months in advance of embarkation, the “credit” is recorded on the financial statements as a liability (i.e., a debt - either deferred or unearned revenue). The credit doesn’t become revenue until earned, which generally is when there is no risk of forfeiture from Viking’s perspective (i.e, satisfy the terms of the cruise contract). Although the company may have been flush with cash, there was a high debt to equity ratio (debt/equity) which can be an indicator of financial weakness or distress, enough so that the insurers wanted to share losses with other parties if the company is unable to deliver on its contractual obligations. Ironically, the company’s debt/equity ratio (assuming the company is not borrowing at interest to pay customer refunds) is improving, but it’s viability is being threatened. 
 

Some have suggested the company will be fine because of Chairman Hagen’s net worth. Back in 2019 his net worth (value of assets over liabilities) was reportedly around $3 billion USD. Undoubtedly most of this was the value of his interest in Viking which is based on a hypothetical sale of the company in an arm’s length transaction (neither party in distress). It represents the “blue sky“ or goodwill of the company. When Viking needed the equity infusion a few years ago I doubt Hagen had sufficient liquid assets available to make the infusion himself, or if he did he wasn’t willing to risk it. I suspect his net worth has declined precipitously during this pandemic. I suspect the company will need outside financing to weather this crisis, especially if the company is not able to resume operations soon. 

[ClevelandKid]

Hanoj - thanks!  A strong light on financial operations, and certainly something to worry about.  Viking has been expanding at a tremendous rate, and may have overstepped its abilities to meet future debt payments.  A thought based on your post - I wonder if they would delay the completion date of the expedition ships.  If the shutdown is 2 - 3 months, I would guess no, but if it is longer they may have to.

[orchestrapal]

Since the dreaded Covid19 will not have gone away just because our president says it is over. We are looking at possibly 18 months Or longer of it still being around.
Since ships have been described as floating PETRI dishes many will not want to cruise for years to come.

This will not “be over until it’s over.”  

Even some cruisers are now unemployed and may never be able to cruise Or vacation  again.
Viking  and other cruise lines will have to have long term plans and probably long times to crawl out of this.
Half empty ships will not keep them in business after this is all over.

Stay safe, stay home.👍

[DaKa2002]

7 minutes ago, orchestrapal said:

Since the dreaded Covid19 will not have gone away just because our president says it is over. We are looking at possibly 18 months Or longer of it still being around.
Since ships have been described as floating PETRI dishes many will not want to cruise for years to come.

This will not “be over until it’s over.”  

Even some cruisers are now unemployed and may never be able to cruise Or vacation  again.
Viking  and other cruise lines will have to have long term plans and probably long times to crawl out of this.
Half empty ships will not keep them in business after this is all over.

Stay safe, stay home.👍

Very much agree.  And as a very 'senior' couple, we are having to pay much more for ever increasing insurance coverage which significantly reduces the potential to cruise more often.

[CCWineLover]

13 hours ago, Hanoj said:

Viking is not in the banking business, at least not in the sense of leveraging deposits into new lending. Viking is leveraging customer deposits to expand their fleet as a source of interest free financing. Things got lopsided a few years ago and Viking’s insurers (there are specific terms used for this in maritime operations that presently escapes me) demanded the company strengthen its balance sheet, which it did by granting equity to a Canadian pension fund, among others, for capital infusions. This was reported in the media and I think a recent Forbes article recounted some of this. Prior to the outside equity investment, Viking’s financial position was weak and considered too risky for the insurers. How is this possible? It has to do with international accounting standards. When Viking collects the full fare 12 months in advance of embarkation, the “credit” is recorded on the financial statements as a liability (i.e., a debt - either deferred or unearned revenue). The credit doesn’t become revenue until earned, which generally is when there is no risk of forfeiture from Viking’s perspective (i.e, satisfy the terms of the cruise contract). Although the company may have been flush with cash, there was a high debt to equity ratio (debt/equity) which can be an indicator of financial weakness or distress, enough so that the insurers wanted to share losses with other parties if the company is unable to deliver on its contractual obligations. Ironically, the company’s debt/equity ratio (assuming the company is not borrowing at interest to pay customer refunds) is improving, but it’s viability is being threatened. 
 

Some have suggested the company will be fine because of Chairman Hagen’s net worth. Back in 2019 his net worth (value of assets over liabilities) was reportedly around $3 billion USD. Undoubtedly most of this was the value of his interest in Viking which is based on a hypothetical sale of the company in an arm’s length transaction (neither party in distress). It represents the “blue sky“ or goodwill of the company. When Viking needed the equity infusion a few years ago I doubt Hagen had sufficient liquid assets available to make the infusion himself, or if he did he wasn’t willing to risk it. I suspect his net worth has declined precipitously during this pandemic. I suspect the company will need outside financing to weather this crisis, especially if the company is not able to resume operations soon. 

 

Hanoj - what a good explanation you have given.  This really helps in understanding what has gone on and what the future may hold.  Thank you for taking the time to detail this out.

[duquephart]

Viking finances current operations with payments made for future business. Look up "pyramid sceme."

[Stateroom_Sailor]

We would love to try Viking Ocean, but it's a bit too expensive.  Perhaps on a last minute reposition cruise at some point.  Either way, we're impressed that Viking was the first to call off cruising operations, and will at least get our River Cruising business.

[Ragnar Danneskjold]

On 3/30/2020 at 5:49 AM, orchestrapal said:

This will not “be over until it’s over.”  

And that will likely be several months after an effective vaccine is widely available.  No one should expect any cruises to happen before that.

 

12-18 months seems to be the timeline to get an approved vaccine.  Then there will need to be some months for the cruise community to get vaccinated.  And likely more time for ports to be accepting of ships full of cruisers coming ashore for shore excursions.  Expect to have to have proof of vaccination.  And likely the ships will have to do periodic passenger/crew tests, etc.

 

Bottom line, no cruises likely for 18-24 months.  Sorry 😞

 

 

[Heidi13]

On 3/31/2020 at 8:05 PM, Stateroom_Sailor said:

We would love to try Viking Ocean, but it's a bit too expensive.  Perhaps on a last minute reposition cruise at some point.  Either way, we're impressed that Viking was the first to call off cruising operations, and will at least get our River Cruising business.

The base fare may be more expensive, but in our experience of comparing total cruise costs, our current Viking World Cruise is no more expensive, per day, than a previous WC in 2015 on another Line.

[Ragnar Danneskjold]

Heidi13,

 

Seeing as you were/are in the maritime business, and are honorary commodore of your “yacht”, have you heard any scenarios where cruising can come back sooner than what I outline above?

 

Ragnar D.

[Clay Clayton]

7 hours ago, Heidi13 said:

The base fare may be more expensive, but in our experience of comparing total cruise costs, our current Viking World Cruise is no more expensive, per day, than a previous WC in 2015 on another Line.

Generally agree with Heidi13-depending on what cruise line and Stateroom one compares, Viking can either be cheaper, about the same or more expensive. 
 

For example-one our recently completed half-transatlantic aboard Sky (we turned around in the middle of the Atlantic and returned to Miami) the Total cost was $10 more per person per day than a similarly sized veranda stateroom on a 12 day crossing on RC Allure of the Seas. We calculated this by taking the cruise fare of each, the OBC offered by the same travel agent for each, gratuities for each and adding $500 to the RC total reflective of cocktails and alternative dining (since Viking includes wine and sodas at meals & our Travel Agent obc was sufficient to provide for cocktails as needed and alternative dining is complimentary there was no added cost to the Viking fare). 
 

On our first Viking cruise, also a transatlantic they were cheaper than a suite aboard Norwegian Epic. As I am very tall and Epic has short beds in their balcony staterooms, we had considered splurging on a suite.  But when we realized Viking was he more frugal option we elected to take it and are glad we did. 
 

We have only taken one non-transatlantic on Viking as their more traditional cruises do tend to be more expensive than what we were willing to pay.  While we enjoyed the cruise and felt like we got good value, we did find ourselves not wanting to get off the ship as we so love the onboard amenities. 
 

[duquephart]

"Viking can either be cheaper, about the same or more expensive."

Duh.

[Ragnar Danneskjold]

Notice to moderators, dp is not an alternate handle for either Ragnar D.  or ho-hum.  Though he is being considered for membership in our club.

[Jim Avery]

12 minutes ago, Ragnar Danneskjold said:

Notice to moderators, dp is not an alternate handle for either Ragnar D.  or ho-hum.  Though he is being considered for membership in our club.

Where I come from duque is pronounced “duck”.

[ClevelandKid]

10 hours ago, Ragnar Danneskjold said:

And that will likely be several months after an effective vaccine is widely available.  No one should expect any cruises to happen before that.

 

12-18 months seems to be the timeline to get an approved vaccine.  Then there will need to be some months for the cruise community to get vaccinated.  And likely more time for ports to be accepting of ships full of cruisers coming ashore for shore excursions.  Expect to have to have proof of vaccination.  And likely the ships will have to do periodic passenger/crew tests, etc.

 

Bottom line, no cruises likely for 18-24 months.  Sorry 😞

 

 

There is a scenario where it comes back sooner - but it is dependent on universal testing with quick (15 minutes) turnaround time.  That may be pie in the sky, but that is what a lot of land based businesses (at least in my neck of the woods) are hoping for.

[Ragnar Danneskjold]

Yes, been discussing that with a few of my hapless chums that are still working stiffs 🙂  It may work for low density employment situations, like offices, etc. where everyone could be tested in the morning before coming in the building.  Relatively easy so isolate any infections.

 

But on a high-density cruise, with shore excursions, pax (and crew) would have to be tested every day, and could be far out at sea, so much harder to do isolation if positives are found.  And to find a port willing to take the sick.

 

This may work for short caribbean cruises, etc., with pre-agreements from ports about taking in the infected.  But I can’t see far-flung trans ocean voyages occurring until a vaccine available.

 

Add in the questions about recirculating ventilation systems on the more modern ships and I have to wonder about even short cruises.  And certainly no one over, say, 60 would be allowed to cruise.

 

I’ve now convinced myself that the 15 minute tests won’t help, only a vaccine will.

[Jim Avery]

Raggy, vaccines are hit or miss.  According to my pharmacist, this years flu vaccine is about 15% effective.  Covid is a nasty virus.  But.....  The majority of people on the planet will not get it.  Of those that get it the majority will recover.  Simple facts.  The terror on the news shows is enough to make one never leave the bed but reality is there is simply no stopping these periodic scourges.  Even the fear mongers worst case for death is still a minuscule percentage of the near 7.8 BILLION people on the planet.  If one becomes immobile by fear as is current conventional wisdom, then one would avoid anything with  potential danger.  Not a realistic way to live.  No travel, no sports, no concerts, no nothing.....  And who pays for housing, food, medical care, utilities for all the millions doing nothing?  Sooner or later we must get back to living or what's the point?

[Ragnar Danneskjold]

I guess the hope is that this virus is slow to mutate, and that there is only one or two strains “out in the field”.  This would allow a vaccine to have a much higher immunity rate than the flu vaccine.  At least for a while...

 

With cruising, its not all a matter of whether the pax are willing to risk it, but also a matter of whether insurers will allow the ships to sail.  Imagine the lawsuits stemming from allowing people to get sick and die from a known serious hazard...  And that will not just be cruise lines with that issue.  It may require congress to give blanket immunity from such lawsuits if a highly effective vaccine is not developed.  And no, I’m not a lawyer, I only play one on Cruise Critic 😉

[Jim Avery]

Traveling of all sorts inevitably exposes one to many things.  Some good, some bad.  I have caught various "bugs" over the course of many trips.  Who knew I could sue someone for carrying me to a place I could catch something?  I really missed my chance for big bucks!🍸  

[DaveSJ711]

1 hour ago, Ragnar Danneskjold said:

I guess the hope is that this virus is slow to mutate, and that there is only one or two strains “out in the field”.  This would allow a vaccine to have a much higher immunity rate than the flu vaccine.  At least for a while...

 

With cruising, its not all a matter of whether the pax are willing to risk it, but also a matter of whether insurers will allow the ships to sail.  Imagine the lawsuits stemming from allowing people to get sick and die from a known serious hazard...  And that will not just be cruise lines with that issue.  It may require congress to give blanket immunity from such lawsuits if a highly effective vaccine is not developed.  And no, I’m not a lawyer, I only play one on Cruise Critic 😉

 

The cruise industry is in disrepute because of the outbreak.  We can argue until the cows come home whether that's fair.  But it's a fact.  The stars will have to align on several levels before the industry returns to "normal" (whatever that is).  I agree with RD that the recovery process could take 12-18 months, if indeed recovery occurs at all.  So many issues to consider...