Study shows COVID-19 sentiment affected cruise stock

Cruise lines were often the subject of international attention during 2020, as the COVID-19 pandemic highlighted the vulnerability of vacationers on board. Years later, a multi-agency team of economists has examined public perceptions of cruise lines and the resulting economic effect on the industry.

Newly published research revealed a relationship between public opinion expressed online and economic performance within the cruise industry, as demonstrated by correlations between average online media sentiment and stock prices examined over a period of four years.

This study, led by a University of Florida researcher with collaborators from Oklahoma State University and Purdue University, provides valuable insight into the underlying factors driving market fluctuations within the cruise industry, which has experienced variations dramatic events during the COVID-19 pandemic.

“Most people think of cruises as purely a leisure opportunity,” said John Lai, study leader and assistant professor of agribusiness in the UF/IFAS department of food and resource economics. “However, there is a significant economic multiplier effect associated with cruise lines. Port cities that receive a lot of passenger cruise traffic also increase demand for port infrastructure development and maintenance, which in turn stimulates economic growth. In addition to this, passengers spend money at a variety of businesses such as hotels, car rentals, restaurants, parks and other recreational activities related to cruise travel.”

To determine any connection between online public perception and a cruise company’s performance, researchers collected daily data on net sentiment from online media (through posts on social media sites like Twitter) and compared it to the corresponding daily closing stock values ​​of three major cruise lines over a four-year period from June 2017 to June 2021.

“Closing prices provide a consistent measurement point on a daily basis and a good picture of a company’s market price at the end of each trading day in the stock market,” Lai said.

The results showed that for every one percentage point increase in average sentiment, daily stock returns would increase by $0.07, $0.23, and $0.08, respectively, for Norwegian Cruise Lines (NCLH), Royal Caribbean (RCL ) and Carnival Corporation (CCL). .

The four-year data collection period allowed researchers to identify the impact of COVID-19 on the cruise industry and identify how major pandemic events, such as outbreaks and no-sail orders, were discussed online. In doing so, a clear correlation was highlighted between these timely events in the COVID-19 response leading to headlines related to cruise regulations or outbreaks on cruise ships with trends in both online sentiment and stock prices. .

“There was a lot of activity during the pandemic throughout the economy, but among those that made national headlines were the activities of cruise operations. In addition to US Navy hospital ships, some cruise operators temporarily repurposed cruise ships for humanitarian assistance,” Lai said. “This led to a notable increase in online postings, which went from focusing on mainstream terms like ‘the Bahamas,’ ‘Puerto Rico’ and ‘travel’ in 2017-2019 to a persistent focus on ‘coronavirus,’ ‘quarantine.’ . and ‘passengers’ in 2020.”

While results varied by cruise line, it was shown that across all three companies, a no-sail order had negative economic impacts, evidenced by a drop in stock market prices.

Overall, these correlations show the importance of a positive social media presence for cruise lines seeking financial success and can provide valuable information to industry stakeholders on the importance of managing their online presence.

“As the cruise industry sets sail in the post-pandemic economic environment, it will be important to pay attention to its social media presence,” Lai said.

The full article, “Public Sentiment Toward Cruises and Resulting Stock Performance in 2017-2021,” is now available in the Journal of Hospitality and Tourism Management: doi.org/10.1016/j.jhtm.2023.05.011.