Cruise Industry Is Throttling Up Again, a Year After Costa Concordia

Cruise ship Royal CaribbeanThe cruise industry is starting to regain its sea legs.

Shares of Royal Caribbean (RCL) coasted higher on Thursday after posting an encouraging quarterly report -- and market leader Carnival (CCL) followed suit.

Royal Caribbean's actual third quarter performance isn't spectacular in of itself. Revenue and earnings declined slightly for the period. However, seeing onboard revenue inch higher despite the downtick in passenger ticket revenue is encouraging. It means that travelers, once aboard, are starting to spend again.

Remembering a Tragedy

Most of the cruising industry news this year has been disheartening, largely stemming from the grounding of Costa Concordia off the Tuscan coast of Italy. The incident in January left at least 30 people dead.

It was a tragedy in of itself, but it naturally cost the industry. The boat belonged to Carnival's fleet, but potential cruise passengers on any vessel were rightfully apprehensive. For many years, cruise ship mishaps had been limited to stomach viruses, bad karaoke and the occasional panic of falling asleep before the midnight buffet.

The Concordia disaster changed that. Planes crash. Trains derail. Ships, even today's modern marvels, can take on water.

The Shifting Tide of Consumer Sentiment

Royal Caribbean acknowledges this week that it did suffer from a Concordia-related slowdown in bookings for sailings during the second and third quarter. However, it points out that the trend is not only finally stabilizing, but is expected to get much better going forward.

Royal Caribbean reported that bookings for the year ahead -- in terms of both the number of passengers reserved and the fares that they are paying -- are ahead of where they were a year ago at this time. That's huge, especially since the Concordia incident was still in the future at this point last year.

The company is boosting its bottom-line outlook for the entire fiscal year. As the result of stronger than anticipated revenue and cost reductions, the cruise line now sees a profit of $1.85 a share to $1.95 a share for all of 2012.

Bon Voyage

Cruising remains a growing industry, and Royal Caribbean also revealed on Thursday morning that it's in negotiations to build another new ship that would be added to its fleet come 2016.

Good news for investors may not be good news for potential passengers, though. There was a golden opportunity to get a great deal on a future cruise shortly after the Concordia accident, but now that bookings are starting to firm up, there will be fewer incentives for cruise lines to offer discounts.

European cruises may still be a good value. The region is still mired in a deeper economic funk than we are closer to home. However, rates are likely to inch higher for the most part at this point.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

5 Comments

Filter by:
Robert

Been on fourteen cruises, havent been on one since January 2012 so Im having withdrawal symptoms. Love cruising.

October 25 2012 at 10:44 PM Report abuse +2 rate up rate down Reply
redroad9

A cruise is the best of all the vacations I have went on. Hawaii was just expensive like I told my wife. I went there twice when I was in the Marines. The comments about white trash is a bit silly. Said by a person who has never been on a cruise.

October 25 2012 at 10:19 PM Report abuse rate up rate down Reply
DR ED

the type of cruise is important,prefer mature people,good food,interesting seminars,european travel,good conversation with fellow travelers. Im 55,10 lbs overweight,retired,happily married,dr.

October 25 2012 at 6:08 PM Report abuse +1 rate up rate down Reply
hey u

Red on Right Return

October 25 2012 at 5:32 PM Report abuse rate up rate down Reply
ilm9p

Floating hotels stuffed with obese, white trash grazing on a bunch of crappy buffets.

No thanks.

October 25 2012 at 3:23 PM Report abuse -2 rate up rate down Reply
1 reply to ilm9p's comment
greenberetrich

Take a good look at yourself .

October 25 2012 at 4:35 PM Report abuse rate up rate down Reply
mily469

i love cruises. been on 3 of them awesome times.

October 25 2012 at 3:15 PM Report abuse +3 rate up rate down Reply