Cruise Industry Hits a Patch of Rough Water

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The waters are getting choppy for the cruising giants as 2012 comes to a close.

Market leader Carnival (CCL) issued disappointing guidance during last week's quarterly report. Rival Royal Caribbean (RCL) is running into obstacles in financing its next mega-ship. Norwegian Cruise Line wasn't in the news, but NCL hasn't been able to complete its IPO since calling it off last year.

The year that began problematically enough with the tragic grounding of Costa Concordia off the Tuscan coast of Italy doesn't appear to be getting a whole lot better.

The Cure for Seasickness

That's not to say investors are complaining. Shares of Carnival and Royal Caribbean are each trading near fresh highs and handily beating the market. But last week's stumbles show that the industry still has a ways to go in wooing back passengers.

Even after Carnival's quarterly report served up better than expected results, the stock still closed 5 percent lower after the world's largest cruise ship operator warned that it will fall short on the bottom line for its new fiscal year. Carnival is targeting no more than $2.40 a share in earnings on 5 percent to 6 percent in revenue growth. Wall Street was forecasting a profit of $2.49 a share on a 7 percent uptick in revenue.

Royal Caribbean's setback has little to do with the cruise line itself. It's the company's South Korean shipbuilder that ran into a roadblock in financing its third Oasis-style megaship for the cruise line. Finland's support for financing the deal fell short last week.

The shipyard has other financing options, and Royal Caribbean is still likely to get the vessel on time for its slated 2016 debut. However, it's another black eye for an industry that hasn't been as festive as its midnight buffets on the pool deck.

Memories of Costa Concordia still sting

We're closing in on the painful one-year anniversary of the Costa Concordia accident that left 32 passengers and crew members dead.

The catastrophic grounding of the ship -- part of Carnival's massive worldwide fleet -- rightfully scared off potential cruise passengers, who rarely questioned their safety before January's accident.

However, now that Carnival is pointing to slower growth in the coming year, don't be surprised if big deals are back again. Shareholders may think that the companies are doing just fine, but the uninspiring guidance tells a rockier tale.

Motley Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above.


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21 Comments

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Joey

Awww couldn't be the cost and economy? could it? Awww

December 30 2012 at 2:05 PM Report abuse rate up rate down Reply
demannmarine

They make their money on soft drinks. beer and mixed drinks, THEN you MUST pay the help with tips, NEVER AGAIN FOR ME, I won a free Cruise and it cost me $2600.

December 27 2012 at 9:28 AM Report abuse rate up rate down Reply
MALT

Cruising today isn't the experiance that it was 30 years ago,food was better,drinks weren't as pricey,ships were smaller and a little more intimate. Loved it,however the megaships have changed that,Disney,RCL, and NCL have gone downhill to the point were I simply spend my vacation dollars somewhere else.

December 27 2012 at 8:38 AM Report abuse rate up rate down Reply
manmi1

NCL is a terrible line. I will never again go with them. I had an upgraded balcony cabin on a two week Baltic Cruise. Our entire party was disappointed in the dirty conditions and the lack of caring by the crew. There are far better lines to cruise with.

December 26 2012 at 11:57 PM Report abuse -1 rate up rate down Reply
Terry and Mandy

You should always use a travel agent who specializes in cruises, when booking a cruise. They know of the best deals and can usually get an upgrade if at all possible.

December 26 2012 at 11:49 PM Report abuse -1 rate up rate down Reply
Terry and Mandy

I went on a Crystal Cruise this summer and noticed that the crowd was much older than on previous Crystal Cruises. The younger cruising segment just doesn't have the money now to take luxury cruises. Many of the older cruisers had chosen Crystal, even though they were regulars on Seaborn, because Crystal was a bit cheaper. Crystal has now become all inclusive with the tipping, liquor, soft drinks, etc. But many of the little niceties have disappeared. The dining room, which is usually exceptional, was just ordinary. The specialty restaurants were so much better. Crystal consistently gets a very high rating, but it just isn't as nice as it used to be.

December 26 2012 at 11:43 PM Report abuse rate up rate down Reply
bjzink

You would think that the prices and service would reflect their desire to fill the ships with passengers. We have found just the opposite - took a cruise on Princess this past fall, and the price was more than we had paid for a similar cruise 2 years ago, and the service was very spotty. Constant requests from the staff to purchase extra price stuff. But..............we still like that type of vacation rather than resort or land tours. Guess we just have to go with the flow. Better than staying home.

December 26 2012 at 8:43 PM Report abuse +1 rate up rate down Reply
2 replies to bjzink's comment
smaselli13

Same experience......Prices are much more expensive now than 2 years ago, for the same cruise on Princess.

December 26 2012 at 9:02 PM Report abuse +2 rate up rate down Reply
Frank

We did a New Years cruise on Princess 3 years ago. Even then there was so much annoying selling going on it turned us completely off of Princess. The bar staff were actually saying to pre-order your New Years Eve champagne because they were running out.....really.... a cruise ship running out of champagne. There were alot of other negative experiences on that cruise, very unfortunate. We usually cruise twice a year and until this year have always taken a New Years cruise. There was always a premium on holiday cruises but this year it got so ridiculus we just said NO! Our favorite line is Celebrity.

December 27 2012 at 7:51 AM Report abuse rate up rate down Reply
Don

I went on a Carnival cruise a few yars back to Bahamas. never been so bored in my life. the most exciting thing on the ship was BINGO..(I am NOT kidding). Our Entertainment was "FELLOW Passengers" singing and dancing, I kid you not. The little kid was cute tap dancing but for the price of what I paid on the cruise you'd think they'd PAID for some talent to be there. The steak was cold and tough by the time i got it. The next time i went to vacation I FLEW to Jamaica..faster..cheaper and a heck of a lot more fun.

December 26 2012 at 7:37 PM Report abuse +1 rate up rate down Reply
1mike1

start booking rooms for singles at a fair price instead of chargeing for 2 people.

December 26 2012 at 7:22 PM Report abuse rate up rate down Reply
kolblh

Cruise for free, join the Navy and see the world.

December 26 2012 at 7:16 PM Report abuse -1 rate up rate down Reply