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

Cruise ship Royal Caribbean
Cruise ship Royal Caribbean

The 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.

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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.

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