Royal Caribbean set for strong 2014 as Europe cruise demand rises

Thu Oct 24, 2013 2:23pm EDT
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By Chris Peters

(Reuters) - Royal Caribbean Cruises Ltd (RCL.N: Quote) reported strong bookings for 2014 as more vacationers opted for its Europe cruises, helping the world's second-largest cruise operator take market share from Carnival Corp (CCL.N: Quote).

Royal Caribbean shares rose 5 percent in afternoon trading, after the company reported better-than-expected quarterly results and raised its 2013 earnings forecast.

"Clearly Royal Caribbean has gained some traction ... at the expense of some of its competitors (like Carnival)," Morningstar analyst Jaime Katz said.

Carnival, which leads the cruise industry worldwide, has been hurt by negative publicity from mishaps on its ships. The company warned in September that it might report an adjusted loss for the fourth quarter, following a 30 percent fall in third-quarter profit.

Royal Caribbean surprised investors by offering a positive outlook for 2014, Katz wrote in a note to clients.

Headline-grabbing accidents over the past couple of years, such as the sinking of the Costa Concordia off the coast of Italy, have hurt demand in the cruise industry. Earlier this month, a six-year-old boy drowned in a pool aboard a ship operated by Carnival.

"Carnival has some sort of brand specific issues, particularly Costa," Katz said. "We would likely see the uptick come a little bit slower for Carnival."

While the incidents aboard Royal Caribbean ships have not been as serious, the company had been forced to cut prices and invest in promotions to revive demand.   Continued...