Carnival and cruise sector count cost of disaster

Mon Jan 16, 2012 8:18am EST
 
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By Matt Scuffham and Sarah Young

LONDON (Reuters) - The cruise ship industry faces an uphill task to restore confidence among customers spooked by spectacular images of the stricken Costa Concordia flipped on its side and could suffer a major hit to sales in a key booking period.

Carnival, the owner of the cruise ship that capsized off Italy's west coast, said it alone expected to take a hit of around $90 million from Friday's accident just as a result of the boat being out of use for the rest of the year.

"The long-term consequences for the cruise industry could be significant. This accident could have a significant impact in terms of trading because we're in the peak-season for reservations," said Natixis analyst Geoffrey d'Halluin.

The first quarter is a critical booking period across the tourism industry and the images are unlikely to encourage holidaymakers already facing tough economic headwinds to opt for a cruise.

"I think it's going to be horrid, short term," Numis analyst Wyn Ellis told Reuters. "There will be a definite short-term impact because it's a key booking period and many people will be put off cruising in the short term."

However, Ellis believes the industry will recover in the long-term.

"I think people have very short memories. This summer's going to be awful but in terms of the long term valuations and the fundamentals of the industry I think the impact will be marginal," he said.

Carnival had already warned in December that it had lowered its prices for 2012 cruises because of weaker demand in Europe as the euro zone crisis took its toll.   Continued...