Tragedy deals near-term blow to cruise industry

Wed Jan 18, 2012 11:44am EST
 
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By Martinne Geller

NEW YORK (Reuters) - Last week's fatal Italian cruise accident could wipe out a good chunk of Carnival Corp & Plc's 2012 profits, and the cruise operator could risk more long-term damage without a stronger public response to the crisis, Wall Street analysts and public relations experts said.

The event could also bruise a $30 billion global industry already grappling with an uncertain economy during its biggest booking month of the year.

The captain of the ship, the Costa Concordia, is under house arrest, accused of multiple manslaughter, causing a shipwreck and abandoning the ship.

"This affects the whole industry. If you see a cruise ship upside-down in the water, and you see people talking about their harrowing escape, that's going to turn off a lot of people," said Levin Stein, CEO of CruiseCompete.com, a website where travel agents compete to offer the best deal on cruises.

A drop in demand for cruise vacations would quickly lead to lower prices, Stein said, since operators hate to sail with empty cabins.

Barclays Capital analyst Felicia Hendrix lowered her 2012 earnings estimate for Carnival by 29 percent to $1.90 per share and her 2013 estimate by 26 percent to $2.25 per share.

Hendrix said it will be some time before Wall Street has any clarity on the financial impact of any resulting loss of demand, commensurate promotions, public relations efforts or future safety measures.

"In light of the uncertainty, we believe it is prudent to lower the bar," Hendrix said.   Continued...