Will Carnival tragedy damage cruise industry?

Markets may be swayed by fear and hope, but when it comes to events like this, they just aren't sentimental.

By The Fiscal Times Jan 18, 2012 12:54PM
CruiseBy Suzanne McGee, The Fiscal Times

Like the rest of the world, investors and traders may have gasped in horror at the images of one of Carnival Cruise Lines' (CCL) largest ships lying on its side along the Italian coast after its captain allegedly sailed too close to the rocks. And like the rest of the world, investors and traders may have recoiled at the news of the victims who couldn't get off the boat in a timely manner.

But that's not why investors and traders spent Tuesday busily dumping Carnival stock, which lost nearly 14%.

Markets may be swayed by fear and hope, but when it comes to events like the capsizing of the Costa Concordia, they just aren't sentimental. Rather, it's the fact that the cruise ship industry -- already struggling from the economic woes in Europe and tremendous volatility in fuel prices, which is one of its major nonfixed costs -- has been dealt a nasty blow at the time of year it can least afford more bad news.

Anywhere from a third to half of all cruises are sold to winter-weary travelers between January and the end of March. The accident, however bizarre and exceptional the cause may prove to be, is a stark reminder that the oceans aren't always safe and controllable.

Given that the cruise industry is focused on convincing the 80% or so of Americans who have yet to take a cruise to stick their toes in the water and book themselves onto a five-day Mediterranean jaunt, this is the worst kind of publicity imaginable. Even the implicit promises cruises offer -- the fact that travelers will be on board a ship with people just like them and land excursions will be carefully controlled, that cruises will often be all-inclusive with few extra charges to budget for and that cruises are often more child-friendly than other affordable holiday options -- can't outweigh the drama of a possible sinking.

For Carnival, in particular, to fill its ships going forward is likely to require heavy discounting, at least for a while -- a strategy that will eat into the company's profits. The risks for rivals like Royal Caribbean Cruises (RCL), whose stock price fell 6% Tuesday, aren't any different than they have ever been.

Carnival is blaming the captain for the fatal error, but the fact that he may have felt he could deviate from the course may also be seen as an indictment, albeit indirectly, of the company itself. If Carnival's rivals can avoid having to discount their own offerings and can emphasize their safety track records, their stock prices may rebound more rapidly.

As long as the pictures continue to hit every television screen and computer monitor around Europe, North America, Japan and Australia, however, don't look for Royal Caribbean's stock to bounce back. But as the focus shifts slowly to an investigation of what caused this accident aboard a ship owned by a different company, and if  Royal Caribbean manages to keep its cabins full of cruisers willing to pay close to normal rates for their berths, the shares may begin to recover more rapidly than Carnival's.

Investors hoping for a quick turnaround in Carnival, however, may find themselves waiting for quite some time.

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22Comments
Jan 18, 2012 3:29PM
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I am a frequent cruise customer (27 cruises to be exact & I have been on all the different lines) and this accident will not change my mind about cruise ships.  I feel safer on this than flying 35,000 feet up in the air on a plane...at least you have a chance for survival if the ship is going down as the numbers tell the story (although tragic) I believe the count was at 11 dead out of over 4,200 people.  If a plane is going down escape is virtually impossible & usually the 200 plus people are killed instantly when the plane hits the ground.  Your odds of living are better on the ship!
Jan 18, 2012 3:37PM
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When is the media going to learn the difference between Carnival Cruise Lines and Carnival Corp.  The Concordia is a Costa ship not a Carnival ship.  Carnival Corp. owns 7 or 8 lines, I believe, but each is operated on its own.  Seems to me they would do some research before making statements. 
Jan 18, 2012 4:37PM
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Well my thoughts are how many cruise ships do you hear about sinking or lying on its side???  how many times a year do you hear about an airplane crashing and killing hundreds of people or even how many accidents do you see on the road in a week that someone has been killed in??  Why does everyone freak out over this why let it stop you from enjoying life??  I have never been on a cruise but I want to go and this is not going to change my mind about it either. 

Jan 18, 2012 5:45PM
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I feel so sorry for all of those passengers who were lost or those who got hurt.  This should never have happened, and the blame is to be placed squarely at this poor excuse for a Captain's feet.  He deviated from approved procedures in order to please a fellow crew member, who by the way, must be feeling like sh*t!  I hope the Italian authorities throw the book at him.  He should no longer be allowed to serve in any capacity, on board any ship.

 

Having said all of that, I will not allow this unfortunate incident to prevent me from enjoying a cruise.  I took my first in 2010 on a Carnival cruise ship, and it was great!  I had a blast and the time went by way too fast for me; that's why my brother, sister, cousin and fiancee are planning another this April.  I'm certain that because of this accident, everyone will be extra careful and maybe pay a bit more attention when they hold the emergency evacuation drill.  The pleasure that such a trip brings, should not be dimmed by stupidity, recklessness or other foolishness.  What's the point?  A great time can be had by all, if we all use a bit of common sense, and watch out for each other.  'Nuff said!

Jan 18, 2012 6:52PM
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Cruising is still the best vacation/entertainment value for your money, if you know how to shop around. The safety ratio is still higher than the airline industry. In fact more people die in car accidents than cruising. So relax and take a cruise.

Jan 18, 2012 8:02PM
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All the people who die in car accidents every day doesn't stop me from driving. All the people who die every day in house fires doesn't stop me from living in a house. When a plane crashes it doesn't stop me from flying. When ship sinks and there's loss of life it's not going to stop me from going on a cruise. All these things are tragic and I feel for the victims and their families however I can't stop living my life because of them. In fact I'm on my next cruise (my 9th) in a week and half and not only do I not have any reservations about getting on that ship, I can't wait to get there!!
Jan 18, 2012 5:29PM
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Yes, it is a tragedy, but Costa isn't Carnival.  Feel very safe crusing on Carnival, RCI and Celebrity.  Can't believe they waited till the second day to hold a muster drill.  When you go to one - PAY ATTENTION - it would have possibly prevented some of the confusion.  It is safer crusing than flying or driving.  They aren't booze fests and food fests if that's not what you are looking for.  We go for the experience of seeing new places and meeting new people - which is entirely your option.  If this brings the prices down for a while, all the better for those of us that love to cruise, can't wait for the next one.  This is very isolated and doesn't scare me off in the least.  Praying for all those involved.
Jan 18, 2012 5:17PM
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Did you see the size of the boulder inside the bottom of the ship? Unbelievable!

 

Jan 18, 2012 5:41PM
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My family and i have traveled with Royal caribbean many times and have found their cruise line to be the best in the world for family travel. We have always had a mustard {however it is spelled} drill to inform us of procedure in case of emergency as soon as we are all on board. From what i have read about this tragedy the cruise line had not done this drill. What an unfortunate mistake.
Jan 18, 2012 5:52PM
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The Safety drills are the done before the ship sails, period.  That is an industry wide standard here.  Shame on the cruise line for allowing this not to happen.  And this is a Carnival ship.

Jan 18, 2012 6:01PM
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RCI and Carnival have yet to prove that the entire crew plus passengers can be safely evacuated in 30 minutes of the abandon ship order....why doesn't the insurance carriers of their liability require this?
Jan 18, 2012 5:34PM
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I have been on several cruises and have enjoyed them all.  But, since I have a baby now and cruises charge just as much for a baby as they do for an adult, I won't be going on any more of them for a long time, just because of the cost.  But, if they have to give deep discounts because of this incident, I may reconsider.  I wouldn't go on a Costa Cruise though, even with a deep discount.
Jan 18, 2012 5:48PM
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Gene Joy and actorboy you guys related?? Kinda dull folks, huh?

I actually lost pounds on my last cruise.

I feel totally safe on RCI.

Jan 18, 2012 7:05PM
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MS Costa Concordia is a Concordia -class cruise ship owned and operated by Costa Cruises, a subsidiary of British-American Carnival Corporation & Plc, (Plc is an abbreviation for privately leased company)

Jan 18, 2012 7:10PM
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According to the Carnival Corp website...

 

Carnival Corporation & plc is a global cruise company and one of the largest vacation companies in the world. Our portfolio of leading cruise brands includes Carnival Cruise Lines, Holland America Line, Princess Cruises and Seabourn in North America; P&O Cruises, and Cunard Line in the United Kingdom; AIDA in Germany; Costa Cruises in Southern Europe; Iberocruceros in Spain; and P&O Cruises in Australia.

 

That's where they are getting Carnival link.  Research before you make dumba$$ posts...

Jan 18, 2012 8:52PM
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Everyone needs to keep cruising. This was a Captain error not a ship error. Unfortunately people died and I find it hard to believe they didn't have the safety meeting before they left port. If it is true that they didn't do one then they have a big problem on hand. Now think about this. If you were on this ship when it hit and had children or families you would run around looking for them before you got off the ship. Obviously that it why it took so long to get people off. Also when the boat is on it's side that would make it difficult as well. Our prayers go out to all the families that lost love ones.
Jan 19, 2012 2:58AM
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Scammed.........Please note your brain is off course.
Jan 18, 2012 9:06PM
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I have taken over 100 Costa cruises. No, I'm not rich. I used to work as an entertainer aboard their ships. Cruising is not only the most enjoyable and least expensive way to vacation, it is also the safest. It is a shame that something stupid like this can hurt an industry already in trouble.

Jan 18, 2012 6:26PM
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Where are they getting Carnival Cruise lines out of costa cruise lines....?
Jan 18, 2012 8:50PM
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cruise lines are greedy people. They are out to scam who ever they can. If you can't see it you deserve to go down with them.
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