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.
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.
- Photos: Costa Concordia runs aground
- 6 die on Italian cruise ship
- Investor alert: Beware eurozone fire sale
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.
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!
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.
Did you see the size of the boulder inside the bottom of the ship? Unbelievable!
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.
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.
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)
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...
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.
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