Cruise Operators Pin Hopes on Chinese Tourists and Technology

Carnival and Royal Caribbean shares rose strongly in 2017 and, while there are risks, the longer-term outlook for the sector looks bright

Jaime M. Katz, CFA 11 January, 2018 | 1:02PM
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Carnival Cruise Ship

Listed cruise companies had a strong year in 2017, boosted by favourable economic conditions and upgrades to shipping fleets. Shares in the world’s biggest operator, Carnival (CCL) – which is listed in London and New York – hit a record high in 2017. In 2017, the share price surged 30% to £53.60, before dropping back towards the end of the year. Shares in Royal Caribbean (RCL) almost doubled from September 2016 to late 2017. From a low of $6 just after the financial crisis, the shares are now trading at $123. Morningstar equity analysts believe that profit expansion can continue in the cruise sector given the operators' willingness to adapt new technology.

There are risks attached to 2018 forecasts – including a slowing of global growth, a weakening of consumer sentiment, higher fuel costs and adverse currency moves – but our long-term thesis is that North American and Chinese demand should allow ships to sail full without fail over at least the next decade.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Carnival PLC1,495.00 GBX-2.62Rating
Norwegian Cruise Line Holdings Ltd25.62 USD-1.95Rating
Royal Caribbean Group84.47 USD-1.64Rating

About Author

Jaime M. Katz, CFA  is an equity analyst for Morningstar, covering leisure and travel and retail.