Cruising Home

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3 mins. to read
Cruising Home

Nowadays you don’t have to join the Navy to see the world. In fact joining the Navy might never have been such a great way to see the world, unless you wanted to see exotic places before they got blown to smithereens. Or you enjoyed seeing native peoples being subjugated. Now, of course, that’s all changed. You can go and see exotic places after they’ve been rebuilt (for tourism) and see the native people employed to serve you as a tourist. Tourism being a notoriously poorly paid industry to work in. Visitors, especially Americans, in turn buy shoddily made pastiches of stylised local culture, and we all pretend the people making them are somehow traditional artisans, preserving some age old skill, and actually have real jobs. In reality, they’re more like what your local authority does with pointless invented administration jobs. It’s all about giving the illusion people have some sort of self-determination when of course they don’t.

So it’s all turned out nice again. I’ve been on lots of cruise ships. They used to be quite full of Americans. At least the big ships. I did go on a Costa Mediterranean cruise which I seem to recall was very French. But out on the high seas it was all Yanks. That has changed a bit nowadays. With the Baby Boomers retiring everywhere, now only 50% of cruisers are American. You’ll see all sorts out there now, from Russians to South Americans. And it’s a really great way to travel. With many ships now capable of carrying over 5,000 passengers you don’t have to worry about sea-sickness. You can easily forget you’re on a ship at all.

It’s a great way to travel. Each port has your hotel in it – the ship. And it’s excellent value. You can get cruising for as little as $100 per day or even less. That includes most things, and things that aren’t included, like alcohol, are dirt cheap anyway since there’s no duty on them. I predicted that cruise lines would be a good investment after the credit crisis. It seemed obvious to me that one thing people wouldn’t want to give up was a holiday, most people still haven’t cruised, and it’s such a low maintenance holiday that costs less than most other ways of travelling at this standard of holiday experience.

There has been some rationalising of the industry and the two big players now are Carnival and Royal Caribbean Cruise Line, who between them own many of the other well-known brands (Holland America, P&O, Celebrity Cruises, etc). Norwegian Cruise Line is not a very close 3rd place.

The stats behind cruising are to die for. Each year passenger numbers increase, capacity increases and so do revenues. The tax bills are low, this we do know. RCCL seems to have paid none, certainly not in the last 4 years anyway, and Carnival not much more. It’s a $40bn industry globally, almost $16bn of which goes to Carnival, and even the global financial crisis didn’t manage much more than an intrinsic dent in steadily increasing revenues. Add to that we have low fuel costs at the moment with oil around $60/barrel, so one of the biggest input costs must now be below budget. We should see some windfall profits for as long as that continues to be the case.

Assuming that Carnival is getting over the Costa Concordia running aground, they could be set to see a share price rally like RCCL and Norwegian. Carnival has been performing well in terms of revenue, and their business has proven to be pretty bullet proof, even in times of economic downturn. They seem to have missed the share price rally that we see on the other charts, and in this situation
you’ll often find that a competitor in the same sector, like Carnival, will catch up. If it is poised to hit a new ATH for the first time since 2006, then we could reasonably expect to see the sort of moves we’ve seen on Norwegian and RCCL, the latter having more than doubled in the last couple of years. Unless Carnival is doing something very wrong, or they were over-priced to start with, then the potential could be great.

CCL 150702 NCLH 150702 RCL 150702

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