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Cruise stocks sink on recession fears

Posted by Anita Dunham-Potter On January - 11 - 2008

CruisingSeatrade Insider is reporting cruise shares going the way of Davy Jones Locker amid recession fears. Today, cruise shares sank to 52-week lows given the recent headlines touting troubling economic news. Wall Street’s largest investment bank, Goldman Sachs, says it expects a U.S. recession in 2008 and had advised fund managers to “underweight” consumer discretionary stocks – that being cruise lines, hotels and airlines.

Indeed, recession fears have had a bearish effect on cruise line stocks, particularly on the two largest cruise lines. A year ago, Carnival shares were at $52.73. Today, those shares were down to $39.56. Conversely, a year ago, Royal Caribbean shares were at $46.36. Today, those shares were down to $34.47. However, the hardest hit cruise stock is Ambassadors International, operators of Majestic American Line and Windstar Cruises. Earlier this year Ambassadors was at $47.86. Today, it has sunk to $10.26.

Bear market aside, the current wave sales period could be very telling for the cruise industry. Unfortunately, ExpertCruiser feels that it could be a very bleak time for cruise lines. Just this week ExpertCruiser has been inundated with more e-mails and brochures than usual.  All ad campaigns are pushing huge cruise savings, tellingly the majority of mailings are coming from from cruise lines that cater to the high end markets. A recent mailing on Oceania offers abundant 2-for-1 deals and free airfare, Majestic America Line is offering free roundtrip airfare on many of of its itineraries, and luxury operator Crystal Cruises is promoting 10 percent cuts on all summer European sailings. The company says it is to offset the high euro, but since Crystal caters to wealthier clientele this seems odd.

Clearly, things are not very rosy even at the top of the food chain and that is a sign the economy is about to play a huge role in cruise line profitability.  Still, for consumers that have been savvy with their money and are able to take cruise vacations the bargains could be bountiful with offers they cannot refuse.

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