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Carnival Corporation (CCL), Royal Caribbean Cruises Ltd. (RCL): Why Cruise Lines Face Spectacular Risks

A More Diversified Option

Investors looking for another option in this space might consider Disney. The company is best known for its media assets and amusement parks, however it also owns a highly popular cruise line. The company’s cruise operations get lumped in with the results of its amusement parks. However, like all things Disney, the company takes a different approach to the industry.

Disney’s cruises tend to be more expensive than competitors’, and driven more by customer service, a Disney hallmark. Additionally, they are geared heavily toward family vacationing. These facts, coupled with the company’s liberal use of its storied characters, truly sets Disney cruises apart from those of Carnival or Royal Caribbean. Moreover, because Disney isn’t usually associated with the cruise industry, disasters don’t usually have much of an impact on the company’s image.

While the Disney fleet is tiny compared to the two largest players, it should benefit from industry growth without the inherent risks. That said, Disney shares are usually priced at a premium because of its high operating standards and impressive business performance, and it isn’t a direct play on the space. That extra diversification, however, could be a good thing.

Bigger Concerns
There are, of course, bigger concerns in the cruise industry, most notably the cost of fuel and employees. For those with international exposure, geopolitical issues can also pose issues. The economy is always a concern, as customers are less likely to spend thousands on anything when incomes are tight. So investors need to keep a big picture view of the space when considering an investment.

Big news items like a disabled ship, however, can have long-lasting emotional impacts. And two years with high profile problems starts to look like a trend. That could be an opportunity for investors to get into these stocks.

The article Why Cruise Lines Face Spectacular Risks originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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