Set Sail With These Undervalued Cruise Lines
We see value in cruise companies as the market is unduly concerned about the impact of new ship deployments.
Jaime Katz: We continue to believe that long-term supply side concerns surrounding new ship deployments in the cruise industry remain overblown. Rather, we believe demand-side growth should more than offset supply increases ahead, thanks to ongoing efforts to tap into new cruisers--which tend to become repeat cruisers. Through entry into new markets, like luxury--which Royal has pursued with its Silversea partnership--or millennials--with its refurbishment of the Mariner of the Seas--Royal has sought to tap into new demographic segments that can become lifetime loyalists to the brand.
We remain impressed that the major cruise operators continue to differentiate their operations by segmenting offerings to cater to specific consumer cohorts rather than a single total addressable global market, protecting their individual brand equity. We think increased target market segmentation and geographic diversification should alleviate concerns over the supply of cruise capacity set to arrive in the next five years, ensuring that new ships don't merely cater to the same existing customers.
Jaime M. Katz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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