As cruise companies gather steam, are their shares doing the same?

When cruise ships were forced to drift empty and aimless for months in 2020, some predicted the end of the industry. Now barely five years have gone by and more passengers are getting on board than ever. How have these companies that lost up to 80% of their market value managed to keep afloat? And more importantly, is this the time to invest? Let’s dive into the figures, opportunities and risks.

Cruise ships have truly undergone a transformation over the past 50 years. Whereas cruises used to be reserved for wealthy retirees in captain’s hats, they now offer package holidays for all ages. In the ’70s and ’80s TV series The Love Boat brought cruise ship glamour into people’s living rooms, resulting in a turning point for the industry. Suddenly, everyone was dreaming of setting off on a cruise of their own. In 1980, the first year of data provided by the Cruise Lines International Association, there were 1.4 million cruise passengers. That number immediately began to grow due to the influence of The Love Boat. By now, over 30 million passengers annually board megaships the size of apartment buildings, with decks featuring water parks, shopping centres and even roller coasters. Cruise lines have even acquired their own tropical islands to offer their passengers a private paradise.

(Tax) paradise on earth

That paradise extends beyond the passengers themselves. Cruise companies also enjoy their own version of a (tax) paradise on earth. They often sail underforeign flags and, thanks to tax optimisation, pass on remarkably low percentages to the authorities. Workers hail mainly from low-wage countries, keeping staff costs under control as well. The industry has also become greener in recent years. The huge floating hotels used to be known for their pollution, going through tonnes of heavy fuel oil. Now the wind has changed. Ships are much more economical and sustainable these days. Some have even replaced diesel with LNG instead of diesel and use advanced water purification systems.

Weathering the storm: the industry post-Covid

Over the past 50 years, not all has been sunshine and roses, of course. The cruise industry barely escaped being capsized by Covid in 2020. Cruises couldn’t go anywhere for months and ships floated emptily, bereft of passengers. The three biggest cruise lines, Carnival, Royal Caribbean and Norwegian, borrowed billions and issued additional shares to keep from going under. Many investors feared the worst and dumped their shares, causing these to plummet by as much as -80% in value. Once everything started up again in 2021, however, that all changed. Cruises are more popular than ever and the corporations’ financial recovery is underway.

Record-breaking bookings

Traditionally, the most important booking period for cruises is between Christmas and March. In the winter of 2024-2025, the season was off to an especially impressive start. Cruise lines were recording more bookings than ever before. According to figures quoted in the Wall Street Journal, bookings for 2025 cruises were already 10-15% higher than normal around December. This is noteworthy, as the cruise capacity (numbers of available beds) had only increased by around 5%. In other words, cruises are filling up faster than they used to. Customers are also booking further in advance, meaning cruise lines have less of a need to resort to last-minute discounts. Instead of lowering prices to fill cabins, they prefer to entice passengers with attractive extras such as beverage packages, specialty dining or on-board credit. As a result of all this, the sector’s pricing power has increased.

Recovering margins

With cruises fully booked again and customers even willing to pay for extras such as shore excursions or beverage packages in advance, plenty of cash is flowing in before ships ever leave the port. For example, Carnival reported a record USD 6.8 billion in advance payments by customers at the end of Q3 2024. That’s an impressive 40% increase over five years earlier, just before the industry was hit by Covid. This prospect of guaranteed turnover acts as a strong financial buffer for the cruise lines. In 2024, the three biggest cruise lines combined generated over USD 4 billion in free cash flow. That cash is being eagerly applied to paying off all their Covid debt. In 2023, Carnival made debt payments of USD 6 billion, and Royal Caribbean even managed to regain an investment grade credit rating. The worst financial woes appear to be past.

Prospective

Cruise lines are also investing in the future. They have placed orders for a wave of enormous new ships, with Royal Caribbean launching the largest yet last year (Icon of the Seas, with room for more than 7,000 passengers). Entertainment giant Disney will be expanding its cruise fleet as well. Nevertheless, that expansion in capacity will take some time to achieve, as cruise ships can take years to build. This means the current market balance remains favourable, with high demand and limited supply; good for occupancy rates and ticket prices. Even if the economy slows down, analysts believe cruises may remain relatively stable. Historically, the industry has shown surprising resilience. During the 2008 financial crisis, most cruise lines remained profitable despite big discounts and falling share prices.

Examining three big players

The cruise industry is dominated by a handful of large groups. Let’s take a look at the three biggest listed cruise companies.

1. Carnival Corporation & plc (CCL)

Profile: Carnival is the world’s largest cruise group, with a fleet of more than 90 ships across nine brands. This American corporation has dual listings in the US and London and owns various well-known cruise lines such as Carnival Cruise Line, Princess Cruises, Holland America Line, Costa Cruises and Cunard. Carnival mainly serves the mainstream segment: affordable, fun cruises for couples, families and friend groups. Carnival is known for its ‘fun ships’, huge ships packed with entertainment options, swimming pools and buffet dining. Geographically, Carnival is very diverse, with market-leading positions in North America and Europe and ships all over the world.

Price: Carnival shares were hit hard in 2020 and have not yet made it back to pre-pandemic levels. Prices were close to USD 50 in late 2019 and are currently around USD 19 (situation on 31 March 2025). Nevertheless, Carnival has seen a strong recovery, with share prices rising by 130% in 2023 and by another 34% in 2024. Investors are pricing in a gradual recovery in profitability. In 2024, Carnival had record sales of USD 25 billion, actually exceeding pre-pandemic levels. The priority now is to keep reducing the enormous mountain of debt built up during Covid. The company’s net debt is still very high at USD 26 billion, around 4 to 5 times its annual EBITDA.

Valuation: Following the past two years’ rally, the price for Carnival still feels reasonable. Its price/earnings ratio for the next 12 months (Forward P/E) is 10.8 (situation on 31 March 2025).

2. Royal Caribbean Group (RCL)

Profile: Royal Caribbean is the second largest cruise operator in the world, with a market value more than twice that of Carnival. The group is listed in New York and is known for innovative megaships and a slightly more premium offer. Royal Caribbean Group has three main lines: Royal Caribbean International (the group’s largest line, with iconic giant ships such as the Oasis class and the new Icon of the Seas), Celebrity Cruises (premium cruises) and Silversea (ultra-luxury expedition cruises). In total, the group operates a global fleet of around 60+ ships, covering all continents. It has a reputation as an innovator in the industry, with ships full of attractions appealing to families and young adults.

Price: Royal Caribbean came out of the Covid crisis surprisingly well. Although RCL, too, borrowed heavily in 2020-2021, it returned to profitability faster than its competitors. It launched multiple new ships in 2022-2023, which were immediate hits and helped contribute to record sales. RCL shares have also recovered well, from USD 20 in the spring of 2020 to around USD 205 currently (situation on 31 March 2025). While the euphoria has settled down a bit due to general economic concerns in recent months, RCL remains the strongest contender in the cruise class. Financially, the group is in the lead, and its debt ratio has declined far enough that RCL’s debt recently regained its Investment Grade rating. Royal Caribbean is also the first big cruise line to have resumed dividend payments post-Covid.

Valuation: Royal Caribbean is currently the most expensive of the three major cruise stocks, but investors are paying for quality. Its price/earnings ratio for the next 12 months (Forward P/E) is 13.9 (situation on 31 March 2025).

3. Norwegian Cruise Line Holdings (NCLH)

Profile: Norwegian Cruise Line Holdings is the third largest corporation in the industry. This Miami-based group has three cruise brands: Norwegian Cruise Line (its main brand, with medium to large ships and an informal Freestyle Cruising formula), Oceania Cruises (high-end mid-size ships, strong culinary offer) and Regent Seven Seas Cruises (ultra-luxury all-inclusive cruises). The group has a fleet of more than 30 ships in total. Norwegian is slightly smaller in scale than Carnival and RCL and serves a mix of market segments, from mainstream to upper-premium.

Price: Of the big three, Norwegian shares have recovered least. Before the pandemic, NCLH shares were trading at around USD 55-60. Currently, they stand at not quite USD 20, not even half their former value (situation on 31 March 2025). Norwegian found the pandemic heavy going, partly because as a smaller player, its buffer was also lower. Prices dropped below USD 10 in 2020, and although they recovered well in 2023 (+64% price increase), confidence remains shaky. Investors are concerned about Norwegian’s high debt and fragile finances. At the end of 2024, the company’s total debt amounted to around USD 13 billion. With just USD 1.4 billion in equity, this creates a debt-to-equity ratio of nearly 10:1. On a more positive note, Norwegian managed to regain its profitability in 2024 with a record turnover of USD 9.5 billion.

Valuation: Norwegian is trading at the lowest multiple in the industry. Its price/earnings ratio for the next 12 months (Forward P/E) is 9.2 (situation on 31 March 2025).

What ways are there to invest in cruise lines?

If you see a bright future for the cruise industry, there are several ways you can invest. Basically, there are two approaches: you can buy shares for specific cruise lines directly, or invest indirectly via a sector tracker or fund.

• Individual shares: You can decide to buy one or several specific cruise shares. If these turn out to be winners, your returns will be higher. You also get the right to vote directly as a shareholder and, as mentioned above, may qualify for some nice benefits. The disadvantage is that you are taking a concentrated position.
• Sector ETF or fund: If you prefer to spread your risk, you can invest in a broader tourism or leisure-oriented fund that also includes cruise lines. There are now ETFs that focus on the travel and leisure industry, or even specifically on ‘Travel & Leisure’ businesses. In addition to cruise lines, these often include hotel chains, amusement parks, booking platforms, airlines, etc. With this type of tracker, you are investing indirectly in a variety of shares in that industry, so it won’t matter as much if an individual cruise line’s shares drop in value. The potential returns will be less extreme. You miss out on the big outliers, but the downsides are also smaller.

Whatever approach you choose, keep in mind that the cruise business is a cyclical consumer industry. It is rarely wise to put all your eggs in one basket. Diversification across multiple industries and regions is always a good idea. If you are convinced of the cruise industry’s potential, you may want to build up a position, possibly buying in stages to spread your timing risk. That way you can avoid investing it all just before the next storm hits.

Before investing, be sure to read up on financial instruments’ main characteristics and risks.

Conclusion: are cruise shares worth investing in?

The cruise industry has been making an impressive comeback. After weathering some major storms, cruise lines are back in calmer waters, with plenty of passengers and growing margins. The basics are looking good: demand for cruises is growing, prices remain competitive and the big players are once again generating attractive cash flows.

It still pays to remain cautious. The past year’s rallies mean prices already take a lot of this good news into account. Cruise shares are no one-way ticket to the moon. The industry remains affected by turbulent macroeconomic seas and specific risks. The high debt levels from the pandemic era are a reminder that these companies can be vulnerable if the tide turns. Another recession or falling consumer confidence could put pressure on bookings. In the end, cruises remain a luxury item. In addition, two of the three market leaders are still trading well below their pre-Covid share prices, a sign that investors remain concerned by sky-high debt levels. In short, while the industry is currently speeding ahead again, it is not immune to headwinds.

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