The cruise sector is expected to beat last year's performance in 2018 on the backs of higher capacity and more passenger bookings, analysts with UBS say.
"As we look at the next 12 months, we see measured supply growth, combined with better booked position for 2018 vs. 2017 and early days of improved technology to enhance ticket and on-board revenue," analyst Robin Farley said in a note to clients.
"These dynamics seem to position the cruise stocks favorably ahead of the '18 wave season," she added.
Analysts Arpine Kocharyan and Raffi Bhardwaj contributed to the report.
Farley said UBS expects the cruise lines will have another year of positive yield growth with Carnival, Royal Caribbean and Norwegian Cruise Line having more bookings at higher prices than the same time last year.
She also expects cruiseship owners will "lap" last year's hurricane impacts in the second half of this year and see a more than 2% cruise return on investment over 2017 due to factors such as bookings.
"Cruise sector may also benefit from demand for the Caribbean in a record cold winter by offering a way to visit Caribbean beaches without having to worry about some infrastructure on islands that are not fully operational," she wrote.
Cruise supply for this year is forecast to grow more than 6%, even with 2017's growth rate of 5% to 6%.
UBS is giving "buy" ratings to Carnival and Royal Caribbean shares and rating Norwegian Cruise Line at "neutral."
All three are expected to have slightly higher expenses in 2018, in great part due to an increase in drydock days.
