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Another Cruise Industry Embarassment Thanks to Royal Caribbean

Just when you thought the cruise industry had enough embarrassing PR disasters in 2013, here comes another. On Monday, Royal Caribbean (NYSE: RCL) vessel, Grandeur of the Seas caught fire causing extensive damage to the stern of the ship. This wasn’t one of those small fires that doesn’t show up on press pictures. This was big. (See an image here.)

The fire was so extensive that passengers had to report to their muster stations and remain there for four hours until the fire was extinguished. No injuries were reported and the ship never lost power. It docked in the Bahamas under its own power and passengers were issued a full refund, a voucher for a future cruise, and a chartered flight back to Baltimore, the ship’s departing port.

2013 has seen a bumper crop of cruise ship incidents. The Carnival (NYSE: CCL) Triumph, which left passengers stranded at sea, was the most visible of these events but other mechanical difficulties as well as widespread sickness has left the industry with a damaged reputation in the eyes of potential patrons. Carnival was forced to lower fares to attract customers but the entire industry has felt the pain.

Despite a less than stellar 2013, the industry has grown at an average rate of 7.4 percent since 1980 turning it into a multi-billion dollar industry with larger and more impressive ships added each year in what has become an arms race of sorts to unveil the biggest and most advanced ship.

As of mid-day Tuesday, Royal Caribbean was trading down 1.5 percent while Carnival was up 0.73 percent.

Disclaimer: At the time of this writing, Tim Parker had no position in any of the equities mentioned.

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