Royally Grounded

The seas are choppy at Royal Caribbean Cruises (NYSE: RCL  ) .

The cruise ship operator posted uninspiring third-quarter results, and then -- faster than an onboard bingo caller can belt out "B-9" -- spooked investors by forecasting a loss for the fourth quarter.

The third quarter was a dud. Revenue fell 15% to $1.8 billion, as the crummy economy and H1N1 fears kept bookings low and cheap. Welcome cost cuts weren't enough to offset crunched margins, which delivered a 44% slide in net income.

Earning $1.07 a share may seem fine for three months of work by a company whose stock is trading in the teens. But this is also the company's seasonally potent summer period, when families and college students bump retirees from the marked-down berths they fill during the rest of the year.

In fact, the company expects to earn far less for all of 2009 than it did during the third quarter. It estimates a profit of $0.70 a share for the year, which leads us to the projection of a $0.05-a-share deficit for next quarter. Analysts had been holding out for a small profit.

Royal Carribean won't look back as it continues to flesh out its fleet. It took delivery of the gargantuan Oasis of the Seas last week; this ship is so big that it offers an urban park the size of a football field on board.

The industry is in an arms race. Norwegian Cruise Line's Epic debuts next year, complete with traveling Blue Man Group and Second City shows. Disney's (NYSE: DIS  ) new boat will feature a water coaster when it sets sail in two years. Market leader Carnival (NYSE: CCL  ) also continues to raise the stakes with every new shipyard addition.

Greater capacity and more thrills should grow the cruising audience. This will be great news for Steiner Leisure (Nasdaq: STNR  ) , the company that manages the spas for most of the larger ships. It also bodes well for Shuffle Master (Nasdaq: SHFL  ) , International Game Technology (NYSE: IGT  ) , and other companies that provide gaming equipment for the floating casinos.

However, one has to wonder what will become of the older ships. For now, they are simply sent off to smaller ports or on shorter itineraries. That's the right approach, but will a Royal Carribean fan settle for the trademark rock wall after a zipline ride on Oasis? Will Norwegian Cruise fans crave Epic's Cirque-like dinner theater experience on smaller ships in the fleet?

Reinvention is important. But when even Royal Carribean is telling investors to expect a loss during the quarter in which Oasis of the Seas makes its debut, it's time to worry.

What do you think of the cruising industry as an investment? Have any cool cruise-ship stories to share? Let the comment box below be your cruise director.