The open waters have never been as inviting to landlubbers as they are right now. The Cruise Line Industry Association expects a record 27.8 million passengers to take a cruise in 2018, up from 25.8 million guests the year before. That figure has been inching higher every year for more than a decade, and with the leading cruise lines rolling out more vessels with greater capacity and more features, it's hard to see that trend reversing anytime soon. We were at just 17.8 million passengers a decade ago.   

Investors are cashing in on the cruising industry boom. The three largest cruise line operators are all publicly traded, and they all coasted to big gains in 2017. Shares of Carnival Corporation & plc (NYSE:CCL) (NYSE:CUK), Royal Caribbean Cruises (NYSE:RCL), and Norwegian Cruise Line Holdings (NASDAQ:NCLH) soared 31%, 49%, and 25%, respectively last year.

Carnival's P&O Pacific Jewel on the water.

Image source: Carnival Corporation.

Cruising has become financially accessible to more potential travelers as new ships across all price points go online.There were 449 ships in operation worldwide in 2017, and another 27 vessels are expected to make their debut in 2018. Once the turf -- nay, surf -- of well-heeled retirees, younger passengers are now enjoying the benefits of having to pack just once to visit various exotic ports-of-call. 

The top cruise line stocks just happen to be the industry's three largest players. Let's look at why Carnival, Royal Caribbean, and Norwegian Cruise Line are the top cruise line stocks that smart investors are buying without getting seasick.

Carnival

The world's largest cruise ship operator is a juggernaut that watches over several popular lines. Beyond its namesake fleet, Carnival's portfolio of 10 brands includes Princess, Holland America, and Costa. Carnival watches over 103 ships with 232,000 lower berths, visiting more than 700 ports worldwide. 

Carnival's sheer size gives it some interesting advantages. It creates cruising-themed travel shows that it pushes to major stateside networks during off-peak hours as well as a recent deal with Univision for Spanish-language programming. Carnival's also a player in wearable tech with the rollout last year of Ocean, a Bluetooth-enhanced device for passengers that helps them with everything from mobile ordering of food and beverages to customizing cabin settings. 

Carnival is coming off of back-to-back quarters of 8.2% revenue growth, something that may not seem all that impressive until you realize that it's been more than six years since Carnival grew its top line by 8% or better. When steady growth accelerates, investors start to pay attention. 

The bottom line was a different story. Carnival clocked in with lower earnings in its latest quarter as a result of unrealized gains and losses on fuel derivatives and other net charges. Fuel is a major expense item for cruise lines, and attempting to hedge out that volatility still creates lumpy numbers. Back those charges out, and Carnival's adjusted earnings per share still declined 6% for the period. Things are still better than they seem. It was a busy hurricane season, and Carnival estimates that profits would've climbed modestly for the quarter that ended in November if it wasn't for the devastating windstorms.  

A key driver in the buy thesis for the cruising industry is that folks are willing to pay more to get on board, and they're spending more once on board. Gross revenue yield -- the top metric for measuring a cruise line's health that breaks down to revenue per available lower berth day -- is on the rise. Gross revenue yields at Carnival rose 6.8% in its latest quarter, with net revenue yields climbing 4.2% on a constant currency basis. 

The year ahead looks promising. Carnival said during its December earnings call that bookings are higher than they were a year earlier, with passengers paying slightly higher rates. It sees gross revenue yields remaining positive in 2018. The bottom line should also go along for the bon voyage, as easing gross cruise costs will help prop up adjusted earnings to between $4 and $4.30 a share in fiscal 2018, up from $3.82 a share a year earlier. It expects to add four new vessels to its fleet this year, including the first of the seven next-generation ships that will be fully powered by liquefied natural gas.

The zipline experience in Labadee with a Royal Caribbean ship in the distance.

Image source: Royal Caribbean Cruises.

Royal Caribbean

The industry's second largest operator is Royal Caribbean. Its fleet consists of 49 ships across its Royal Caribbean, Celebrity, and Azamara brands as well as ownership stakes in three different international cruise lines. 

Royal Caribbean hit fresh all-time highs last week after posting strong financial reports. Revenue rose 5% for its latest quarter, and unlike Carnival, Royal Caribbean actually posted an increase in both reported and adjusted earnings per share. Gross and net revenue yields were up 4.1% and 3.9%, respectively. Royal Caribbean has now come through with eight consecutive years of positive yields.

Royal Caribbean announced last week that it's rewarding its 66,000 employees with a bonus after achieving its three-year goal of doubling its earnings per share and recording a double-digit return on invested capital. They will receive 5% of their 2017 salary as a stock bonus that will vest over the next three years.

Looking out to 2018, Royal Caribbean expects to add three more ships to its fleet. It's eyeing adjusted earnings per share of $8.55 to $8.75, up from $7.53 in 2017

Norwegian Cruise Line

NCL is the smallest of the three giants. Its empire consists of 25 ships offering 50,400 berths across its Norwegian, Oceania, and Regent Seven Seas brands. There are advantages to being nimble. It was NCL that introduced Freestyle Dining, freeing passengers to eat when and where they choose at any time.

Norwegian Cruise Line reports later this month, but all signs point to another strong report out of the group. It's been growing its revenue faster than its two larger peers, and its guidance back in November was calling for another period of growing revenue, earnings, and revenue yields. 

Unlike Carnival with its 2.5% yield, and Royal Caribbean with its 1.8% payout, Norwegian Cruise Line is investing all of its profits back into the company. The valuations are roughly the same for all three players. Carnival, Royal Caribbean, and NCL are fetching a reasonable 13 to 14 times this new year's projected earnings. The industry's attractive, and these hot stocks will continue to be hot unless the economy or travel trends start sailing in the wrong direction.

Rick Munarriz owns shares of Royal Caribbean. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.