Carnival Cruise Lines (CCL -5.56%) and Royal Caribbean (RCL -0.72%) are the two largest competitors in the cruise line market. The cruise line industry's revenues as a whole have risen at 7.9% per year since 1980, with 20.3 million passengers having embarked on a cruise in 2013. The market value of the cruise industry was $36.2 billion in 2013. The World Travel Market, a research group, expects growth to continue well into the future. This growth means that there is definitely more money to be made in this industry, but which company is the best play for investors to gain in this market?

Short-term gains
Royal Caribbean has seen great returns from the growth of cruises as vacations. The market has noticed, and the company's share price has risen over 70% in the last two years.The company has been able to get investors excited in the past by deploying industry leading cruise ships, and 2014 should be no exception.

Rendering of the deck pool on Royal Caribbean's Quantum of the Seas.

Royal Caribbean's soon-to-be-operating Quantum of the Sea has been anticipated with much industry fan fare. The ship boasts indoor skydiving, bumper cars, a roller skating rink, and an arm with an attached passenger holding area that extends from the top of the ship to give passengers a hovering view of passing landscapes. When this ship becomes operable later this year, there is sure to be excitement for both the company and its stock. 

Carnival, on the other hand, does not have the same rosy outlook for the first half of 2014. The company was able to beat their own warnings of revenue drops for the fourth quarter of 2013, but has again warned of net losses in the first half of this year due to rising advertising expenditures and other operating costs. The company has also said that the costs of these expenses, in an attempt to grow the company's brand, will ultimately benefit the company's bottom line during the second half of the year. Current booking trends for the company support this. In the short term during the first and second quarters of this year, however, Carnival might get snubbed by investors looking for quick profits. 

Long-term value
Even though Carnival may have a lackluster first two quarters, there is plenty of reason to believe that the company will be able to grow profitable and make for a good long-term investment. First of all, Carnival already has the top market position in the industry. In its 2013 earnings release, Carnival CEO Arnold Donald stated "With over 100 ships and more than 10 million guests we have a scale advantage that cannot be replicated in this industry. We are aggressively seeking opportunities to leverage that scale to drive top line improvement and gain cost efficiencies."

The quote above is reasonable in light of the company's strong financial position. Low debt and a reasonable price are two reasons why this company should post great long term value with less risk. With a debt/equity ratio of just 0.40, Carnival takes on less risk in a down economy compared to Royal Caribbean, which has a debt/equity ratio of 0.56. Carnival also offers a better dividend yield for investors at 2.40%.

While the new Quantum of the Seas ship from Royal Caribbean looks impressive and may help the company's stock price in the short term, the stock itself already looks overvalued compared to the company's earnings. With a P/E multiple of 149, Royal Caribbean shares are trading at a much higher price than that of Carnival, which has a P/E multiple of 29. 

Is there a winner?
Both Royal Caribbean and Carnival have positive and negatives. For short-term gains, investors may want to look to Royal Caribbean to take advantage of the newfangled Quantum of the Seas. However, even though Carnival has warned of a shaky start to 2014, this is definitely a company to keep on your watch list for investors with a long-term buy-and-hold style of investing. As Warren Buffet advises, the best holding period is forever.