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Sector Snap: Cruise companies

NEW YORK (AP) -- Cruise operators are cutting prices this winter and are expected to reduce them further in the new year, an analyst said Tuesday, a sign that demand is still weak almost a year after a highly publicized sinking amid a stubbornly sluggish global economy.

Rachael Rothman of Susquehanna Financial Group estimates that major brands have reduced prices for winter and early 2013 sailings by about 3.5 percent since late September. She also noted pricing appears weaker in closer-in bookings, leaving less opportunity for Carnival Corp. to report a sizeable improvement in fourth-quarter results.

Cruise line operators entered 2012 thinking they could start charging passengers more again after offering widespread discounts following the 2007-2009 recession. But just two weeks into the year, 32 people died when Carnival Corp.'s Costa Concordia sank off the coast of Italy. Bookings slumped even as cruise companies lowered prices.

Both Carnival and Royal Caribbean Cruises Ltd. expressed optimism about improving demand and prices when they reported third-quarter results in the fall. But Rothman thinks that the two cruise operators will have to wait until the second half of next year to see a much-needed spark in their business.

That pick up is also dependent on how strong the peak season is after it begins in February. Rothman said the performance of both companies in the first month of the year should be a key indicator as to whether the year will be one of sustained recovery or another one of slow growth.

Both companies' stocks lost ground Tuesday. Carnival fell 65 cents to $37.73, while Royal Caribbean lost 40 cents to $34.80.