PHOTO: The sun is rising on a new day for the cruise industry. (Courtesy of www.thinkstock.com)

The cruise industry is on the verge of a comeback as yields rebound from the recession and negative ship incidents like the Costa Concordia capsizing in January 2012 and the Carnival Triumph in February 2013, Robin Farley, a leisure analyst with UBS, wrote in a research report titled “Don’t Abandon Ship: Cruise Lines Outlook for 2014-2015.”

Farley notes that, over the past 20 years, yield growth of 5-10 percent typically occurs during a recovery after a downturn. “And we believe that’s where Carnival is today, with room for recovery likely to drive above-average yield growth next year (as 2014 must still anniversary the impact of negative PR from last year’s Triumph issues),” she wrote. “So how do we know that there isn’t a structural shift that is permanently going to prevent Carnival from recovering price? We point to the 4 percent yield increase in 2011, the year before Concordia, as an indication that pricing was starting to recover post the downturn and was in fact showing above-average growth that year, as both Carnival and Royal Caribbean saw similar 4 percent yield growth before the demand disruption from Concordia.”

In fact, Farley said Costa looks like to be the “best-performing brand” for Carnival this year, since it began showing positive pricing in the fourth quarter last year.

“Royal Caribbean has had the best performance through Wave Season 2014 as the company benefits from recovery without any company-specific issues,” Farley wrote. “Norwegian is benefitting from ship additions as a capacity and pricing driver, although investor concerns about the potential exit of its largest shareholder remain an overhang.”

Long-term, the cruise industry will benefit from several positive trends, she said. For example, the industry has slowed on newbuild orders, which means slower capacity growth in North America and Europe for at least two more years.

She also points to more aggressive marketing of passengers from underpenetrated international markets in Europe, Asia and South America. Also, new ships based year-round homeports such as New York helps tap into new passengers bases. And once they get onboard, they’re very likely to sail again—she says 30-60 percent of Carnival guests repeat a cruise on the same brand within three years.

Plus, Europe is regaining momentum, Farley said. “Carnival’s European brands had in recent years generated an operating income premium to North American brands, though that was not the case in 2012, post the Concordia incident,” she wrote.

So companies pulled ships out of Europe. For example, Carnival Corp. plans to deploy 30 percent of its fleet capacity on European itineraries in 2014 versus 31 percent in 2013. Royal Caribbean Cruises Ltd. has 22 percent of its capacity in Europe this year, down about 15 percent from 2013. And Norwegian’s European deployment is 20 percent of its total capacity this year versus 25 percent in 2013, but not because it has removed ships from Europe but due to new ships introduced in the U.S.

“Over the long term, we expect Europe to sustain growth given the relatively low penetration rates and subdued supply growth combined with strong consumer demand that was evident in early 2012 before Concordia,” Farley said.