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Miami-based leading cruise company, Royal Caribbean Cruises Ltd. (RCL - Analyst Report), is set to add a new ship to its Quantum cruise line. In this regard, the company has inked a construction agreement with the German shipbuilding company, Meyer Werft GmbH.

Quantum is an upcoming new series of passenger cruise ships which is slated to debut in 2014 with its first ship, Quantum of the Seas, followed by the launch of another vessel, Anthem of the Sea in 2015. Meyer Werft will also be responsible for the construction of these two ships. The new vessel, which is scheduled to be delivered in mid-2016, will be the third Quantum class ship.

Royal Caribbean did not disclose the exact price of the new ship, but it has hinted that the price will be nearly same as the other two Quantum class cruise ships. The company’s contract with Meyer Werft is subject to the fulfillment of certain financial terms and conditions.

Post launch, Quantum will be one of the leading cruise lines with the second biggest cruise ships in the world. All of these ships will feature 16 decks and 2,090 staterooms with a capacity to accommodate 4,180 passengers. These ships will introduce a new era for the cruise vacation industry with various additional facilities. Now, with the addition of this vessel under the Quantum line, the company will be able to further enhance its cruise services and attract more customers.

Royal Caribbean now expects its capital expenditures (all contracts are included) to be $700 million, $1.2 billion, $1.2 billion and $2.1 billion for 2013, 2014, 2015 and 2016, respectively. Following the launch of the third Quantum ship, the company’s capacity will grow 4% annually over the next five years.

Royal Caribbean’s ship, Grandeur of the Seas, caught fire on May 27, 2013, following a similar incident with another cruise operator, Carnival Corp. (CCL - Analyst Report). Royal Caribbean assured a refund to the passengers booked for the May 31 sailing along with the transportation expenses incurred. Although there were no casualties in the disaster, it might shatter passenger confidence in the industry, especially that of first-time cruisers and result in subdued bookings. In this circumstance, the decision of adding a new ship in its Quantum cruise lines comes as a positive for the company.  

Royal Caribbean currently retains a Zacks Rank #3 (Hold). Some companies from the leisure and recreational services industry that are worth a look include The Madison Square Garden Company (MSG - Snapshot Report) and Regal Entertainment Group (RGC - Snapshot Report), both carrying a Zacks Rank #2 (Buy).

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