By Juveria Tabassum

(Reuters) -Cruise operator Carnival narrowed its annual loss forecast and swung to a third-quarter profit thanks to higher ticket pricing and robust demand, but concerns around steep fuel costs sent its shares down 5% on Friday.

Rivals Norwegian Cruise Lines and Royal Caribbean have also been able to raise ticket prices and still stay cheaper than hotels, drawing younger crowds looking to splurge on experiences rather than big-ticket discretionary purchases.

"Fear around inflation, shrinking consumer savings, student loan repayments, and other spending issues have bogged down shares recently, but should prove to be transient," Morningstar research analyst Jaime Katz said in a note.

"All signals indicate cruising is resonating with consumers."

Taking the shine off its annual outlook, however, Carnival forecast a wider-than-expected fourth-quarter loss and said it would face a net impact of $130 million from higher fuel prices and unfavorable currency exchange rates.

It also sees costs driven up by an 18% increase in dry dock days for maintenance and repair work in 2024.

Unlike other major cruise operators, Carnival does not hedge against volatility in oil prices.

The company was "not thinking" about fuel hedging at this point, CFO David Bernstein told Reuters in an interview.

Instead, to reduce the fuel burn, Carnival was looking at fuel optimization technologies and enhancing itineraries, Bernstein added.

CRUISE DEMAND THRIVES

Cruise operators have benefited from pent-up travel demand following the pandemic and travelers looking for better vacation deals. Cruise pricing is now 35% to 40% cheaper than leisure hotels, said Redburn Atlantic analyst Alex Brignall.

Carnival said it had taken more than 2.5 million guests on their maiden cruise this year, with first-timers surging to 170% of prior-year levels in the quarter, driving record quarterly revenues and returning occupancy to pre-pandemic levels.

"Our booked position is as far out as we've ever seen it," said CEO Joshua Weinstein. But while demand stays strong, booking volumes for 2024 might recede as inventory get saturated, he added.

Carnival posted third-quarter profit of $1.07 billion, or 79 cents per share, compared with a loss of $770 million, or 65 cents per share, a year earlier.

(Reporting by Juveria Tabassum; Editing by Devika Syamnath and Shweta Agarwal)