Cruise Ships are Getting Bigger

| Aug. 13, 2013

Oasis of the Seas - largest
class of ship in the world

Ships on order now will make the average cruise ship sizes larger and more crowded than ever before

There is a rumor circulating that Seabourn Cruises talking to various shipyards about building a new vessel. The source is Robin Farley, a cruise industry research analyst for investment firm UBS. She is saying "we believe CCL [Carnival Corp.] may be in discussions with shipbuilders for another Seabourn order which could be announced before the end of 2013, perhaps in the range of a 450-600 berth vessel." Carnival Corp. is the parent company that owns Seabourn Cruises.

What is interesting about this? First is the trend towards larger vessels. It is very important to note that Seabourn gained its reputation as a very small ship company. Its first two ships were made to carry just 100 passengers before the company added three more ships that each carried 200 passengers.

But at that point Seabourn was acquired by Carnival Corp. who immediately sold the two smallest ships to SeaDream Yacht Company. Under the Carnival Corp umbrella those three smaller Seabourn ships remained largely the favorites of loyal Seabourn customers even after the line introduced three brand new vessels at over twice the size and able to carry 350 passengers apiece between 2009 and 2011.

The newer vessels were very similar in design and onboard service and culinary standards to the first small ships, but on my Seabourn cruise I heard many people saying "we like these bigger ships, but we can't wait to get back to the small ones."

Surprisingly, even though Seabourn made its reputation as a small ship cruise line with very high luxury standards (and prices to match) by using the slogan "this is my yacht," the company just sold off those three 200-passenger smaller ships to Windstar cruises, another small ship cruise line that has a loyal following of its own, but one that is not so steeped in the "luxury" market as Seabourn.

Windstar is a very interesting company - originally started as an independent company with three beautiful small ships (200 passengers) with real masted sails, it was quickly acquired by Holland America Line. But a few years later Holland America was also acquired by Carnival Corp. meaning CCL also acquired Windstar.

So, at that point CCL owned both Seabourn and Windstar. After a few years CCL decided it only needed one small ship cruise line and it chose to focus on Seabourn, so Windstar was sold to another company who in 2010 left the ships (in a bankruptcy) to a subdivision of the Anschutz Company of Denver called Xanterra which runs the Queen Mary and the concessions at many national parks. Xanterra, the current owners of Windstar also just made an agreement to purchase the three 200-passenger ships of Seabourn - the ones that loyal Seabourn cruisers professed to love the most. Meanwhile (remember) Seabourn is rumored to be looking to build an even bigger new ship of 450 to 600 passengers.

It just goes to show two things - what a small world the cruise industry can be, and how a powerful company like Carnival Corp. would rather focus on maximizing profits than appealing to a niche market who likes ships that carry less than 200 passengers.

But let's not pick on Seabourn too harshly - a 450 to 600 passenger ship is not unusual in luxury circles; Regent and Crystal both have ships that carry 700 to 1000 passengers, but it is unusual for Seabourn, which specializes in a very quiet, intimate and low-key atmosphere. But more passengers per ship means more profit, and if anything has put a dent in the psyche of the luxury cruise lines it is the success of lines like Oceania, which happens to belong to the same parent company as Regent Seven Seas Cruises, the most inclusive and expensive mainstream cruise line in the world. In June Regent also just announced it is building a new ship in the range of 54,000-tons and 738 passenger berths.

The Main Lesson

The average size of cruise ships is getting bigger. Although one can still find small ships in operation by small companies like SeaDream and Windstar, the more "corporate" cruise lines are planning to build bigger and more crowded ships than ever before:

Let Seabourn serve as the first example. Along the same lines, I mentioned Oceania who also just built two new fabulous ships, Marina and Riviera, that are so nice they make "luxury" lines look plebian (Oceania is not even considered a luxury line, but its food is top notch and the ships are works of art).

However, the latest standard for Carnival Corp. ships is 130,000 tons to carry 4000 passenger berths, which means a possible maximum capacity of over 5000 passengers. A 'berth" is a "bed on the floor" which means the minimum number of regular beds before you add sleeper sofas, pull downs and other ways to add people to a stateroom made for two people.

Not to be outdone, Norwegian Cruise Lines already has contracts to build two "Breakaway-plus" ships that are slated to come in at an astounding 163,000 tons and carry 4200 passenger berths, for a possible total capacity of easily close to 6000 passengers.

Royal Caribbean already owns the two largest ships in the world, Oasis and Allure of the Seas; each at 220,000-tons and with 5400 berths for a total capacity of well over 6200 passengers. But the company has already announced it will build a third Oasis-class ship, and it has an option expiring in December to build a fourth ship of the same size and I expect that will be announced soon. I only say that because I can hardly remember the last time a cruise line turned down any contractual option to build an extra ship of an existing class.

In addition, Royal Caribbean is also already building two new ships in a class called "Quantum-class" which will come in at 167,000-tons apiece and carry 4180 passenger berths, making it quite capable of carrying over 5000 passengers.

The bottom line is that cruise ships are getting bigger and bigger on average - but even more importantly, they are also getting more crowded. One of the biggest costs for a cruise line is fuel, a fixed cost for each ship regardless of how full it may be - so the greater number of passengers the line can fit into any one ship the more money they make on a per-cruise basis - and that is their bottom line.

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