Fleet expansion echoes pre-recession era in the cruise industry

This article first appeared in the Spring/Summer 2015 issue of International Cruise & Ferry Review. To read the full article, you can subscribe to the magazine in printed or digital formats

With five orders for major new cruise ships just before Christmas and two big deliveries in the closing months of the year, the total industry order book was left a net 5,100 berths stronger at almost 105,000 beds to be built by 2020. This takes total capacity to be constructed to levels not seen since the start of 2008, when the latest recession was starting to take shape. For those who believe – and there are many – that the health of the cruise industry can be gauged by the strength of its shipyards’ order books, this was very good news indeed.

And it will not have escaped the notice of the industry’s observers and analysts that three of the five ships involved in this pre-Christmas rush came from companies in the Carnival Corporation & plc stable, in an apparent loosening of the self-imposed chains which have seen the group’s annual orders total halved to two or three contracts.

Also, in the Far East, Carnival is breaking new ground with a Memorandum of Understanding regarding the formation of a new shipbuilding company with partners China State Shipbuilding Company and Fincantieri in Italy, its principal European builder, to service the growing China business. If this becomes a reality, it will be a rare example of a cruise line entering the shipbuilding arena.

One of the three new Carnival Corporation vessels just ordered is a new Pinnacle-class ship, sister to the first of class, Koningsdam, for Holland America Line. This 2,650-berth ship is to be delivered in March 2018. Also there is also another 604-berth vessel, Seabourn Ovation, for luxury line Seabourn – a sister for Seabourn Encore, ordered earlier last year for delivery in late 2016. The second ship will arrive in the spring of 2018. This latest vessel will be the fifth Odyssey-class all-suite ship for Seabourn.

And Carnival Cruise Line is ordering a sister to the Carnival Vista, due out in 2016, at the Fincantieri yard. This second ship is scheduled for delivery in March 2018 and will be the line’s 26th vessel.

Royal Caribbean Cruises Ltd. has also had an interesting few months where ship orders are concerned. Michael Bayley, almost with his last breath as head of Celebrity Cruises before becoming president and CEO of sister company Royal Caribbean International, announced two 2,900-berth vessels to be built by the Saint-Nazaire shipyard of STX France and known as Project Edge. The ships, enthusiastically greeted by many trade professionals, will be about 7% smaller than Celebrity Reflection, delivered as long ago as autumn 2012. So there will be a six-year gap to the first of these two deliveries in the autumn of 2018; the second vessel is due in early 2020. The point of the smaller size is to allow greater accessibility to ports.

A major delivery at the end of last year was the 3,700-berth Costa Diadema, a new flagship for one of Europe’s principal lines. She came out of Fincantieri’s Marghera yard. Costa CEO Michael Thamm said the new ship, dubbed the Queen of the Mediterranean, will set new standards in the European cruise industry and further strengthen Costa’s leadership on the Continent. “She is the best expression of our new brand presentation; our largest ship and the biggest under the Italian flag.”

Equally prestigious is P&O Cruises’ new flagship, Britannia, which weighs in at a slightly larger 141,000gt with 3,600 lower berths. The ship will account for 24% of the raised fleet capacity. The vessel is expected to help the UK market achieve its next target of 2 million passengers a year.

The first of Royal Caribbean International’s large new Quantum-class ships, Quantum of the Seas, was delivered very close to the arrival of the second ship, the Anthem of the Seas, scheduled for the first quarter 2015. Both are of 168,800gt and 4,180 berths. Anthem, part of Royal Caribbean’s second-largest class of ship, will initially carry out a Mediterranean programme before going to the USA in winter. A third vessel is due in 2016. In each of 2013 and 2014 there were only six major ship deliveries, but this figure will more or less double to 11 in 2016. Perhaps the most newsworthy delivery will be in May 2016 when Viking Star, the first ship in river cruise guru Torstein Hagen’s ocean cruise venture, comes into service as the first of four confirmed orders at the Fincantieri shipyard in Italy, which agreed five options in all as well as the original contract.

The 928-berth vessels are deliberately much smaller than many new ships as they are aimed at being ‘destination rich’ – rather like Viking’s river ships. Hagen is highly critical of the large cruise companies, saying that with their big ships “they have lost sight of the destinations to which they sail”. This is the first major new line in the industry for about a decade.

Another new venture, but this time rather further away, is British entrepreneur Sir Richard Branson’s plan to enter the industry. Things have recently firmed up with Bain Capital, a Boston asset management group with a reported US$80 billion under its control, ready to invest “hundreds of millions of dollars” in the Virgin plan. To date, Virgin says it will invest more than US$100 million itself; raise part of the funding required via a share offering; and take on US$1 billion in debt. The US$1.7 billion raised would be used to build two ships, possibly of 3,500 berths each.

In the autumn Norwegian Cruise Line will take delivery of its largest ship to date, the 4,200-berth, 163,000gt Norwegian Escape, the 11th ship built for the group by Meyer Werft. Another ship, Norwegian Bliss, is due in 2017. Norwegian Escape only had her keel laid last September for a fast building time. She is the first of four new ships due from Meyer by 2019.

In the Far East, delivery of a new first of class for AIDA Cruises, AIDAprima, was put back to the autumn because of extensive design changes which the Mitsubishi Heavy Industries shipyard could not accommodate in time. The group also announced losses of at least US$600 million from cruise shipbuilding and may soon get out of it altogether. This, taken with reports from Europe that Fincantieri is interested in a stake in the Saint-Nazaire shipyard – partly confirmed by the French government (which has a one-third stake) – could mean just a couple of companies will be left to build cruise ships.

One of these, Meyer Werft, took a controlling 70% interest in STX Finland’s Turku yard, whose future had been in doubt. This added security inspired TUI Cruises, the joint venture with RCCL, to order another four vessels in the Mein Schiff series in a deal worth more than US$2 billion in total. Richard Vogel, the CEO who built up TUI Cruises from scratch but has now left the company, said earlier: “The positive outcome between STX Turku and Meyer Werft means that valuable know-how stays within the Turku shipyard.”

The continuing strength of the river cruise market is evidenced by the plans of market leader, Viking, which has ordered another 12 vessels, 10 of them to the 195-berth longship design, at the Neptun Werft yard at Rostock. Another six are reported for 2016. After 18 namings last March, the total Viking fleet stood at 64 vessels.

The Den Breejen shipyard in Holland has been active, booking orders for Scenic Tours, Emerald Waterways and Avalon Waterways. Scenic, the only Australian-owned river cruise line in Europe, has contracted the 169-berth, four-deck Scenic Opal and Scenic Jasper for use on the Rhine, Danube and Main from April. Founder and chairman, Glen Moroney, claims the company has the newest fleet with its 12 vessels.

Emerald Waterways has contracted Emerald Sun and Emerald Dawn for a spring delivery. The hulls of the 92-berth ships are being built at Den Breejen, but fitting out is at Breman Shipping. The Swiss-owned Avalon, which operates 16 ships, has booked Avalon Tranquility II and Avalon Tapestry II at Den Breejen. They are the latest examples of the new Suite-class ships first introduced three years ago. Each boat has 65 passenger cabins and 21 for the crew. Avalon carries 500,000 passengers a year.

CroisiEurope is back on the shipbuilding scene with the 96-berth Loire Princess. Block assembly was begun at the STX France shipyard in St Nazaire, a partner of the nominal builder Neopolia. The vessel, reflecting the ‘Green Ship’ concept, will be ready for the new river season in April.

And finally, in a boost for a successful long-term partnership, the De Hoop shipyard in Holland is building its 11th river boat in 13 years for LÜftner Reisen.