Billions in New Cruise Ships Are Ready to Sail, With Nowhere to Go

Billions in New Cruise Ships Are Ready to Sail, With Nowhere to Go
Fran Golden November 17, 2020 https://www.bloomberg.com/news/articles/2020-11-17/almost-4-billion-in-n...

Around the world, cruise lines are cutting the ribbon on extremely expensive new vessels—then keeping them indefinitely docked.

Normally, when a new ship wraps construction at a shipyard, it’s cause for a party, with executives in sharp suits and free-flowing Champagne. But when the sparkling 596-passenger ultraluxury ship Silver Moon joined Royal Caribbean Group’s elite Silversea Cruises brand in late October—the culmination of a $380 million, 20-month project—there was little pomp and circumstance. No media were on hand at the Italian shipyard to ooh and ahh over such exquisite design features as bespoke Lalique panels in the French restaurant and handcrafted Savoir beds in the top suites.

This time, even Royal Caribbean’s top brass bowed out of the celebration and teleconferenced from Miami. And the ship’s handover, in Ancona, Italy, came with a cringe. After all, Silver Moon has nowhere to go. With border restrictions and a second wave of the Covid-19 pandemic freezing all kinds of travel, she may have to wait at least until spring to make her maiden voyage—and start turning any kind of profit.

“It’s very painful in many ways,” says Jason Liberty, Royal Caribbean Group’s executive vice president and chief financial officer. “All this energy—whether it’s design, creating unique activities and venues—obviously you’re investing money as well, and you take delivery of the ship and you can’t do what you do best: delivering the best vacations in the world.”

Liberty isn’t alone in his frustration. At least 10 ships—ranging in cost from $75 million to near $1 billion—have wrapped construction amid the pandemic, representing an industry investment of more than $3.84 billion. Three additional vessels debuted at the beginning of the year. Most are stuck in holding patterns until the U.S. Centers for Disease Control and Prevention and its counterparts around the world greenlight a return to cruising.

All Dressed Up, With Nowhere to Go

At this point last year, 2020 had been predicted in the cruise world as the beginning of a boom decade for ship building. According to trade publication Cruise Industry News, the year started with 117 cruise ships on order by 2027, a new record in the history of cruising. After all, the industry’s fast-growing popularity—32 million projected cruisers in 2020, up from 30 million in 2019–made new tonnage feel like a foolproof bet. Now it just feels like a sunk cost, adding to billions of dollars in quarterly losses that some companies were already experiencing.

Entirely new brands, such as the adults-only Virgin Voyages and the luxe Ritz-Carlton Yacht Collection, may be among the hardest-hit. They’ve invested in multiple ships, with no previous revenue to defray costs, only to have their first planned year of operation wiped out. Worse, they cater to a new-to-cruise market that may be especially skeptical in the post-pandemic world. (Both debuts have moved to 2021.) Also launching next year is new luxury expedition brand Atlas Ocean Voyages—which has added complimentary Covid-19 health insurance to its all-inclusive fares.

Boom Gone Bust

Of the 13 ships that have wrapped construction in 2020, few have carried guests. In addition to Silver Moon, they include the French-built, 2,918-passenger Celebrity Apex—whose high-tech features such as an off-the-ship “Magic Carpet” platform drove the cost up to nearly $1 billion—and the 100-passenger Silver Origin, which will sail the Galapagos region with butler-serviced suites.

Many of these debuts should have been media juggernauts for the ships’ parent companies, none more so than Windstar Cruises’ first “stretched” ship, set to debut later this month after being cut in half and getting stitched back together with 84 feet added to its midsection. The major transformation of the 312-passenger Star Breeze—which adds 50 suites to each deck—has been anticipated for two years; now, it will get shown off quickly via video feed and remain docked, indefinitely, at its shipyard in Sicily.

“Who would have thought a year ago that you would bring out a ship and not immediately put it into operations?” says Christopher Prelog, president of Windstar Cruises. Originally set to sail on June 29 before a delivery delay, Star Breeze will now be held in place until the end of March, costing Windstar roughly $1 million a week in lost fares.

Silver Linings

On the plus side, Prelog says that virtual handovers avoid the last-minute stress of scrambling to get a ship ready for guests. “The focus now is to maintain it so that when the guests do come on board, it still has that sparkly and newness factor to it.”

Then there are construction delays, which usually come as bad news. They’ve been common this year, because of temporary shipyard shutdowns—good news these days, given that executives rarely sign the biggest checks until the job is done. Some vessels were delayed up to 10 months, with more than two dozen now slated to debut in 2021. That should help minimize cash drain until sailings resume, which may not happen until well into next year, depending on border reopenings and whether the industry can prove operations are safe before a vaccine is widely rolled out.

Plus, brands will be armed with plenty of buzz whenever it’s safe to set sail again. New ships such as Carnival’s forthcoming 5,282-passenger Mardi Gras, outfitted with the first roller coaster at sea, tend to draw loyalists who want to be the first onboard, as well as new-to-cruise travelers looking to try the latest and greatest.

Will all this new-ship buzz help the industry recover from last winter’s images of hazmat-suited health officials investigating shipboard Covid-19 outbreaks? Barbara Muckermann, Silversea’s chief marketing officer, says it will, and she’ll have an unprecedented three ships to showcase next year. “New ships provide a lot of marketing excitement, and I think that’s needed,” adds Liberty.

Still, that’s only true if he and his peers can persuade the market that cruising is safe—a looming question mark, given that at least three small-ship companies have already experienced Covid-19 outbreaks aboard vessels since resuming sailing this summer, even in the face of stringent precautions such as operating in a so-called “bubble” in which all guests quarantine and get PCR-tested before boarding.

Glitz and glamour is great, says Windstar’s Prelog, who adds that “safe to cruise has to be the main message.”