Royal Caribbean Blog

The cruise industry has been shutdown for an entire year and losing billions of dollars each quarter. So why are cruise ships still being built?

If you read just a few articles about what is happening in the cruise industry, you would know the industry is facing its most dire circumstances, perhaps ever. With mounting loses, debt piling up, and very few ships actually sailing, you might be wondering why cruise ship orders are still being filled and new ships launching.

It's a good question given everything happening today, and the answer lies has less to do with today and more to do with tomorrow.

A number of new cruise ships were delivered in 2020, and more will be delivered in 2021.

Royal Caribbean, Celebrity, Carnival, and many more lines took delivery of ships and even announced new ships that will be built in the next few years.

Royal Caribbean has plans for Odyssey of the Seas to join the fleet in Spring 2021 and Wonder of the Seas sometime in 2022. There are orders on file for other new ships in the coming years too.

On top of that, quite a few existing cruise ships were sold to be scrapped many years sooner than likely would have happened if there had not been a global health crisis.

Moreover, these ships were scrapped because of the lack of need for these ships right now, the high costs of maintaining them, and the lack of buyers to transfer the ship to their fleet.

It would seem given the mounting debts and financially motivated scrapping of existing ships that building new cruise ships would be the last thing cruise lines would want to do.

So why are cruise ships still being built?

First, cruise ships are ordered many years in advance and they get financed just as early.

As an example, Odyssey of the Seas, which was set to debut in 2020 but had to be pushed back to 2021 due to the global health crisis, was ordered back in November 2015.

Construction of Odyssey began in earnest on February 1, 2019.

Wonder of the Seas, the next Oasis Class cruise ship, was ordered on May 25, 2016 and construction began on April 24, 2019.

Basically, cruise ships we are seeing coming out of shipyards today were ordered many years ago.

Similar to when you buy a car and finance it, you place the order and agree to pay it off over the course of many months.

The second reason why ships are still being built is the cruise industry being shutdown and health crisis has lead to the ability to delay these new ship deliveries.

Ordinarily, a new cruise ship delivery is rarely delayed much, but the unprecedented situation that the entire cruise industry is under has opened up many more possibilities.

Between the cruise lines and shipyards, new ship orders have been delayed in order to space them out better and provide more time for cruise lines to secure additional funding, as well as become situated in a better position.

Odyssey of the Seas was delayed from an original delivery date in 2020, and Wonder of the Seas was similarly pushed back a year.

Read more: Top 5 things Royal Caribbean had planned for 2020 that got delayed

Thus far, orders for new ships have not been completely cancelled, but instead put off to a further date with the hope things will improve financially for cruise lines. Because of the long amount of time needed to build a ship, even a ship that begins construction today, will not be ready for at least a couple of years.

If all of that makes sense, then why are cruise lines building new ships at the same time they are scrapping and selling off many other ships?

The answer boils down to the economics of operating cruise ships.

New ships run more efficiently than older ships because of a combination of new design trends, more berths, and revenue opportunities onboard.

Royal Caribbean Cruises Ltd. Chief Financial Officer Jason Liberty told investors that the company could break even with use of fewer, but newer cruise ships, in lieu of older ships.

"For our newer ships, you need about 30 percent load factors to kind of break even. And then they skew to about 50 percent load factor on onto our older ships."

In addition, selling older ships is something that always happened.  Granted, some ships that got scrapped in 2020 might have been sold to another operator if there had not been a global health emergency, but the fact is cruise lines sell ships when the time is right.

Mr. Liberty also said that Royal Caribbean typically sells one to two ships per year.

So the shutdown may have accelerated plans to sell off ships and in some cases, caused vessels to be scrapped instead of sold to another company.

Lastly, cruise ships are still being built because cruise lines are also looking at the big picture.

In the long term, a return to cruising means meeting the pent-up demand for travel that everyone will want to embark on once things start moving back in the direction of normal.

Prior to the shutdown, the cruise industry was extremely profitable, and new ships sell extremely well.

So new cruise ship orders are not being cancelled because there is still a great deal of optimism for what the future holds, while also coming at the expense of older and less efficient/profitable ships.

As the cruise industry reaches the one year mark of being shutdown, Cozumel has proposed it transition from port of call to homeport.

During a radio interview, the mayor of Cozumel proposed allowing cruise ships to sail from the island so that cruises could restart in the Caribbean more easily.

Riviera Maya News posted the transcript of a radio interview by Pedro Joaquín Delbouis, where he said he has reached out to at least one cruise with the proposal.

In his frustration that the cruise industry remains shutdown, Mayor Delbouis thinks cruises could sail from Cozumel to destinations in the Caribbean.

Read more: Things to do in Cozumel on your Royal Caribbean cruise

"There is constant communication with the United States authorities and the Caribbean Cruise Association and there is nothing scheduled for this first quarter, so together with the Secretary of Tourism, we propose that we be a home port."

"There is still no answer with the US lines, but we are in talks with the MSC, which managed an itinerary through the Caribbean without touching North American soil."

"If they cannot leave from the United States, let them make a route to the Caribbean sailing from Cozumel."

Cozumel has long been a destination for cruise ships to visit, but sailing from the island would present a series of challenges, including facilities for embarkation, supplies, and getting passengers easily to the island.

Mayor Delbouis added he thought sailings could include stops in places such as Havana, Cuba or Progreso, Mexico.

His idea is to have, "one or two weekly departures from here."

Read more: Best Cozumel beach resorts

The Mayor did concede that the plan would not be easy to get started, "We know that supply logistics is not easy at all, and more so from an island, but it can be done."

In a separate statement, Mayor Delbouis called on Mexico's federal government to provide support for the plan, "The cruise ships could sail from Cozumel, but we need the support of the federal government."

The key to having cruise ships sail from Cozumel is based on the construction of the fourth cruise ship dock in Cozumel, which began work in October 2020.

This infrastructure is among the 39 projects that make up the Agreement for the Economic Reactivation that President Andrés Manuel López Obrador signed with the Private Initiative (IP) in October 2020.

Mayor Delbouis said the dock could be the perfect facility for Cozumel to transition from port stop to embarking passengers.

On social media, Mayor Delbouis insisted this idea needs both federal and state government support so that the port could make cruise lines see Cozumel as their port of departure for Caribbean sailings.

Before the entire cruise industry shutdown, Royal Caribbean had lots of plans for the next few years, but those have since been curtailed for economic reasons.

Nonetheless, Royal Caribbean will push ahead with at least two projects based on comments from the Port of Galveston Port Director.

Rodger Rees talked at a webinar about the short term future of the Port of Galveston, and he said Royal Caribbean outlined the top two port project priorities for the cruise line.

Royal Caribbean was forced to delay construction of a brand new terminal by a year.  Despite the major setbacks financially, Royal Caribbean remains committed to the Port of Galveston cruise terminal project, as well as the Freeport, Bahamas port expansion.

Mr. Rees said he was told by "the President of Royal Caribbean" that the cruise line had about 20 projects on the drawing board prior to the global health crisis, and they have whittled it down to two projects.

"One of them is us, here in Galveston. And then the other one is actually a a development over Freeport, Bahamas."

The project in Freeport that Mr. Rees alluded to in his conversation is the presumed purchase of the Grand Lucayan resort and Freeport Harbour project.

"The one hundred million dollar contract with Royal Caribbean is still on the table. We're having conversations with them right now to start construction in April."

"April 1, we're slated for construction to begin on the new cruise terminal."

Mr. Rees' comments echo that of previous statements where Royal Caribbean has indicated to him that they are onboard to begin construction.

At a meeting in December 2020, Mr. Rees said Cruise Terminal 3 is still scheduled to begin construction in April 2021 so that it can be ready to open in October 2022. 

"They revealed to me that they had, in fact, set aside some equity on their balance sheet, encumbered some equity on their balance sheet for the cruise terminal, construction and other work."

The new Terminal 3 in Galveston will be built on 10 acres of land at Pier 10, and will be used exclusively by Royal Caribbean.

Vaccine is the key factor

Mr. Rees also talked about the role of the COVID-19 vaccine, and he believes it will be the major factor to move things forward.

"I think the biggest I think the biggest thing that's going to help the cruising start back up again is obviously going to be the vaccine."

"The cruise lines are starting to lean towards that as the as the key factor to starting up."

Mr. Rees said the cruise lines and the ports are working on a series of agreements to ensure medical care is adequate to meet the needs.

"Covid's here. vaccine's not going to eradicate it 100 percent."

"Every now and then you're probably going to get one or two, three cases on these cruise ships. The important thing is not to get 50 to 500 cases on them."

"They're doing the same thing on the cruise lines that we'll be doing here in airports and what we do in our daily life, distancing and masking."

The man who dropped his granddaughter from the window of a Royal Caribbean cruise ship has been sentenced three years’ probation.

Salvatore “Sam” Anello plead guilty to negligent manslaughter in October 2020, and accepted a settlement that would allow for a reduced sentence. His sentencing was delayed in December 2020 and rescheduled to February 2021.

Mr. Anello will serve his probation from his home state.

In July 2019, 18-month-old Chloe Wiegand fell to her death after her grandfather dropped her from an open window on Freedom of the Seas.

Initially Mr. Anello claimed he did not know the window was open and said he would not plead guilty after his granddaughter fell from a top deck of Freedom of the Seas.  He then changed his plea in order to avoid jail time and serve probation instead.

According to the maternal grandfather's testimony, Chloe asked be raised up by her grandfather. He put her on a rail by a window, thinking the glass would hold her. However, the window was open.

Royal Caribbean said that surveillance video shows Anello leaning out the window for about eight seconds before lifting the girl by and out of the open window for 34 seconds before he lost his grip. 

After the initial accident occurred, Royal Caribbean issued a statement that the company was "deeply saddened by the tragic incident."

"Our hearts go out to the family. We have made our team available to assist them with the resources they need. Out of respect for their privacy, we do not plan to comment further on the incident."

The parents of Chloe have an ongoing civil case against Royal Caribbean.

We have a new update to share of Royal Caribbean's next new cruise ship, Odyssey of the Seas.

The Meyer Werft shipyard released a new photo of Odyssey of the Seas at her outdoor dock, with plenty of snow seen around the ship.

Meyer Werft posts a new photo about once a week to give the public a look at the general progress being made.

In addition to a photo of the ship, we also have a look at progress inside.

The roboscreens were delivered and installed in Two70 aboard the ship.

Royal Caribbean International Vice President of Entertainment Nick Weir shared photos of the giant 36-axis robotic video screens on Twitter.

Mr. Weir indicated that the screens are installed and activated, and they are ready for the new shows planned for the venue.

Read more: New show announced for Royal Caribbean's Odyssey of the Seas

Roboscreens are what Royal Caribbean calls the six 100” video screens attached to six industrial robots, developed by ABB RoboScreens.

A RoboScreen is a graphical screen mounted to the arm of an ABB articulated arm robot, which creates a unique viewer experience by bringing virtually unlimited, 6-axis movement to the video media. Available in various sizes, the Two70° RoboScreens feature six ABB IRB 6620 robots, each holding a 100” diagonal Daktronics LED screen.

On Royal Caribbean's Quantum-class ships, the RoboScreens are stored in the ceiling when not in use but during shows in Two70, the RoboScreens extend down on the gantry to a position above the stage, displaying unique video and imagery while performing choreographed movements, all custom produced for the specific performance.  

On the Quantum-class, the RoboScreens will periodically assemble in various formations, such as six screens in a row to form one continuous, long screen; a three by two stack to form one big square screen; or a serpentine row, much like a ‘W’ and a ‘V’ strung together.

Once complete, Odyssey of the Seas will join Royal Caribbean's fleet as the second Quantum Ultra class cruise ship and split her time between Europe and North America.

Odyssey will feature a number of firsts onboard, including the first Quantum Class ship with Giovanni’s Italian Kitchen & Wine Bar, a Playmakers Bar location in the SeaPlex, a revamped Adventure Ocean and two-level pool deck.

Happy weekend! We hope you are in the midst of a wonderful weekend full of things to do to pass the time between cruises.  We have a summary of all of this week's Royal Caribbean news in case you missed any of it!

The cruise world was surprised when Canada announced a year-long ban on cruise ships from its waters.

Canada's Minister of Transport announced all cruise vessels are banned from Canadian waters until February 28, 2022.

According to Canada's government, cruise ships, "pose a risk to our health care systems."

Not only does the ban affect Alaska cruises, but New England cruises in the fall visit Canadian ports as well during the popular leaf peeping season.

Just like Alaska cruises, New England cruises rely on a stop in Canada to make the visit legal under U.S. law.

Royal Caribbean News

• Royal Caribbean releases Spring 2022-2023 deployment schedule
• CDC hasn't provided technical instructions to cruises lines four months after lifting the No Sail Order
• Royal Caribbean removes 2021 Alaska and Canada cruises from website
• Carnival announced new health protocols including masks, social distancing, testing and more
• Florida Ports: Significant cruise ship numbers may take another year to return
• Mailbag: What's worth paying extra for on a cruise?
• Save up to 45% off pre-cruise add-ons with Royal Caribbean's new sale
• 10 ways to overcome common cruise ship mistakes
• Yes, it does sometimes snow on cruise ships
• What you need to know about visiting Barbados on a cruise ship
• What is the best mask to wear on a cruise ship?
• Odyssey of the Seas construction photo update

Royal Caribbean Blog Podcast

The 392nd episode of the Royal Caribbean Blog Podcast is now available and this week, Matt talks about cruise ship rumors he hears all the time these days.

Having seen so many of these discussions on social media, there seems to be a few of these "predictions" that are passed around as the truth. Here is a list of some commonly shared cruise ship rumors that have not been verified or announced by Royal Caribbean.

Please feel free to subscribe via iTunes or RSS, and head over to rate and review the podcast on iTunes if you can! We’d appreciate it.

New RCB Video: Unwritten rules of going on a cruise ship

Have you subscribed to the Royal Caribbean Blog YouTube Channel? We share some great videos there regularly, all about taking a Royal Caribbean cruise! This week, we are sharing our latest video — Unwritten rules of going on a cruise ship — and don’t forget to subscribe here.

Royal Caribbean Group CEO admits he still doesn't know when cruises will resume

Not even the head of Royal Caribbean Group is sure when cruises will restart in great numbers.

Royal Caribbean Group Chairman and CEO Richard Fain provided a new video update where he talked about the current state of affairs related to the global health crisis, as well as addressing cruises resuming.

Towards the end of this new video update, he tackled the question he is most commonly asked: "when cruising will resume in strength?".

There has been very little news on progress being made by any cruise line to conducting test cruises, and the reason might be because they are still waiting on what to do.

When the U.S. Center for Disease Control Control (CDC) lifted the No Sail Order at the end of October and replaced it with the Framework for Conditional Sail Order, the agency outlined a series of steps required for cruises to be able to progress towards restarting.

The first step was to provide technical instructions on what each ship needs to do in order to prepare itself for test cruises.

Cruise Critic reported that cruise lines were still waiting for those instructions.

In a statement from the CDC to RoyalCaribbeanBlog, the agency confirmed they have not yet delivered that first step.

"Returning to passenger cruising is a phased approach and our current focus is on the protection of crew and working with cruise lines to implement the initial phase requirements of testing all crew and developing onboard laboratory capacity."

"Future orders and technical instructions will address additional activities to help cruise lines prepare for and return to passenger operations in a manner that mitigates COVID-19 risk among passengers, crew members; including simulated voyages, certification for conditional sailing, and restricted voyages."

"We anticipate the next phase of technical instructions (Technical Instructions for Port and Local Health Authorities Agreements) to be released in the next few weeks."

Nearly four months after the No Sail Order was lifted, cruise lines are not much closer to restarting sailings in the United States as they were in the fall.

The realization that progress was slow in terms of getting test cruises going became apparent in various statements by cruise line industry officials.

Read more: Everything you need to know about Royal Caribbean test cruises

Carnival Corp. CEO Arnold Donald told investors during an earnings call that they were still waiting on additional guidelines from the CDC for future phases.

Florida Ports Council Vice President of Governmental Affairs Michael Rubin told Florida's Senate Transportation Committee cruise lines are working to meet an “onerous” list of requirements from the CDC.

Prior to cruise ships sailing again from the United States, test cruises will need to be conducted to demonstrate the cruise line's new protocols are effective.

These simulated voyages will require volunteers to be onboard to help go through the variety of scenarios cruise lines need to test.

Read more: Top 14 things the CDC requires cruise ships do on test sailings

The new protocols would apply to crew and passengers and include things such as rapid testing, requiring face masks, social distancing and more.

What are the technical instructions?

When the CDC issued the Framework for Conditional Sailing Order that said any cruise line that wants to restart from the United States needs to apply for a conditional sailing certificate 60 days before a voyage.

First, ships must implement testing and other protocols for the safe return of crew. Non-revenue test sailings will follow, with vessels then required to request and receive approval to resume sailing with passengers onboard.

The CDC promised that further technical instructions will be posted on the CDC's website at a later date.

Read more: Royal Caribbean's Chief Medical Officer explains what needs be done to get approval to cruise again

On its website, the CDC says the instructions are meant to ensure health and safety protections for the crew prior to resuming passenger operations in a way that mitigates the risk of spreading COVID-19.

"The cruise ship operator must conduct a monitored observation period and laboratory testing of volunteer passengers, as directed in CDC technical instructions or orders, prior to embarking volunteer passengers on a simulated voyage."

Other activities as may be listed in the forthcoming CDC technical instructions and orders.

Less than 24 hours after Canada announced it banned cruise ships for a year, Royal Caribbean's website no longer shows cruises to Alaska or Canada available to book.

Canada announced it was extending its ban on cruise ships for an entire year, through February 2022.

While Royal Caribbean has not officially informed guests that sailings that visit Canada in 2021 are cancelled, all potentially affected sailings have been removed from being able to be booked on the cruise line site.

When searching for Alaska sailings, no dates in 2021 are available to search, and New England/Canada cruises are also missing from the available cruises to book.

If cruise ships cannot visit Canada, Royal Caribbean cannot legally operate sailings that do not visit a "nearby foreign port" during the sailing, due to the Passenger Vessel Services Act of 1886.

Canada made the sweeping ban on Thursday that prohibits any cruise vessel carrying more than 100 or more people from operating in Canadian waters.

Cruises to Alaska or New England that sail from the United States are required to make at least one stop in a foreign port in order to satisfy U.S. law.

Without the possibility of visiting Canada, the Alaska and New England cruise season is effectively cancelled.

There are only two possible ways these cruises could be salvaged:

First, Canada could lift the cruise ship ban if the health situation improves. Canada added in its announcement that if the global health crisis sufficiently improve to allow the resumption of these activities, the Minister of Transport has the ability to rescind the Interim Orders. 

Second, the U.S. could provide a temporary waiver of the Passenger Vessel Services Act.  The chances of that happening seem low based on recent comments by the new U.S. Transportation Secretary.

During confirmation hearings, Pete Buttigieg told the Senate committee that he supports the Jones Act, which is the part of the law that applies to cargo vessels.

"[The Jones Act] is so important to a maritime industry that creates hundreds of thousands of jobs, as well as a shipbuilding industry here in the U.S.," Buttigieg said in response to questioning from Senator Maria Cantwell (D-WA), the Senate Commerce Committee’s ranking member.

The 2021 Alaska cruise season looks to be in serious trouble with a new ban just announced.

Canada's Minister of Transport announced on Thursday it has banned all cruise vessels from Canadian waters until February 28, 2022.

Citing the need to keep "Canadians and transportation workers safe and healthy", the government announced two interim orders that prohibit pleasure craft in Canadian Arctic waters and cruise vessels in all Canadian waters until February 28, 2022. 

Specifically, cruise vessels carrying 100 or more people are not allowed in Canadian waters.

According to Canada's government, cruise ships, "pose a risk to our health care systems."

"As Canadians continue to do their part to reduce the spread of COVID-19, our government continues to work hard to ensure Canada’s transportation system remains safe. Temporary prohibitions to cruise vessels and pleasure craft are essential to continue to protect the most vulnerable among our communities and avoid overwhelming our health care systems. This is the right and responsible thing to do."

Minister of Transport Omar Alghabra added that if the global health crisis sufficiently improves to allow the resumption of these activities, the Minister of Transport has the ability to rescind the Interim Orders. 

Prior to this extension, Canada's ban on cruise ships was set to expire on February 28, 2021.

Not only does the ban affect Alaska cruises, but New England cruises in the fall visit Canadian ports as well during the popular leaf peeping season.

Just like Alaska cruises, New England cruises rely on a stop in Canada to make the visit legal under U.S. law.

In case you are wondering, the penalties for violating the ban include $5,000 per day for individuals and $25,000 per day for groups or corporations. 

Canada banning cruise ships means cruise lines cannot legally offer cruises to Alaska because of cabotage laws that require a foreign port to be visited during the sailing.

Royal Caribbean has three cruise ships schedule to sail to Alaska in 2021.  Quantum of the Seas already had her entire 2021 cruise season in Alaska cancelled in favor of keeping the ship sailing from Singapore.

Cruises sailing from the United States must adhere to the Passenger Vessel Service Act of 1886 (sometimes referred to as the Jones Act).

Even if the United States allows cruise ships to sail again, they would not be able to sail to Alaska without Canadian waters and ports open to satisfy U.S. cabotage laws.

There is some talk of a temporary amendment to the PVSA to allow cruise ships to depart without a foreign port stop, although there has been no progress made beyond proposals. 

The Greatert Victoria Harbour Authority issued a statement in support of the Canadian government's decision to extend the cruise ship ban.

"Cruise will resume when it is safe to do so, when border restrictions are removed, and when people may safely enjoy non-essential travel."

The port authority did concede the decision will, "create a devastating impact on the dozens of local, small businesses that are involved with cruise in Victoria," due to a combination of no cruise ships in 2020 and now another year without them.

The road to recovery for cruise lines is not going to be a swift or easy one.

At a meeting of Florida's Senate Transportation Committee, Florida Ports Council Vice President of Governmental Affairs, Michael Rubin, said it will be a while yet before cruise ship operations return to "significant" numbers.

"I’m not sure we’ll have significant cruise operations until perhaps next year and even beyond that," Rubin told the committee.

"Some of the smaller luxury liners … may not be operating till further than that, until there’s actual vaccines available around the world. We are concerned. We’re hopeful that they’ll allow them to operate at least half capacity here maybe in April, maybe in June. Hopefully, before that timeframe, because this is really, really troubling."

Rubin represents the Florida Ports Council, which is a nonprofit group that represents major seaports in Florida. 

Rubin added that cruise lines are working to meet an “onerous” list of requirements from the U.S. Centers for Disease Control (CDC), with the hope of having some ships operating at half capacity by the summer of 2021.

According to Rubin, one issue that has remained is to figure out is how to handle cruise passengers getting on or off a ship in a port of call.

Mr. Rubin believes some high profile stories about cases on cruise ships from early 2020 are hindering progress to resume operations, "As you know, there was some high-profile incidents of passengers trying to get off and a few deaths out there."

"So, we’re living with those high-profile incidents, and it can’t seem to get past it. … I think all of our ports and the cruise lines are trying to work with the CDC to say, ‘Look, we’re gonna have protocols, we’ll have masks, we’ll sail at half capacity so we can quarantine people if they need to be quarantined.’"

He believes when cruises do restart, the cruise lines will adopt a series of new rules, "I think all of our ports and the cruise lines are trying to work with the CDC to say we’ll have protocols, we’ll have masks, we’ll sail at half capacity so we can quarantine people if they need to be quarantined."

The CDC recently added a new order that requires anyone on a cruise ship to wear a face mask.

Mr. Rubin's comments come a few weeks after Port Canaveral estimated some cruises might return in July. Neither Port Canaveral nor Mr. Rubin's comments are based on any cruise line statements.

Royal Caribbean Group Chairman and CEO Richard Fain tackled the question of when cruises might restart with the answer everyone has known for months: no one yet knows for certain.

"My answer is consistently, I don't know. But more recently, my answer has been, I don't know, but that's the good direction to be going in."

"It's going to take a while and we just need to be patient."

"But it is happening and these early cruises are going to give us information that will help inform how we can operate safely and that's going to give us all confidence in an earlier and safer restart."