Brand new ships vs. Amplify older ones

[D Alt]

What is the reasoning or business case for spending billions of dollars on building brand new ships when, in my opinion, they should be refurbishing and amplifying existing ones? 

I was just on Liberty and that ole gal needs to be updated. 

[smokeybandit]

Liberty was a victim of covid for her amplification along with Adventure, Allure and Explorer.

[Ampurp85]

They are building new ships with different offerings. They cannot create more space on the smaller ships by amplifying them. 

[D Alt]

4 minutes ago, Ampurp85 said:

They are building new ships with different offerings. They cannot create more space on the smaller ships by amplifying them. 

Freedom and Independence were amplified.  My point is refurbish her. 

I believe the Captain did say on this past cruise that she will be in a longer dry dock in a couple of years, but I didn't hear exactly his words personally, so not sure if he meant just for maintenance or an actual amplification. 

[twangster]

17 minutes ago, D Alt said:

Freedom and Independence were amplified.  My point is refurbish her. 

I believe the Captain did say on this past cruise that she will be in a longer dry dock in a couple of years, but I didn't hear exactly his words personally, so not sure if he meant just for maintenance or an actual amplification. 

So there was this thing.  It was called a pandemic.  They had no income.  They borrowed a lot of money to survive.  They borrowed $45B dollars.  As a result they had to put off the amplification they had scheduled. 

Let's say you lost your job.  You were out of work for 2 years.  To survive you borrowed money from family and friends.  After two years you find a part time job that almost covers your mortgage but not the rest of your expenses.  You are still using the money borrowed from family to survive and then finally you find a real full time job.  Now three years later you have enough income to cover your expenses and have a little left over every month.  Phew.    

You are working full time now but you still owe your friends and family tens of thousands of dollars.  How would they feel if you took your paycheck and instead of paying them back you renovated your kitchen and bathrooms?  New shoes.  New purse.  New car.  Life is good!  But you haven't paid back a single dime.

While they are now making a profit they still have massive debt they need to pay back.  That debt didn't go away once they were able to start filling ships to capacity.  That debt will be around for decades to come.  

[melmar02]

One of the genies on Allure announced on our bridge tour that she's (Allure) going to be amped in 2025. There may be something on the schedule for Liberty even they haven't officially announced anything yet. 

[twangster]

Royal knows Liberty needs some TLC but Royal has investors and creditors they need to satisfy.  They have to show those folks that they are starting to address their massive debt.   

Royal needs to explain to these folks the value of an amplification and why putting $120 million dollars into Liberty and $200 million dollars into Allure is a good business decision.  They need to develop a business plan and illustrate how the amplification investment will allow Royal to pay back their debt faster.  The creditors are nervous.  They have billions and billions at stake if Royal gets it wrong.  

It takes time to see that the industry is stabilizing.  It takes time to prove the risk is worth it.  Once they can get these folks to agree, they will amplify.  

[smokeybandit]

8 minutes ago, twangster said:

It takes time to see that the industry is stabilizing.  It takes to prove the risk is worth it.  Once they can get these folks to agree, they will amplify.  

And it doesn't hurt the bottom line for the time being that the un-amped ships are still sailing full. So it's not like the ships are suffering because of the lack of updates.

[D Alt]

yeah i get that twangster about being in debt but it hasn't stopped them from building 2 brand new ships.  I'm just trying to figure out how putting over a billion dollars into a brand new ship is going to get them out of debt vs. only spending 120 million to refurbish.  

[smokeybandit]

Those ships were in the pipeline years ago. They'd have to get out of contracts to cancel new ships. 

 

Plus new ships are new revenue streams. I mean look at the insane prices Icon cabins are going for.  Updating existing ones is really just a marketing ploy to keep up with the joneses.

[D Alt]

33 minutes ago, twangster said:

So there was this thing.  It was called a pandemic. 

BTW, no need to be condescending.  

[Ryan79]

@D Alt Those newer ships have been in the pipeline for several years and RC has hundreds of millions to billions of dollars in contracts with those vendors to built and complete those ships. Construction on them did not start recently. If RC was to cancel those contracts, They would be on the hook for them. Those are legally binding. RC cannot change their mind mid-project. Even if they did just cancel, then they would have the half built hulls to deal with and then down the road pay someone else to finish those ships at an even greater cost than what was negotiated several years ago. Even when amped, the Liberty will still not come close to brining in the same revenue as a new Icon class. So to abandon new builds for an amping doesn’t make any long term fiscal sense at this point in the game. Does it make sense for them to maybe amp Liberty before they start contracting to build their next class? Maybe, but that ship has sailed (pun intended) when it comes to delaying Icon pass versus amping a few more older ships.

[D Alt]

Just now, Ryan79 said:

@D Alt Those newer ships have been in the pipeline for several years and RC has hundreds of millions to billions of dollars in contracts with those vendors to built and complete those ships. Construction on them did not start recently. If RC was to cancel those contracts, They would be on the hook for them. Those are legally binding. RC cannot change their mind mid-project. Even if they did just cancel, then they would have the half built hulls to deal with and then down the road pay someone else to finish those ships at an even greater cost than what was negotiated several years ago. Even when amped, the Liberty will still not come close to brining in the same revenue as a new Icon class. So to abandon new builds for an amping doesn’t make any long term fiscal sense at this point in the game. Does it make sense for them to maybe amp Liberty before they start contracting to build their next class? Maybe, but that ship has sailed (pun intended) when it comes to delaying Icon pass versus amping a few more older ships.

thanks Ryan

[twangster]

Suggest you try listening in on the investor calls.  The reasoning behind everything they do can be found on the investor calls.

[kspam]

Our first cruise ever was Majesty.  We took the same ship about 10 years later for memories and it was still as beautiful as the first time.  

 

 

[Rfk]

Will RC do some new but smaller ships? Like airlines do for mid-tier routes?  Don’t need a huge jet for every destination, city pair, etc. 

[twangster]

7 minutes ago, Rfk said:

Will RC do some new but smaller ships? Like airlines do for mid-tier routes?  Don’t need a huge jet for every destination, city pair, etc. 

There are some rumors to that effect.  Small is unlikely.  Medium size maybe.

[DoomSlayer]

7 minutes ago, Rfk said:

Will RC do some new but smaller ships? Like airlines do for mid-tier routes?  Don’t need a huge jet for every destination, city pair, etc. 

The ship is supposed to be the destination. Airplanes are expected to get you from point a to point b as quickly and cheaply as possible. Cruise ships are designed to get you from point a back to point a as slowly as possible. 

[smokeybandit]

29 minutes ago, DoomSlayer said:

Cruise ships are designed to get you from point a back to point a as slowly as possible. 

And we thank them for that

[steverk]

A cruise ship is a large, man made machine.  To put it into a more relatable scale, let's compare it to another complex, man made machine, your car.  

Your car has a life expectancy of somewhere around 10 years.  It can last longer than that with enough TLC, but many last less. Why? Because the cost of maintenance goes up and the reliability goes down.

It works pretty much the same with a cruise ship. The life expectancy is about 30 years, but it can last longer with a lot of love.  By 40, you're looking at a really tired vessel.

So, there are several things Royal needs to consider in the amp/replace decision. How much does each option cost? How long will the amp'd ship last? How much interest will there be in each ship?

One other issue we haven't mentioned is average ship age.  If they continually amp every old ship, then they will have a bunch of old tired ships at some point in the future.

If you assume a 30 year life expectancy, then you want to target a median age of 15 years.  Royal currently has 26 ships in the fleet.  That means they need to build a new ship about every 13 months to keep the fleet size constant and the median age about 15 years.

Put simply, Royal has to continue to build ships in order to remain viable.

[Va4fam]

@Twangster......your remodeling example works but a more accurate scenario is having a rental house that you remodel to stay competitive with other rental houses or perhaps charge higher rates to get a better return on investment.  

[PL8SWPR]

14 hours ago, D Alt said:

yeah i get that twangster about being in debt but it hasn't stopped them from building 2 brand new ships.  I'm just trying to figure out how putting over a billion dollars into a brand new ship is going to get them out of debt vs. only spending 120 million to refurbish.  

 

Liberty is sailing full so spending money on it really isn't going to improve the bottom line all that much.  Sure they can slightly increase price due to the upgrades, but not much.  Still an old ship.

New ships means new profit, more yearly passengers overall.

 

I do have Liberty booked for the Oct 31 sailing.  I think we got a hump balcony for $1400 on a 6 night to Mexico and Cococay.  Chose it really for the itinerary as we've never done Mexico before.  I'm not all that hard to please when it comes to ships, but I will miss Playmakers.

[twangster]

2 hours ago, PL8SWPR said:

 

Liberty is sailing full so spending money on it really isn't going to improve the bottom line all that much.  Sure they can slightly increase price due to the upgrades, but not much.  Still an old ship.

New ships means new profit, more yearly passengers overall.

 

I do have Liberty booked for the Oct 31 sailing.  I think we got a hump balcony for $1400 on a 6 night to Mexico and Cococay.  Chose it really for the itinerary as we've never done Mexico before.  I'm not all that hard to please when it comes to ships, but I will miss Playmakers.

She is sailing full and that includes the typical 50% plus a bit of guests who have never sailed Royal before.

Not a great way to Wow! a new guest.  "I sailed Royal and the ship was meh, kind of run down.  Next time I'll try...". 

[Vancity Cruiser]

I'm sure Royal would love to amplify all their ships, and I would love for them to do it. However, I am not prepared to have cruise fares triple in price to cover it

[OCSC Mike]

29 minutes ago, Vancity Cruiser said:

I am not prepared to have cruise fares triple in price to cover it

 

They've gone up enough as-is. 

[Robert M]

2 hours ago, twangster said:

She is sailing full and that includes the typical 50% plus a bit of guests who have never sailed Royal before.

 

Yeah that’s my wife and daughter this July, Liberty was a short 4 night so I can see if they like cruising, I was on Navigator back in 2002 for her shakedown cruise and loved it, my fear is they will think it’s an old run down ship….

[Rackham]

8 hours ago, steverk said:

The life expectancy is about 30 years, but it can last longer with a lot of love.  By 40, you're looking at a really tired vessel.

So, there are several things Royal needs to consider in the amp/replace decision. How much does each option cost? How long will the amp'd ship last? How much interest will there be in each ship?

One other issue we haven't mentioned is average ship age.  If they continually amp every old ship, then they will have a bunch of old tired ships at some point in the future.

Voyager, Radiance, and Voyager-class vessels will be hitting the big 3-0 within a decade. Freedom-class not too long after. 

I would expect if Royal will be introducing a smaller ship compared to Icon, we'll hear about it within this decade. It'd give them something big to market after their final Oasis-class ship. With that said, off the top of my head, the three Icon-class ships combined have approximately the passenger capacity of Vision and Radiance-class together, if not more. If Royal decided to get out of the small ship business, they could send off their smallest vessels without taking a capacity hit from a before and after Icon-class perspective. I suspect, however, that Royal will decide to introduce a new ship class with around 4,000 capacity to take over the role Radiance and Voyager-classes currently fill. It's highly unlikely with their current business strategy that we'll ever see a new ~2,500-passenger Royal Caribbean ship.

 

[Geezer Of The Seas]

Bigger is not necessarily better IMO; maybe for the RCCL executive suite and the bean counters, but not for my wife and I. We've sailed three classes of vessel, Navigator (Mariner), Radiance (Jewel), and Oasis (Wonder). Mariner was our absolute favorite and our first. We sailed in early 2022 when capacity limits were still in place. We sailed with only 1800 passengers (and a Grand Suite for $1800!) Jewel was at 100% double occupancy. Both  were  a joy to be on, though Mariner was definitely an outlier. Then there was Wonder last month. We came, we seen, we experienced, but we won't do it again. But that's us. Doesn't bigger also mean there's some ports excluded due to size? As it is, our ABC trip on Jewel last November was I guess among the last before Bonaire imposed port visit restrictions/ # of ships/passengers daily? The day we visited Bonaire, Celebrity Edge, HAL Rotterdam (I think) were also calling. 

Since it seems a ship service life appears to be 3 decades, we'll miss Mariner when she winds up beached somewhere for breakup. Until then................

[Ampurp85]

2 hours ago, Geezer Of The Seas said:

Bigger is not necessarily better IMO; maybe for the RCCL executive suite and the bean counters, but not for my wife and I. We've sailed three classes of vessel, Navigator (Mariner), Radiance (Jewel), and Oasis (Wonder). Mariner was our absolute favorite and our first. We sailed in early 2022 when capacity limits were still in place. We sailed with only 1800 passengers (and a Grand Suite for $1800!) Jewel was at 100% double occupancy. Both  were  a joy to be on, though Mariner was definitely an outlier. Then there was Wonder last month. We came, we seen, we experienced, but we won't do it again. But that's us. Doesn't bigger also mean there's some ports excluded due to size? As it is, our ABC trip on Jewel last November was I guess among the last before Bonaire imposed port visit restrictions/ # of ships/passengers daily? The day we visited Bonaire, Celebrity Edge, HAL Rotterdam (I think) were also calling. 

Since it seems a ship service life appears to be 3 decades, we'll miss Mariner when she winds up beached somewhere for breakup. Until then................

Mariner is voyager class, like Navigator.

[Geezer Of The Seas]

Correct. I knew the vessel class was called Navigator; it was the first in class, Mariner was the last? It was our first cruise, just a 4 day hike to Nassau and my wife's favorite new theme park Perfect Day. Birthday present as it were. Didn't do me any harm either. 

16 months later, 3 cruises have sailed nearly 6000 miles and visited places we never dreamed we would. Do we have a problem? 

Mariner, we'll meet again 1/29/24................

[twangster]

18 minutes ago, Geezer Of The Seas said:

Correct. I knew the vessel class was called Navigator; it was the first in class, Mariner was the last? It was our first cruise, just a 4 day hike to Nassau and my wife's favorite new theme park Perfect Day. Birthday present as it were. Didn't do me any harm either. 

16 months later, 3 cruises have sailed nearly 6000 miles and visited places we never dreamed we would. Do we have a problem? 

Mariner, we'll meet again 1/29/24................

Voyager Class consist of Voyager, Explorer, Adventure, Navigator and Mariner.  That's the order they were built.  

 

[smokeybandit]

I'm still a bit bummed RC did the Adventure/Voyager swap for this summer.  That would have completed the series on Voyager class for us.

 

[WAAAYTOOO]

1 minute ago, smokeybandit said:

I'm still a bit bummed RC did the Adventure/Voyager swap for this summer.  That would have completed the series on Voyager class for us.

 

Me too.  Voyager is the only one we haven’t sailed on.

[twangster]

Same.  But she's coming in 2024!  At least until they swap her again.  

[USFFrank]

5 hours ago, Geezer Of The Seas said:

 Doesn't bigger also mean there's some ports excluded due to size? 

 Yes. There are quite a few ports in the world that Royal sails to that can only done on their smaller ships. I'm not a bean counter, but IMHO they would be making a mistake by not building some new smaller ships to take the place of the older ones once they are retired by Royal. 

[twangster]

Having only the Suez Canal to move between oceans will soon be a limiting factor for Royal.  They need to have something that is neo-panamax capable in the fleet similar to Edge class on Celebrity. 

Radiance class has a few years left but they are older and they use more expensive fuel.  At their Panamax size there isn't any room on them to amplify or upgrade in a meaningful way.  They are too small and while they turn a profit where they are used they are leaving money on the table.  As they continue to age their operating costs will go up further reducing the opportunity to maximize net income potential.  

Something around the size of Edge class allows them to use the Edge platform without starting completely from scratch.   

[Mr. Green]

It may not be economical to amp a ship due to size, age, etc. You can only do so much with the space you have and at a certain point engineering does come into play with what can be done. This really would apply to older ships. Also, the cruise industry like everything else is a case of "keeping up with the Jones's". Other companies are building bigger floating cities with multiple entertainment venues and dining options. It seems that was the industry is demanding these days. While you may have a small market share of people that enjoy a smaller ship, it is going to come down to dollars, profit, and getting people on the ships.

[Jill]

I have this sinking feeling (pun intended) that as the smaller ships age out, Royal will push that demographic to Celebrity. Celebrity will fill the void of Vision, Radiance and even Voyager class. They will become the replacement while Royal continues to build behemoths that can sail to maybe 10 ports but begin turning a profit at 31% occupancy. I love my oasis class but cruising is way more than the Caribbean. I’ve got a bucket list to tackle! 

If that happens I’m ok with it as long as the loyalty level gives me my 5 drinks and not just a 2 hour happy hour. 

[steverk]

13 minutes ago, Jill said:

I have this sinking feeling (pun intended) that as the smaller ships age out, Royal will push that demographic to Celebrity. Celebrity will fill the void of Vision, Radiance and even Voyager class. They will become the replacement while Royal continues to build behemoths that can sail to maybe 10 ports but begin turning a profit at 31% occupancy. I love my oasis class but cruising is way more than the Caribbean. I’ve got a bucket list to tackle! 

If that happens I’m ok with it as long as the loyalty level gives me my 5 drinks and not just a 2 hour happy hour. 

My guess is Royal will continue to build ever larger ships.

However,  I also think a medium sized class will also be announced. 

Why? Because I don't believe Royal will abandon places like Northern Europe or Alaska.  Norway in particular won't support huge ships.

Could I be wrong? Could Royal Caribbean Group decide that Celebrity and SilverSea is enough for these markets? Anything is possible. 

[OCSC Mike]

FWIW, there are rumors that RC will be building a new class roughly the size of Voyager class. These would be the future “small” ships.

Just something I’ve read. I’m no expert on this sort of thing.