Two new mid size ships starting 2022

[Gail & Marty sailing away]

On 1/12/2019 at 6:54 PM, OlsSalt said:

 

If passengers only want verandah cabins, why is HAL still selling out their inside and oceanview? Apparently there is a market for this price point still. 

I agree.

[AL3XCruise]

21 hours ago, RDC1 said:

What they found was that they can make a profit in the primarily UK market, by not having to outlay substantial amounts of capital to buy new ships. The article you quoted indicates that their complete valuation of all four of their ships is 48,691,000 pounds or about 64 million dollars.  

 

I think your assessment is spot on.  Neither Olson's parent nor Carnival report detailed financials for operations of specific lines, but some rough numbers for Carnival show an EBITDA of around $4.7 billion USD on $17.5 billion in revenue in 2017.  That gives an EBITDA to revenue ratio of about 27%.  

 

Olson reports about $40 million USD (using today's exchange rate for 2017 data, but its close) on $252 million in revenue, or about 16%. 

 

I would have preferred to use NI for comparison but couldn't find a number for Olson that I felt was reliable enough.  The numbers above are out of 2017 annual reports for Carnival and Bonheur ASA.  They are also back of the envelope calculations--but I think enough to be germane to the discussion.

 

Different business models yield different results, and obviously Olson is profitable in their niche.  As RDC1 notes, they don't need to service debt on multi-hundred-million dollar new ships, which is a big part of that profitability.  But If Carnival can invest in ships offering far higher ROIs and chose to spend money elsewhere they would be crucified by their investors.  

 

Olson, as a smaller organization and new entrant, is smart to pursue a segment that is of limited interest to their competitors.  If the markets they are currently targeting become saturated, Carnival may very well explore moving HAL or another brand into the Olson territory, but probably not until then.

[OlsSalt]

26 minutes ago, AL3XCruise said:

........

Olson, as a smaller organization and new entrant, is smart to pursue a segment that is of limited interest to their competitors.  If the markets they are currently targeting become saturated, Carnival may very well explore moving HAL or another brand into the Olson territory, but probably not until then.

 

HAL is already well into Olsen territory, but it is now abandoning it.  Unlikely they will move back into it. However, Olsen expanding into the NA market with their excellent offerings and who knows, maybe some the older HAL grand dames soon to get phased out, would be a very welcome niche.

 

If Olsen is still sailing a Prinsendam sister ship (Boudicca), they do have more faith in its original stock than the new bigger is better HAL is considering.   HAL is too much of a mish mash today - so it does need to decide - bigger or smaller. ( Verdict is in)   Why new and bigger HAL does not get collapsed into the Princess brand remains a mystery to me.  What part of the bigger ship market do they intend to carve out for themselves?

 

 We fell in love when HAL was almost all smaller, and watched it start  dosing on steroids with the intro of the still relatively petite Euro and NA, by today's mega ship standards. Each new HAL addition diminishes our own interest in the HAL brand - there is no future for us or cruising on HAL's larger ships.  

 

But Olsen now does get a nod to see how it actually delivers, what it presents in its marketing - how clunky are its older ships - and how high up in cabin category does one need to go to get something equivalent to the normal HAL experience. Voyages of Discovery tried using an older German built ship and it was ultimately a very poor substitute  for its unique programs. it will also be interesting to see how well the Prinsendam does as the new German Phoenix brand.

 

The whole industry is like one big watery chess board.  Or maybe that is a Ouija board. 

Edited January 15, 2019 by OlsSalt

[RDC1]

2 hours ago, OlsSalt said:

 

HAL is already well into Olsen territory, but it is now abandoning it.  Unlikely they will move back into it. However, Olsen expanding into the NA market with their excellent offerings and who knows, maybe some the older HAL grand dames soon to get phased out, would be a very welcome niche.

 

If Olsen is still sailing a Prinsendam sister ship (Boudicca), they do have more faith in its original stock than the new bigger is better HAL is considering.   HAL is too much of a mish mash today - so it does need to decide - bigger or smaller. ( Verdict is in)   Why new and bigger HAL does not get collapsed into the Princess brand remains a mystery to me.  What part of the bigger ship market do they intend to carve out for themselves?

 

 We fell in love when HAL was almost all smaller, and watched it start  dosing on steroids with the intro of the still relatively petite Euro and NA, by today's mega ship standards. Each new HAL addition diminishes our own interest in the HAL brand - there is no future for us or cruising on HAL's larger ships.  

 

But Olsen now does get a nod to see how it actually delivers, what it presents in its marketing - how clunky are its older ships - and how high up in cabin category does one need to go to get something equivalent to the normal HAL experience. Voyages of Discovery tried using an older German built ship and it was ultimately a very poor substitute  for its unique programs. it will also be interesting to see how well the Prinsendam does as the new German Phoenix brand.

 

The whole industry is like one big watery chess board.  Or maybe that is a Ouija board. 

But HAL is not really in Olson's territory because they do not sail old ships.  They build or buy ships much earlier in their lifetime.  Looking at the most recent data on new smaller ship build  in 2012 Oceania paid 380 million for the Riveria and in 2018 Seabourn paid $585 million for the 650 passenger Ovation. So Oceania 1 ship build 7 years ago cost 6 times what the value of Olsons entire fleet.

 

There are NO new small ships getting built below the premium brand level, because the economics do not make sense in the mass market fare range. You can have some attempts to sail small ships at lower prices such as Fred Olson, but they will at best be very small niche markets.  Others have tried and usually have failed. If it wasn't for CCL who purchase HAL and under whose ownership all of the current HAL ships were purchased or obtained, HAL would most likely not have survived either. 

[RDC1]

If you look at the HAL ships that they have purchased the purchase cost per passenger has been less than $175,000 per passenger with the exception of Amsterdam in 2000 at $241,000 (which was the last of its class) and Konigsdam at $208,000 per passenger. So Hal could build the much larger Nieuw Amsterdam in 2010 for the $175,000 per passenger for $450 million, not much more and substantially less per passenger than the Amsterdam 10 years earlier that cost them $400 million.

 

For comparison Oceania's Riveria is 2012 cost them $380,000 per passenger berth over twice what HAL pays per berth on its builds.

 

 

Edited January 15, 2019 by RDC1

[cruisemom42]

16 minutes ago, RDC1 said:

If you look at the HAL ships that they have purchased the purchase cost per passenger has been less than $175,000 per passenger with the exception of Amsterdam in 2000 at $241,000 (which was the last of its class) and Konigsdam at $208,000 per passenger. So Hal could build the much larger Nieuw Amsterdam in 2010 for the $175,000 per passenger for $450 million, not much more and substantially less per passenger than the Amsterdam 10 years earlier that cost them $400 million.

 

For comparison Oceania's Riveria is 2012 cost them $380,000 per passenger berth over twice what HAL pays per berth on its builds.

 

 

 

A very concrete example of what I mentioned (a couple of pages ago!) regarding the economies of scale when building new ships.  

 

[RDC1]

41 minutes ago, cruisemom42 said:

 

A very concrete example of what I mentioned (a couple of pages ago!) regarding the economies of scale when building new ships.  

 

You have similar economies of scale when it comes to ship operations as well.

[sattva]

This is a fascinating thread; thanks to all who are participating.  I sincerely hope the contributors who think there is an American market still for mid-size ships visiting some smaller ports are right.  My wife and I started traveling in "Europe on $5 a Day" era and are still "low frills:" cruisers. 

 

For the Caribbean, Celebrity Reflection is ideal for us as a floating resort in January.  Otherwise, we are itinerary-focused cruisers.  We prefer the Med and have been happy with HAL's smaller ships.  We're on Prinsendam to Norway in June because of ship size but, even more, thanks to new-to-us ports such as the North Cape, Trondheim, Narvik, and Tromso.  But we'd never go on a mega-ship or a super-luxury line.  Couldn't stand the former nor afford the latter.

 

Whether there really are 15,000 travelers like us, as OlsSalt envisions, is a good question. British lines such as Fred. Olsen and Saga may be on the way to an answer.   Many of their passengers are older Brits who are content with small cabins, little glitz, and modest entertainment.  We enjoy this kind of travel--and had a fine river cruise in Portugal last year with a British outfit..  I'm looking now at a Fred. Olsen cruise that goes from Tenerife to Cape Town with stops along the coast of Africa and at St. Helena and Ascension Islands.  For about four weeks in an ocean-view cabin, the cost is around $4500 per person or $175/day including drinks and gratuities.  

 

Economies of scale will probably prevent American lines from continuing  to provide the kind of cruising we like at a price we can bear.  But some European lines may be answer for now.

[OlsSalt]

How much does it cost to build and furnish an intentional "luxury" ship per passenger, as compared to a less luxurious outfitted and build?  How valid is the $380,000 per passenger cost when it is an Oceania ship vs a HAL comparable size ship.

 

The recently posted PBS video on building the luxury small ship (Regent? Oceania?) demanded that ship reach a "comfort" class status which was the very top of the game. This required the most precision designed and executed propellers ever to date constructed to reduce vibration and cavitation that qualified them to reach this special "comfort" class claim. Along with luxury fittings everywhere they could be installed. 

 

We value-cruisers do put up with a less sanitized onboard setting, and are willing to hear and feel and even smell  the ships we are on. 

Edited January 16, 2019 by OlsSalt

[RDC1]

35 minutes ago, OlsSalt said:

How much does it cost to build and furnish an intentional "luxury" ship per passenger, as compared to a less luxurious outfitted and build?  How valid is the $380,000 per passenger cost when it is an Oceania ship vs a HAL comparable size ship.

 

The recently posted PBS video on building the luxury small ship (Regent? Oceania?) demanded that ship reach a "comfort" class status which was the very top of the game. This required the most precision designed and executed propellers ever to date constructed to reduce vibration and cavitation that qualified them to reach this special "comfort" class claim. Along with luxury fittings everywhere they could be installed. 

 

We value-cruisers do put up with a less sanitized onboard setting, and are willing to hear and feel and even smell  the ships we are on. 

As I stated earlier the Amsterdam in 2000 cost 400 million, $241,000 per passenger at full capacity.   So at best increase that for inflation to get a similar HAL ship.  That is significantly more than the 175000 per passenger that HAL seems to be fairly consistent on HAL builds.  HAL also built the Nieuw Amsterdam, a considerably larger ship in 2010 for 450 million  and 175,000 per passenger at full capacity.

 

So lets just say that you could build a ship the size of Amsterdam for the same price as 19 years ago, not likely, but lets use that assumption.

 

Then to maintain the same profitability on that ship as the Nieuw Amsterdam your fare would have to be 38% higher just to account for the increased capital expenditure per passenger. Then if you look at crew to passenger ratio  Am  647/1380=.47 compared to NAm 929/2106=.44 (if you assume similar average crew costs, which again is not likely due to having similar numbers of technical staff, so most of the increase is lower paid hotel workers, but to keep it simple lets assume the same ratio) that means that the crew costs would be 7% higher per passenger.  So that makes the difference in fare to be at least 45% for a similar profit margin.  By the time you add in fuel efficiency and other items of scale  you get a fare structure where you would need to charge over 50% higher for an AM class ship compared to a NAm class ship to have similar profitability.  And that is IF you could build that size ship at that cost today considering that the Nieuw Amsterdam was built 10 years later.

 

How many would pay over 50% more for similar cabins between those two ships? For that matter would you?  The numbers are probably actually worse.

Edited January 16, 2019 by RDC1

[OlsSalt]

How much does it cost to build a non-luxury smaller ship compared to the luxury ship price per passenger quoted above?  So much speculation still going on this topic.   Let's do make that an R class type ship - new build.

 

Even if HAL does not choose to build any more R class ships, I just would like to know the non-luxury ship building costs differentials for that size - if the prices quoted here keep insisting they will need to be luxury ship builds.

 

How  much of the original R class design and engineering would need to be scrapped in order to still produce a viable smaller ship in today's market - cost savings upfront there if it does not need significant re-engineering of this classic ship suitable for the 1200 passenger model.   How about bulk order pricing?

 

Only real change I would make in a new R class is superficial only - put the casino and smokers in the interior Pinnacle dining area and the Pinnacle up where the casino is located. Hate that dead end that blocks the flow of the aft stair case top to bottom, but that would be the only tweak I would make.

 

If HAL saturates the large ship market, or  more likely fails to offer a competitive advantage to retain a larger ship market share, how profitable will new large HAL ship builds in the first place.  

 

Sounds like there is a lot of febrile market chasing going on at HAL, and an organization management that is singularly ill-equipped to make any predictions about the future of cruising in the first place. 

 

Edited January 16, 2019 by OlsSalt

[RDC1]

11 hours ago, OlsSalt said:

How much does it cost to build a non-luxury smaller ship compared to the luxury ship price per passenger quoted above?  So much speculation still going on this topic.   Let's do make that an R class type ship - new build.

 

Even if HAL does not choose to build any more R class ships, I just would like to know the non-luxury ship building costs differentials for that size - if the prices quoted here keep insisting they will need to be luxury ship builds.

 

How  much of the original R class design and engineering would need to be scrapped in order to still produce a viable smaller ship in today's market - cost savings upfront there if it does not need significant re-engineering of this classic ship suitable for the 1200 passenger model.   How about bulk order pricing?

 

Only real change I would make in a new R class is superficial only - put the casino and smokers in the interior Pinnacle dining area and the Pinnacle up where the casino is located. Hate that dead end that blocks the flow of the aft stair case top to bottom, but that would be the only tweak I would make.

 

If HAL saturates the large ship market, or  more likely fails to offer a competitive advantage to retain a larger ship market share, how profitable will new large HAL ship builds in the first place.  

 

Sounds like there is a lot of febrile market chasing going on at HAL, and an organization management that is singularly ill-equipped to make any predictions about the future of cruising in the first place. 

 

 

 

1. the last R class ship cost 400 million in 2000.

 

2. there have not been any ships built in that price range or smaller since, except by premium lines, with one exception Aida built the Aura in 2003 for 350 million (207,000 per passenger)

 

3. HAL builds ships in the 175,000 per passenger berth range or lower and the last R class cost them significantly more then that.

 

4. cruise lines are limited in the number of ships that they are building due to limited shipyard space building them, so even if someone wanted to build smaller ships they would have a problem getting yard space, thus the fact that the smaller ships being built are higher than one might expect for ships of their size.

 

The best source of cruise ship costs out there, showing the cost of most ships, including date built, or acquired, cost and cost per passenger berth is https://www.cruisemapper.com/wiki/759-how-much-does-a-cruise-ship-cost

[OlsSalt]

Fuzzy math here: 207,000 per passenger new builds divided by 30 year useful life requires 1200 passengers to pay back just $9,000 each year ,just one time a year to pay back the initial capital outlay for the original new build.

 

270,000 per passenger build cost divided by 30 years = $9000 per passenger per year. Let's say HAL makes $5000 per passenger every 30 days.. (average $166 per day fares) or $60,000 a year per passenger.

 

That leaves $51,000 a year per passenger to run the ship. ($61 million a year per ship) Having fun with numbers here-all are variable for different outcomes and agendas.

 

Beyond those very crude figures,  I know absolutely nothing about ship operating costs -just working with those very sketchy fundamental numbers. But this does help to  understand the Fred Olsen model,  since they don't have to pay of new- builds, but do have to payoff purchase prices for older ships. And perhaps provide for a higher degree of ongoing maintenance - or not. 

 

 

[AL3XCruise]

First of all this is a great discussion... it seems like talks about business strategy elsewhere on this board often fall apart fairly quickly due to personal attachment to certain lines.  Here everyone is sharing thoughts and insights in a friendly way.

 

1 hour ago, RDC1 said:

 

The best source of cruise ship costs out there, showing the cost of most ships, including date built, or acquired, cost and cost per passenger berth is https://www.cruisemapper.com/wiki/759-how-much-does-a-cruise-ship-cost

 

I looked at that site but was hesitant to post it as I wasn't sure how they sourced there info.  I'm not saying its wrong, I just generally don't like to repost data that I haven't been able to verify from multiple sources or from a primary source, like a annual report.  I'm guessing the information is mostly accurate, but there are some inconsistencies in the presentation.  For example Allure OTS (where it notes maximum passenger capacity) and Oasis OTS (where it notes double occupancy).  That makes Allure's cost per berth far less.  Still, the cost for ship seems to line up anytime I've cross referenced with another source.

 

I know the focus here is HAL, but it is interesting to note that the Oasis class ships generally cost more per berth than smaller RCI vessels.  I don't know if that is due to the amenities, some technical issues on a ship that large, or something else entirely.  As pointed out by others, luxury ships also tend to be more expensive per berth, and not many small non-luxury ships have been built recently.  In short, while my hunch would be bigger is cheaper per berth all else being equal, its tough to draw broad conclusions about construction costs without more data.  

 

Operations are different.  I think it is fairly well understood that while hotel staff increases more or less proportionally to passenger count (assuming the same level of service), the rest of the crew only increases slightly as the ship grows.

 

1 hour ago, OlsSalt said:

Fuzzy math here: 207,000 per passenger new builds divided by 30 year useful life requires 1200 passengers to pay back just $9,000 each year ,just one time a year to pay back the initial capital outlay for the original new build.

 

270,000 per passenger build cost divided by 30 years = $9000 per passenger per year. Let's say HAL makes $5000 per passenger every 30 days.. (average $166 per day fares) or $60,000 a year per passenger

 

I understand you say the math is fuzzy.  Based on https://cruisemarketwatch.com/financial-breakdown-of-typical-cruiser/, which averages data from several lines annual reports, your revenue number is pretty close.  If you assume that all depreciation and interests expenses are related to ship acquisition (they aren't, but we are being fuzzy), the average is about $455 per week left over for ship acquisition (and profit).  Target returns vary by industry, but if we assume 10% as a typical minimum, you are left with a loss of more than $50,000 over 30 years (assuming operating costs and ticket prices both follow the same inflation curve).

 

Obviously, a small ship may be able to charge slightly more.  However, it can also be argued that a small ship will see less revenue from onboard spending due to fewer offerings.  Furthermore, a small ship will likely cost more per passenger to operate than the industry average.  I don't have the time or resources to dig into that kind of nitty gritty, but I'm guessing Carnival Corp does it all the time.

 

I will agree that as the different brands jockey for market segments on the "big watery chess board" it creates some confusion about what they actually are.  I don't have experience with either line HAL or Princess, but as someone who has been looking at them as a possible change from my normal lines they seem to be getting more similar.  I almost wonder if in the long term Carnival sees Princess as following Celebrity's apparent move towards an affluent younger crowd that wants an upscale yet fun alternative to CCL.   HAL then moves into Princess territory to pick up the slack while improving operating margins.  Sadly that likely means certain HAL aspects will be lost.

 

 

 

[jeff92k7]

So I just came across this thread.  My wife and I are Carnival cruisers but are seriously looking at moving "up" to HAL in the next couple of years as our kids grow and we no longer need the family activities and atmosphere that Carnival provides.  Everything I see about HAL basically works exactly like Carnival (which we like) but is a step or two up in quality.  We're not rich so we will never go on the ultra luxury lines, but something like HAL sounds perfect for us.
 
After reading this thread and all the talk of new ships, I had a couple of comments.  Most of the talk is about new ship builds which are too expensive (and I totally get that).  However, no one has said much about refitting older ships and I haven't seen anyone mention the possibility of bringing over ships from Carnival's other brands.  For example, the Spirit class of ships that Carnival uses are ~88,000 tons and ~2100 passengers.  Those are also mostly balcony cabins and seem right in line with what we see on HAL.  Those ships would be a great option for Carnival to refurbish and transfer to HAL.  
 
Carnival already has experience refitting ships.  They have recently done major refits on the Elation and Paradise (Fantasy class ships) as well as the Destiny (now Sunshine), and they have plans to do two more Destiny class ships (the Triumph and Victory).  Those Destiny class refits are so extensive that Carnival has totally renamed the ships and is calling them Sunshine class ships now.
 
Refits are far more cost effective than new builds and can allow Carnival corp and it's many brands to keep ships in service much, much longer which continues to make money for the company and keep fares lower.
 
As to the comments about no cruise line keeping ships older than 30 years...  I just don't see that as being an issue at this point.   When we were on the Fantasy last year, we did the behind the scenes tour and one of the things we learned was that the Fantasy (1991) was the first cruise ship with diesel electric propulsion instead of direct drive propulsion.  This means that the props are turned with electric motors that get their power from multiple generators as opposed to a large engine directly turning them.  In practice, this is a lot more reliable and can, and likely will, keep ships in service much longer.  It is far easier and more cost effective to replace one of 7 generators than it is to replace an entire direct drive engine. 
 
Previous classes of ships would see dramatic increases in maintenance costs as they age which led to earlier retirements on those ships versus the newer ships.  As such, it is entirely feasible that Carnival may continue to refit ships and could keep them in service for 30 or 40 years (or more) provided the hulls remain in good condition.  Everything else inside could be gutted and replaced, keeping the ships like new.
 
This is even more possible when you think that Carnival is building these new 5000-6000 passenger monstrosities (Mardi Gras).  Eventually, they will have to do something with the smaller ships as the big ones take over sailings.  They can't keep adding more home ports indefinitely.  Since building smaller ships is not cost effective, the idea of refitting and moving the ships to other lines (like HAL) enables them to continue to make money and keep the tiered brand structure in place servicing all types of customers in the cruise market.

Edited January 16, 2019 by jeff92k7

[RDC1]

4 minutes ago, AL3XCruise said:

First of all this is a great discussion... it seems like talks about business strategy elsewhere on this board often fall apart fairly quickly due to personal attachment to certain lines.  Here everyone is sharing thoughts and insights in a friendly way.

 

 

I looked at that site but was hesitant to post it as I wasn't sure how they sourced there info.  I'm not saying its wrong, I just generally don't like to repost data that I haven't been able to verify from multiple sources or from a primary source, like a annual report.  I'm guessing the information is mostly accurate, but there are some inconsistencies in the presentation.  For example Allure OTS (where it notes maximum passenger capacity) and Oasis OTS (where it notes double occupancy).  That makes Allure's cost per berth far less.  Still, the cost for ship seems to line up anytime I've cross referenced with another source.

 

I know the focus here is HAL, but it is interesting to note that the Oasis class ships generally cost more per berth than smaller RCI vessels.  I don't know if that is due to the amenities, some technical issues on a ship that large, or something else entirely.  As pointed out by others, luxury ships also tend to be more expensive per berth, and not many small non-luxury ships have been built recently.  In short, while my hunch would be bigger is cheaper per berth all else being equal, its tough to draw broad conclusions about construction costs without more data.  

 

Operations are different.  I think it is fairly well understood that while hotel staff increases more or less proportionally to passenger count (assuming the same level of service), the rest of the crew only increases slightly as the ship grows.

 

 

I understand you say the math is fuzzy.  Based on https://cruisemarketwatch.com/financial-breakdown-of-typical-cruiser/, which averages data from several lines annual reports, your revenue number is pretty close.  If you assume that all depreciation and interests expenses are related to ship acquisition (they aren't, but we are being fuzzy), the average is about $455 per week left over for ship acquisition (and profit).  Target returns vary by industry, but if we assume 10% as a typical minimum, you are left with a loss of more than $50,000 over 30 years (assuming operating costs and ticket prices both follow the same inflation curve).

 

Obviously, a small ship may be able to charge slightly more.  However, it can also be argued that a small ship will see less revenue from onboard spending due to fewer offerings.  Furthermore, a small ship will likely cost more per passenger to operate than the industry average.  I don't have the time or resources to dig into that kind of nitty gritty, but I'm guessing Carnival Corp does it all the time.

 

I will agree that as the different brands jockey for market segments on the "big watery chess board" it creates some confusion about what they actually are.  I don't have experience with either line HAL or Princess, but as someone who has been looking at them as a possible change from my normal lines they seem to be getting more similar.  I almost wonder if in the long term Carnival sees Princess as following Celebrity's apparent move towards an affluent younger crowd that wants an upscale yet fun alternative to CCL.   HAL then moves into Princess territory to pick up the slack while improving operating margins.  Sadly that likely means certain HAL aspects will be lost.

 

 

 

I have not checked everything on that table, but I did go through and check the HAL ships we were talking about and the data did match other publicly available information.  Exact or not who knows, but it appears to be the best I can find.  

 

There are some inconsistencies in passengers, but the cost totals per passenger that I checked seemed to be based upon max capacity, not two berth capacity. I have not gone through any of the Royal numbers because the topic is primarily HAL and to some degree the CCL parent company.

 

In addition to crew costs, don't forget that larger ships are more cost effective when it comes to fuel costs per passenger as well.  Probably much more so than crew cost per passenger differences.  You also have the fact that docking fees are generally not per passenger, so while their might be some differences on ship tonnage, most docking costs seem to be fixed so the more passengers the lower the fee costs added on to the fares.

 

Mass market companies are pretty similar with 25-30% of revenue coming from on board sales. The primary reason that they don't like solo cruisers.  Even at a 100% markup for solo cabins they still lose money (more than their profit margin) compared to at least 2 per cabin.

 

What I come back to in the end is if there was money to be made, people would be doing it.  Businesses are very good at finding and taking advantage of opportunities.  The fact that no one is building ships in the R class size space for any mass market line, nor is there any new startup building or for that matter even buying older ships for use in the mass market price area, makes it pretty clear to me that there is no money to be made there with those ships at that price point. To make money at these sizes, you need to charge premium cruise line fares.

[RDC1]

37 minutes ago, jeff92k7 said:

So I just came across this thread.  My wife and I are Carnival cruisers but are seriously looking at moving "up" to HAL in the next couple of years as our kids grow and we no longer need the family activities and atmosphere that Carnival provides.  Everything I see about HAL basically works exactly like Carnival (which we like) but is a step or two up in quality.  We're not rich so we will never go on the ultra luxury lines, but something like HAL sounds perfect for us.
 
After reading this thread and all the talk of new ships, I had a couple of comments.  Most of the talk is about new ship builds which are too expensive (and I totally get that).  However, no one has said much about refitting older ships and I haven't seen anyone mention the possibility of bringing over ships from Carnival's other brands.  For example, the Spirit class of ships that Carnival uses are ~88,000 tons and ~2100 passengers.  Those are also mostly balcony cabins and seem right in line with what we see on HAL.  Those ships would be a great option for Carnival to refurbish and transfer to HAL.  
 
Carnival already has experience refitting ships.  They have recently done major refits on the Elation and Paradise (Fantasy class ships) as well as the Destiny (now Sunshine), and they have plans to do two more Destiny class ships (the Triumph and Victory).  Those Destiny class refits are so extensive that Carnival has totally renamed the ships and is calling them Sunshine class ships now.
 
Refits are far more cost effective than new builds and can allow Carnival corp and it's many brands to keep ships in service much, much longer which continues to make money for the company and keep fares lower.
 
As to the comments about no cruise line keeping ships older than 30 years...  I just don't see that as being an issue at this point.   When we were on the Fantasy last year, we did the behind the scenes tour and one of the things we learned was that the Fantasy (1991) was the first cruise ship with diesel electric propulsion instead of direct drive propulsion.  This means that the props are turned with electric motors that get their power from multiple generators as opposed to a large engine directly turning them.  In practice, this is a lot more reliable and can, and likely will, keep ships in service much longer.  It is far easier and more cost effective to replace one of 7 generators than it is to replace an entire direct drive engine. 
 
Previous classes of ships would see dramatic increases in maintenance costs as they age which led to earlier retirements on those ships versus the newer ships.  As such, it is entirely feasible that Carnival may continue to refit ships and could keep them in service for 30 or 40 years (or more) provided the hulls remain in good condition.  Everything else inside could be gutted and replaced, keeping the ships like new.
 
This is even more possible when you think that Carnival is building these new 5000-6000 passenger monstrosities (Mardi Gras).  Eventually, they will have to do something with the smaller ships as the big ones take over sailings.  They can't keep adding more home ports indefinitely.  Since building smaller ships is not cost effective, the idea of refitting and moving the ships to other lines (like HAL) enables them to continue to make money and keep the tiered brand structure in place servicing all types of customers in the cruise market.

Somewhere on cruise critic there is a posting by Chengkp75, an experienced large ship marine engineering officer, who has spent time working for cruise lines (specifically NCL if I recall right) where he discussed the drivers for increased costs past 30.  It includes more frequent inspections, with more in depth inspections having to be conducted.  I looked for and could not find that posting. Was hoping he would enter this discussion and give us the benefit of his experience concerning the age issue.

 

As far as Carnival continuing to use old ships why would they if they are less profitable then new ships?  Business's, atleast good ones, try to increase margin, not decrease it. They do, do things with older ships.  They sell them to someone like Fred Olson or some other European or Asian companies that will use such ships. If there is no market then they are scrapped.

 

Carnival with their lower price point have kept some ships past 30 years in the past for example the holiday was 34 when they got rid of it.  They do have new ships being added faster then their current fleet is aging so I expect the current Fantasy class ships to be retired as the new ships come online due to where they deploy their capacity.

Edited January 16, 2019 by RDC1

[OlsSalt]

What I keep coming back to is ..... "if money is to be made, people would be doing it" ... then how the heck is HAL not fixing its own website.

 

 How much money is HAL, the small to mid-size cruise line,  losing right now due to failed bookings lost on their nightmare website. Hate to see this recent self-inflicted marketing failure make it appear there is no market for a small to midsize, mid price cruise line.  

 

Yes, diving deeply into pure speculation here. Nor will we learn anything when the next CCL annual report comes out, but there are often gems that reveal part of the story in the obscure footnotes buried under the required and exhausting technical verbiage. I eagerly await its issue. 

Edited January 16, 2019 by OlsSalt

[jeff92k7]

1 minute ago, RDC1 said:

Somewhere on cruise critic there is a posting by Chengkp75, an experienced large ship marine engineering officer, who has spent time working for cruise lines (specifically NCL if I recall right) where he discussed the drivers for increased costs past 30.  It includes more frequent inspections, with more in depth inspections having to be conducted.  I looked for and could not find that posting. Was hoping he would enter this discussion and give us the benefit of his experience concerning the age issue.

 

As far as Carnival continuing to use old ships why would they if they are less profitable then new ships?  Business's, atleast good ones, try to increase margin, not decrease it.

 

I can't speak to the extra inspections and related costs, but that does make sense.  I don't know what that would be, but I would be curious to see how much more expensive that is and if those increased inspections go by the original date of the hull, or the date of some other equipment (last major refit, for example).
 
My comments about using older ships is that even though they may be less profitable per sailing than newer ships, there isn't the giant price tag of actually building a new ship that they have to subsidize over those sailings.  That would offset the reduced revenue per passenger, assuming the same ticket fares.   The older ships are all paid off and there is a big difference in a $20 million dollar refit, versus a $500 million dollar new build.   You can get a lot of sailings out of that older ship before the cost of that extra $480 million price tag would be paid off.   
 
I'm sure Carnival Corp has many a bean counter looking at all that stuff.  If those older ships weren't still profitable in some fashion, then the Fantasy class would have been retired already.  They are all over 20 years old and the oldest will hit 30 in two years.  Yet Carnival continues to refit them and just did major renovations/upgrades on two of them (the two newest that have azipod propulsion, which may have had some bearing on why those two got such big overhauls).  It seems Carnival has plans to keep at least some of them around for a while longer.  We know the Fantasy will hit 30 years old in service since they have already announced that sailings on her will continue into 2021.
 
Now, for sake of discussion, if they were to transfer one of their older Carnival ships to HAL, the cost per passenger would increase a bit since HAL does have higher fares than Carnival.  That additional per passenger revenue could, again, offset some of the costs of maintaining an older ship.  
 
I'm not saying that this is going to happen... just bringing it up as an option that no one had yet mentioned in this thread.

[OlsSalt]

BTW, I don't need two cabin clean-ups a day. One would do nicely. 

[RDC1]

1 minute ago, jeff92k7 said:

 

I can't speak to the extra inspections and related costs, but that does make sense.  I don't know what that would be, but I would be curious to see how much more expensive that is and if those increased inspections go by the original date of the hull, or the date of some other equipment (last major refit, for example).
 
My comments about using older ships is that even though they may be less profitable per sailing than newer ships, there isn't the giant price tag of actually building a new ship that they have to subsidize over those sailings.  That would offset the reduced revenue per passenger, assuming the same ticket fares.   The older ships are all paid off and there is a big difference in a $20 million dollar refit, versus a $500 million dollar new build.   You can get a lot of sailings out of that older ship before the cost of that extra $480 million price tag would be paid off.   
 
I'm sure Carnival Corp has many a bean counter looking at all that stuff.  If those older ships weren't still profitable in some fashion, then the Fantasy class would have been retired already.  They are all over 20 years old and the oldest will hit 30 in two years.  Yet Carnival continues to refit them and just did major renovations/upgrades on two of them (the two newest that have azipod propulsion, which may have had some bearing on why those two got such big overhauls).  It seems Carnival has plans to keep at least some of them around for a while longer.  We know the Fantasy will hit 30 years old in service since they have already announced that sailings on her will continue into 2021.
 
Now, for sake of discussion, if they were to transfer one of their older Carnival ships to HAL, the cost per passenger would increase a bit since HAL does have higher fares than Carnival.  That additional per passenger revenue could, again, offset some of the costs of maintaining an older ship.  
 
I'm not saying that this is going to happen... just bringing it up as an option that no one had yet mentioned in this thread.

First for a transfer to HAL to take place they would need to be refit into the look and feel of a HAL ship, which is significantly different than a Carnival ship so there would be substantial remodeling costs. Second there would have to be a perceived need, which I doubt HAL will have. Third the Fantasy class ships are in the 2000 passenger range, considerably larger then the R class ships being discussed. About the same size as the Eurodam built in 2008 which many of the traditional HAL cruisers consider to be far too large.

 

 

[RDC1]

20 minutes ago, OlsSalt said:

What I keep coming back to is ..... "if money is to be made, people would be doing it" ... then how the heck is HAL not fixing its own website.

 

 How much money is HAL, the small to mid-size cruise line,  losing right now due to failed bookings lost on their nightmare website. Hate to see this recent self-inflicted marketing failure make it appear there is no market for a small to midsize, mid price cruise line.  

 

Yes, diving deeply into pure speculation here. Nor will we learn anything when the next CCL annual report comes out, but there are often gems that reveal part of the story in the obscure footnotes buried under the required and exhausting technical verbiage. I eagerly await its issue. 

HAL has far far more information than any of us here will ever have.  No one says that there is not a market.  What people are saying is that there is not a profitable market for new ships at HAL's price point.

[kazu]

24 minutes ago, jeff92k7 said:

My comments about using older ships is that even though they may be less profitable per sailing than newer ships,

 

Just to add an interesting fact to the discussion - The Prinsendam, the smallest ship in the fleet is still the most profitable PER passenger in the fleet.  that includes on board spending not just cruise cost (although cruise cost is pricier).

 

Yet, that ship is going.  Go figure!

[RDC1]

5 minutes ago, kazu said:

 

Just to add an interesting fact to the discussion - The Prinsendam, the smallest ship in the fleet is still the most profitable PER passenger in the fleet.  that includes on board spending not just cruise cost (although cruise cost is pricier).

 

Yet, that ship is going.  Go figure!

It clearly charges the highest fares. On the cruises I have checked it has been anywhere from 25% to 50% higher on a per day per passenger basis.   It was a ship that HAL obtained relatively cheaply, unlike a new build.  So if the operational costs are less than 25% higher per passenger per day it might just be.  Where are you getting the expense data?

 

It is still going away this year.  So would not expect HAL to hang on to the R class for more than 30.

[kazu]

1 minute ago, RDC1 said:

Where are you getting the expense data?

From the officers of the ships.

 

And not just the Prinsendam 😉. 

The 2nd most profitable announced they were first and then muttered softly - next to the Prinsendam, of course.

 

It's held that status for a very long time.  It's more expensive to run with the higher crew to passenger ratio and maintenance costs for sure, but it's a profit maker for HAL.