Royal Caribbean’s $1 billion deal shows demand for cruises off the beaten path
Royal Caribbean Cruises dove head-first into luxury and expedition cruising with its latest deal.
The Miami-based cruise company RCL, +0.89% said Thursday that it had agreed to pay roughly $1 billion to acquire a 66.7% stake in Silversea Cruises, a privately-owned cruise company headquartered in Monaco that specializes in luxury and expedition cruises.
‘Expedition cruise lines used to be about people who wanted to take pictures of birds and didn’t mind eating oatmeal in a cafeteria for breakfast.’ Doug Gollan, editor of luxury travel newsletter DG Amazing Experiences
Silversea has nine ships. Its five larger ships mainly travel to larger, more popular tourist destinations such as Alaska, Iceland and Bali. The company’s four expedition-class ships voyage to smaller, more remote locations such as Svalbard, a Norwegian archipelago positioned between mainland Norway and the North Pole, Easter Island, the Galapagos and Antarctica, all locations that larger ships have difficulty accessing.
Royal Caribbean struck the deal to fill a gap in the company’s portfolio, Royal Caribbean Chief Executive Richard Fain told MarketWatch. “The ultra-luxury and expedition markets are growing so much more exponentially than other markets,” he said.
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Though the company offered premium and ecotourism cruises through its Azamara and Celebrity brands, it lacked a true ultra-luxury line unlike its competitors Carnival Corp. CCL, +1.53% and Norwegian Cruise Line NCLH, +0.92% Carnival owns Seabourn Cruise Line, while Norwegian has Regent Seven Seas Cruises.
Royal Caribbean also has partial ownership of Pullmantur Cruises and operates TUI Cruises as a joint-venture with German tourism company TUI Group TUI1, -1.48%
Expedition cruising can be elegant — and expensive
“Expedition cruise lines used to be about people who wanted to take pictures of birds and didn’t mind eating oatmeal in a cafeteria for breakfast,” said Doug Gollan, editor of luxury travel newsletter DG Amazing Experiences.
“Now they’re going from being like Jacques Cousteau diving at a reef to 800-thread-count linens and sipping on Champagne,” he added.
‘Now they’re going from being like Jacques Cousteau diving at a reef to 800-thread-count linens and sipping on Champagne.’ Doug Gollan, editor of luxury travel newsletter DG Amazing Experiences
Despite all of this fervor, the expedition sector is still small compared to the rest of the cruise industry. Expedition cruises can hold only a couple hundred people — far fewer than the thousands that can travel on the largest ships owned by the likes of Royal Caribbean and Carnival. In 2018, 27 million people are expected to travel on cruise ships — of whom just 250,000 will journey on expedition cruises, said Monty Mathisen, managing editor at Cruise Industry News.
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While a small market, expedition cruises can command a serious premium in terms of the cost to book a vacation. Fares for a 10-day Antarctic cruise with Ponant, for instance, start at more than $10,000, whereas fares for a nine-night cruise to Bermuda and the Caribbean with Royal Caribbean start at $1,200.
Cruise fanatics have more expeditions to choose from
Indeed, Royal Caribbean is not the only company to double down its investment in expedition cruises.
French cruise ship operator Compagnie du Ponant, which specializes in high-end expedition cruises, has seven new ships on order that will be rolled out over the next few years. Its newest ship, La Laperouse, is set to launch in July with a circumnavigation of Iceland, and five other Explorer-class ships will debut through the end of 2020.
Additionally, Ponant is building the Icebreaker, which will be the first luxury ship able to reach the true North Pole (rather than the magnetic North Pole, which is located in Northern Canada), and plans to enter it into service in 2021.
Lindblad Expeditions LIND, +0.77% another cruise company that specializes in expedition voyages, plans to add two new ships to its fleet — the National Geographic Venture in December 2018 and the National Geographic Endurance in January 2020 — and has options for two more polar vessels.
These ships are being designed with lower guest capacities to address concerns about the impact expedition cruising may have on the environment and passenger safety as it grows in popularity, Sven Lindblad, CEO of Lindblad Expeditions said.
Read more: How ‘dry docking’ could ruin your $10,000 cruise vacation
This segment of the cruise industry is expected to add 30 new ships and nearly double its passenger capacity by 2021, according to Cruise Industry News. That represents about a third of the new ships that are poised to launch between now and 2027. And luxury travel network Virtuoso expects the expedition cruising business to grow 13% over the next year alone.
Royal Caribbean’s move into the space nevertheless stands out, industry experts said. The Royal Caribbean-Silversea deal was reminiscent of Viking Cruises’ acquisition and ship-building activity that sparked renewed interest in the river cruising industry over the past couple of decades, said Carolyn Spencer Brown, editor-at-large for travel website Cruise Critic.
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Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.
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