Tuesday, 13 May 2014

Lines ponder retirement plans for old ships

Lines ponder retirement plans for old ships

By Tom Stieghorst
*InsightHow and when to dispose of older ships is one question quietly being studied by the management teams of North American cruise lines.
There is a wide gap in revenue potential between the newest, most modern ships now being delivered and the industry’s oldest vessels, which in some cases date to the early 1990s.
Those ships are typically deployed on short cruise itineraries out of South Florida or southern California, where the guest expectations of the hardware aren’t that high but neither is the cost of the cruise.*TomStieghorst 

A decade ago when ships were past their prime, they were sent overseas to sail for brands in the U.K. and southern Europe, but that strategy faltered after the 2008 economic downturn. Until very recently, demand for cruises in some European countries was moribund and new capacity wasn’t needed.
The recent decision to deploy Quantum of the Seas to Shanghai, China full time signals that Asia isn’t likely to be a region where older tonnage goes to find new life either.
Lines have tried to retrofit some of their newest features onto older ships during drydock. This has been partially successful, and marketing slogans such as Royal Caribbean International’s “Every Ship Is Our Best Ship” have helped to position those ships as improved, if not new.

But the pace of innovation, particularly at lines such as Royal Caribbean, has been gaining speed. And as fleets get bigger, it takes longer and longer to bring a new feature to every ship.

Charters are another solution for older ships. Norwegian Pearl has sailed the Caribbean for much of the winter on charter, Norwegian Cruise Line officials have said. So Norwegian didn’t have to push agents to sell Pearl against the more attractive Norwegian Breakaway or Getaway, which carry double-digit fare premiums to Norwegian’s older ships.
But Norwegian has more new builds in the pipeline. Where are its older ships going to go? And if they don’t exit the fleet, will the gap between fares on newer and older ships continue to widen?

Older tonnage can be a good solution for some cruise lines. Windstar Cruises has acquired three ships from Seabourn, a more luxurious line, and is adapting them to Windstar’s casually elegant style. The ships are close to 30 years old, their useful lifespan for accounting purposes. But they are still in pretty good shape.

Windstar guests sailing last week on the Star Pride, the first of the three ships to be converted, didn’t spend much time talking about the age of the ships.
My guess, though, is that the Windstar-Seabourn deal is more a one-off transaction than a model for other lines. It should be very interesting to see what other creative solutions cruise lines come up with for their older tonnage in the years to come.