Cruise Shares Rise as CDC Outlines Quicker Path to Sailing’s Return

Port of Miami.

Cruise shares advanced after the U.S. Centers for Disease Control and Prevention outlined a new path to the resumption of voyages.

According to the new guidance in a letter to companies on Wednesday, ships can return to U.S. waters with paying customers if 95% of guests and 98% of the crew are vaccinated, bypassing a previous requirement for starting with trial voyages, according to a summary provided by a person with knowledge of the matter, who asked not to be named discussing private communications. The letter was previously reported by USA Today.

Royal Caribbean Cruises Ltd. rose as much as 5.7% to $92.45 in New York trading. Carnival Corp., the industry market-share leader, rose as much as 4.8%, and Norwegian Cruise Line Holdings Ltd. advanced as much as 7.1%.

On Thursday, Royal Caribbean alluded to the letter in its quarterly business update, saying the message had addressed some of the company’s “uncertainties and concerns.” Royal Caribbean said it now sees a pathway to sailing from the U.S. again during the Alaska cruise season, which runs from roughly May to September.

The CDC didn’t immediately respond to a request for comment.

The U.S. cruise industry has been essentially banned from operating via U.S. ports since the beginning of the Covid-19 pandemic in March 2020. The companies have recently ramped up lobbying efforts to win approval for a return, arguing in part that the industry was unfairly singled out for the strictest treatment even as other tourism businesses have returned in some fashion.

CDC Checklist

Technically, the CDC lifted its hard ban on cruising in October, but it replaced it with a checklist for restarting cruises that no operator has yet managed to complete. The industry had previously criticized the conditional sailing order as overly burdensome and out of touch with the new reality since the arrival of Covid inoculations. Florida, where the major cruise companies are headquartered, even sued the federal government to hasten the return of the industry.

But Royal Caribbean said the recent discussions with the CDC have turned more productive.

“They have dealt with many of these items in a constructive manner that takes into account recent advances in vaccines and medical science,” Royal Caribbean said Thursday in its first-quarter business update.

The company reported revenue totalling $42 million, which was slightly better than expected by analysts tracked by Bloomberg.

It said it has started to spend slightly more cash to cover expenses related to restarting the fleet. Royal Caribbean also noted that cumulative advanced bookings for the first half of 2022 are “within historical ranges and at higher prices” to its 2019 pre-pandemic baseline.

Coronavirus: Royal Caribbean agrees $2.2bn loan facility

Coronavirus: Royal Caribbean agrees $2.2bn loan facility

Royal Caribbean Cruises has agreed a $2.2 billion loan facility with banks to shore up cash flow as the coronavirus pandemic hits travel companies.

The cruise giant said it has “borrowed the full amount available under the term loan to further bolster its liquidity”.

Royal said it has more than $3.6 billion in cash and has committed financing for all of its new ships on order.

“This is a period of unprecedented disruption for the cruise industry,” said chief finance officer Jason T. Liberty.

“We continue to take decisive actions to protect the company’s financial and liquidity positions as they enable us to keep focused on our guests, our crew and our long-term plans.”

Royal, which owns Celebrity Cruises, Azamara and Silversea, suspended sailings earlier this month along with other cruise lines around the world as travel restrictions were imposed globally.

A new era of cruise tonnage replaces an old one

Celebrity Cruises' Xpedition, which has the look of its time: More portholes than private balconies, for example. Photo Credit: Daniel Romagosa/Celebrity Cruises

by Tom Stieghorst

Back when I first started writing about cruises, in the mid-1980s, one of the things that really excited me about the job was the modern new cruise ships being built in places like Finland and France.

They were getting bigger, fancier, with terrific new amenities and style. It was a pleasure to be able to describe them to readers who at that time probably didn't know what the new ships were all about.

But there were other ships that I toured, older tonnage that still had a niche in the industry. I remember a lot of Greek ships that were way past their prime; Scandinavian car ferries converted to cruise duty; and ocean liners that were years out of date.

I was reminded of those days recently while touring Celebrity Cruises' Celebrity Flora, which is nearing completion at a shipyard in Rotterdam. It is the first ship purpose-built for the Galapagos Islands and looks like it will be a dream to sail.

The Flora is a new standard for an area of the globe that has been getting by on older tonnage for a long time. Galapagos-based ships include Celebrity's own Celebrity Xpedition, which was built in 2001 for Sun Bay Cruises and acquired by Celebrity in 2004 when it began cruising there.

The Xpedition has the classic look of ships of its era: more portholes than balconies, for example. It carries 96 passengers compared to 100 for the Celebrity Flora, but at 2,842 gross tons, it is only half the size of the 5,739 gross-ton Flora.

A rendering of the Celebrity Flora, an example of the new standard in cruising, which will replace the Xpedition in the Galapagos.

To be sure, seeing the wildlife in the Galapagos is the major focus of any cruise there; the hardware is secondary. But if you can go in style, comfort and, indeed, luxury, why not?

One of Celebrity's quasi-competitors in the Ecuadoran islands is going through a similar transition with its product. Next year Silversea Cruises will introduce the Silver Origin in the Galapagos and retire the Silver Galapagos, which was once part of the original, 1990s-era, Renaissance Cruises fleet of 100-passenger ships.

These new ships are going to raise the bar for the other licensed vessels, many of them small, that offer cruises in the Galapagos -- much the same way that the Carnival Fantasy and Sovereign of the Seas prompted some changes for the Chandris family when it was sailing classic ships like the Britanis out of Florida. John Chandris eventually concluded that was a hopeless strategy, and he started Celebrity Cruises to focus on newly built ships such as the Celebrity Horizon. Today, Celebrity survives and thrives as a division of Royal Caribbean Cruises Ltd., which bought it in 1997.

Silversea Cruises has also joined the RCCL stable, by virtue of a sale of a 67% interest last year. One of the first things RCCL management did after the purchase was to announce a new Silversea ship for the Galapagos.

The two RCCL ships are going to set a new benchmark for cruising in the Galapagos and may spell the end for some of the less contemporary vessels in that market.

RCCL ventures outside cruising with launch of tour-booking site

Royal Caribbean Cruises Ltd. (RCCL) has launched a new subsidiary, GoBe, an online seller of tours and activities – and not just to cruise customers.

"We're thrilled to officially open GoBe to every type of traveler, from hotel guests and staycationers to business travelers with a long layover," managing director Billy Campbell said in a statement.

GoBe says it offers thousands of tours in 97 countries, and it plans to triple inventory by the end of the year.

There are three main product categories on GoBe: high-value group tours, private excursions, and exclusive "Travel Creations." RCCL said Travel Creations are tailor-made tours that can be "found nowhere else online."

Users of the site can search by destination, interest or group requirements. The site can also search cruise itineraries for nearly 20 cruise lines. Certain tours and activities are designated as "cruise-friendly," enabling users to identify which tours depart from areas close to ports.

GoBe offers a variety of products, like a sea kayak expedition in Port Frederick, Alaska, during which participants can spot humpback whales and enjoy scenic bays and estuaries; a private helicopter ride over Rome; and surfing lessons in Brazil.

If searching by interests, users can select from about 25 categories, from event tickets to family activities to full-day tours to budget tours.

Azamara triples down on destination-focused cruising

Azamara Quest

Azamara Club Cruises plans to deepen its brand identity as an immersive, destination-oriented cruise line by adding more opportunities for passengers to connect locally on shore excursions and by offering more overnight and late-night port stays.

Azamara has for many years featured longer port stays and overnights, but is "tripling down" in the words of president and CEO Larry Pimentel. Marketing will be built around the phrase "Stay Longer. Experience More.," which Pimentel, said "is not just a tagline, but a definition of brand essence."

The two-ship line (Azamara operates the 700-passenger Quest and Journey) will offer over one thousand destination experiences "that can't be Googled or found anywhere else because we're creating them," Pimentel said.

It will include over 250 overnight and late-night stays (8 p.m. or later) in ports, which is roughly 50% of all its port calls, in a total of 70 countries. He also said that over 50% of the ports on its itineraries are ones where larger ships can't dock.

Azamara's immersive program includes Country Intensive Voyages, a product that will allow guests to experience more of a given country, as the majority of the destinations are concentrated in one country such as Japan, Italy, Spain, Norway, New Zealand, Australia, Greece or Croatia.

Pimentel said that focus on a single country, in which a ship may visit 13 ports in 14 days, gives travel advisers an opportunity to introduce cruising to clients who otherwise might be considering a land-based tour of a country. During a presentation of the concept, he referred to Azamara as "a no-cruise cruise."

Another new point of emphasis will be "Cruise Global, Connect Local," a series of land programs that are designed to deliver personalized and authentic experiences. Programs are built around biking, golf, food, local celebrations and site-specific wildlife and wilderness tours, as well as overland tours either during the voyage or pre- and post-cruise.

That tagline is purposefully elastic to permit labeling of specific programs, e.g., "Cruise Global, Bike Local" or "Cruise Global, Golf Local."

There will also be a program called Meet Local, involving immersive cultural experiences that offer people-to-people connections at the homes, farms and villas of local families, Azamara said.

"Our land product will be curated to ensure guests get to connect in a personalized and unique way with the people in the destinations they visit," Pimentel said.

Onboard programming will be augmented to present more information than ever on local destinations ranging from local culinary and beverage selections to travel movies, lecturers and panel discussions on destinations and other relevant topics, as well as entertainment.

Pimentel, who is also "chief destination experience officer" for parent company Royal Caribbean Cruises Ltd., said that the concept could extend to other RCCL brands, but for only for "a very tiny subset" of Royal Caribbean International clients in the highest cabin classifications or a small percentage of Celebrity passengers in "rarefied suites."

He nonetheless expects that other lines will begin to offer deeper land experiences. "It will change. People always follow a good concept."

Cruise Ships a Beacon for Germany’s KfW in Dire Shipping Market

The world’s largest cruise ship, Harmony of the Seas (Oasis 3), leaves the STX Les Chantiers de l’Atlantique shipyard site in Saint-Nazaire, France, May 15, 2016. REUTERS/Stephane Mahe

By Nicholas Brautlecht for https://gcaptain.com

(Bloomberg) — The call of the Caribbean is proving irresistible for Germany’s KfW IPEX, the development bank that funds the shipbuilding industry.

After lending 1.1 billion euros ($1.2 billion) to finance pleasure ships last year, including part of the funding for two new Royal Caribbean Cruises Ltd. vessels built in Germany, KfW IPEX is preparing to fund yet more cruise liners, earmarking a total 2.8 billion euros in new shipping loans this year. More than half of its 16 billion-euro maritime loan book is now devoted to cruise ships.

With passenger numbers rising at an annual rate of 4.5 percent, the global cruise industry is one of the few bright spots in a shipping market awash with debris after eight years of crisis in the container segment. It also offers European shipbuilders an opportunity to steal a march on Chinese competitors, who are still several years behind technologically in this corner of the market, Carsten Wiebers, the global head of KfW IPEX’s maritime industries business, said in an interview.

“We don’t expect the Chinese to reach a standard in the next five to six years that can rival international cruise ship companies in existing markets,” said Wiebers, 53, who has led KfW’s maritime funding for 18 years. “There’s little risk that the cruise industry will see overcapacity, which is a very heavy burden for other shipping segments.”

KfW IPEX’s large exposure to the cruise industry is unique among German shipping lenders, which have traditionally focused on container ships and bulk carriers. By the end of March, Wiebers had increased the cruise share of the bank’s maritime-loan book to 51 percent from 32 percent in 2009, when the global financial crisis had sent the shipping market into a slump from which it has yet to recover.

By contrast, at Norddeutsche Landesbank, which is seeking to diversify while shrinking its 18 billion-euro shipping loan book, cruise ships and ferries have just a 1 percent-share.

At KfW, which boosted its maritime loan book by 10 percent over the past seven years, cruise ships accounted for 30 percent of new shipping loans last year. Commitments included two new liners for Miami, Florida-based Royal Caribbean, which controls about one-quarter of vessel capacity in the North American and European markets. Those contracts are for 12-year terms with a “considerable portion” syndicated with an international banking consortium, according to Frankfurt-based KfW, which declined to disclose further details.

Industry Booming

The industry is booming in Europe, where top shipyards including Germany’s Meyer Werft GmbH and Italy’s Fincantieri SpA are working to capacity to fill orders similar to Royal Caribbean’s $1 billion Ovation of the Seas that has been cruising around Asia, Australia and Europe since its delivery in April.

To lure as many as 4,180 passengers on board, the super-cruiser boasts a capsule on a swivel arm from which guests can view the ship from 300 feet in the air, while others can try the world’s first simulated skydiving experience offered at sea.

“Investment activity has shrunk drastically in all segments of shipping except the cruise industry,” said Wiebers, who is set to take up a new role as KfW’s head of aviation and rail financing next month.

Much of the wider industry’s demise stems from the fact that ship financiers ignored technological advances, lending clients too much money too long for vessels that aged rapidly, Wiebers said. With this in mind, KfW has changed its focus to companies with bigger fleets and corporate structures.

“We practically don’t take any asset risks,” Wiebers said. Almost two-thirds of KfW shipping loans are covered by export credit insurers like Euler Hermes Group, he said.

Chinese Competition

Still, competition for new business from top-tier clients like Danish shipping giant A.P. Moeller-Maersk A/S is getting stiffer, with Chinese peers including Industrial & Commercial Bank of China Ltd. and Bank of China entering the fray, he said.

“The Chinese are financing with terms that are unbeatable for European banks,” in some cases offering loan-to-value ratios of 90 percent and above and repayment periods as long as 18 years to large maritime companies, said Wiebers. European banks typically grant loans with a maturity of 10 years.

Norwegian tanker operator Frontline Ltd., which counts billionaire John Fredriksen as its largest shareholder, secured $328 million from China EXIM Bank in the first quarter to finance eight new vessels with the Asian lender, the company said in May.

With funding opportunities for banks in the wider shipping market still scarce, KfW’s 2016 financing target is ambitious, Wiebers said.

“The industry is undergoing massive structural changes on the shipping and the financing side,” said Wiebers. “All clients are very cautious, even in segments doing well like car carriers.”

Royal Caribbean sells stake in Spanish and French cruise brands

Royal Caribbean sells stake in Spanish and French cruise brands

Royal Caribbean Cruises is selling part of its interest in its Spanish and French cruise operations for an undisclosed sum.

Madrid-based private equity firm Springwater is taking a 51% stake in Pullmantur and Croisières de France, leaving the US cruise giant with a 49% holding through a new joint venture.

Royal Caribbean will retain full ownership of the ships and aircraft currently operated by the two brands, which will be leased into the joint venture.

Chairman and chief executive, Richard Fain, said: "Pullmantur and CDF have a long history of offering authentic, localised cruise vacations to their home markets.

"We look forward to the new focus that this joint venture with Springwater will bring to these companies as they seek to grow."

He added: "Given the signs of recovery we have seen in the Spanish economy, as well as increased interest in cruising from tourists in France, we think this is the right time to bring together the extensive experience of our deeply valued employees at Pullmantur and CDF with the local travel and tourism expertise of the Springwater team.

“Springwater's local management presence in Madrid, coupled with RCL's long-standing history in cruise operations, will provide the foundation for improved returns in the future."

Caribbean cruise pricing strengthens, analyst says

Norwegian Star in Cabo San Lucas By Dave Jones

Prices have substantially risen for cruises in the Caribbean, according to a survey taken by Wall Street brokerage Susquehanna Financial Group.

In a report published Dec. 14, analyst Rachel Rothman said first-quarter prices in the Caribbean are up 13.8% at Carnival Corp., 7.6% at Royal Caribbean Cruises Ltd., and 26.1% at Norwegian Cruise Line Holdings. Rothman noted that the comparison at Norwegian is skewed by the replacement of the Norwegian Pearl and Epic with the newer Getaway and Escape in the Caribbean.

For the second quarter, the survey showed Carnival’s Caribbean pricing is up 15.7 %, while RCCL and NCLH are down 5.8% and 6.6%, respectively.

In the Mediterranean, Carnival’s first-quarter pricing is up 23% but Norwegian Cruise Line is down 6.5%. The report noted that Royal Caribbean and NCLH's Oceania and Regent Seven Seas brands don’t offer Med cruises in the first quarter.

Royal Caribbean seeks new terminal in Miami

Royal Caribbean Cruises Ltd. has started negotiations aimed at building a new $100 million terminal at Port Miami that would accommodate Oasis-class ships.

Specifications call for a 170,000-square-foot terminal with a berth of 400 meters, or about 1,312 feet. Oasis of the Seas is 1,186 feet long.

The specifications are in a memorandum of understanding to be considered by the Miami-Dade Board of County Commissioners on Sept. 16. If approved, the memorandum would become a roadmap for a final negotiation. The memorandum said the terminal is “assumed to become operational” by the end of 2018.

“By the nature of a memorandum of understanding, there is still a long road to go,” said Rob Zeiger, Royal Caribbean’s vice president of communications.

Royal Caribbean currently docks at Terminal G at the port, the closest one to downtown Miami. The new terminal would be built partly on a cargo area in the easternmost part of the port furthest from downtown. Designated Terminal A, it would be developed and owned by Royal Caribbean except for a small contribution from the county.

The agreement, which would last for a minimum of 20 years, calls for Royal Caribbean to pay an initial rent on leasing the land beneath the terminal for $9.5 million a year, or about $250 million over the life of the agreement, after annual escalators. The lease would have four 10-year optional extensions. A summary of the memorandum calls it a new model for financing terminals at the port.

“This deal structure is extremely attractive to the port because it transfers risk from the county to a private company,” said the summary, signed by Jack Osterholt, deputy county mayor.

The memorandum said that ever since Miami lost the deployment of Oasis and Allure of the Seas to Fort Lauderdale’s Port Everglades in 2009, the port has been talking with Royal Caribbean about ways to boost the number of passengers. Currently, that number is about 730,000 a year.

RCCL execs pleased with pricing-discipline policy

By Tom Stieghorst 

Royal Caribbean’s campaign to curb last-minute deep discounts is off to a good start.

So say top execs at Royal Caribbean Cruises Ltd., who had several things to say about what they’re calling Royal’s “price integrity policy,” in talking to Wall Street analysts last week.

Starting in March, Royal said it would stop filling its ships by offering very low prices within a month of sailing. Depending on the itinerary, Royal said it would stop discounting either 10, 20 or 30 days before the ship leaves the dock.

In an earnings call with analysts, Royal Chairman Richard Fain said the company was extending the policy in some cases to apply to bookings within 40 days of departure.

That is what is called incremental progress. If Royal sticks with it, there may be positive results for both Royal and travel agents.

Fain said that Royal is trying hard to be more consistent in its pricing, in part to keep travel agents in its corner.

“There's probably one thing that frustrates the travel agents that we work with as much as anything else, [and it] is those late last-minute discounts,” he said. “And we can't afford to frustrate them.”

A bit later in the call, CFO Jason Liberty raised a second reason why curbing the deep-discount cycle will benefit Royal.

“It's really very important to the branding,” said Liberty. It lacks credibility, Liberty said, to contend that you are a brand that is high quality and has high respect in the industry — “and you can have us for half-price.”

“So the ability to maintain your image as a higher-quality product, which really has to permeate everything you do, is probably a big driver, as big a driver of our thinking as anything else,” Liberty said.

Fain said Royal recognizes that the policy is costing money in the short term. But Royal’s second-quarter earnings were up 34% from a year ago, so any losses are being offset elsewhere.

“It's still early days, but the impact we have seen from a load factor perspective is relatively small, and it's in line with our expectations,” Fain said.