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Love that new cruise ship smell? Get over it

18_8
18_8
Written by editor

There are few things that get die-hard cruisers as excited as the debut of a new ship. Just look at the frenzy over Royal Caribbean’s soon-to-launch Oasis of the Seas.

There are few things that get die-hard cruisers as excited as the debut of a new ship. Just look at the frenzy over Royal Caribbean’s soon-to-launch Oasis of the Seas.

But the endless stream of shiny new vessels that has been a hallmark of the cruise industry for more than a decade and a major driver of growth soon will be coming to an end — at least for a while.

With the economy slumping, credit tight and Wall Street worried about industry profits, cruise industry executives haven’t been shy about saying they’re unlikely to order new ships anytime soon.

“We have said for some time now that under current circumstances we don’t envision ordering any new vessels,” Richard Fain, chairman and CEO of Royal Caribbean, told Wall Street analysts Tuesday — echoing comments made repeatedly over the past year by Carnival chairman Micky Arison.

Fain made the comments during a conference call to discuss the line’s third quarter earnings in which frustrated Wall Street analysts pressed him to commit even more forcefully to not building more ships. While Fain left the door open for future orders, he made it clear it’s not a likely scenario.

“We don’t know what the future holds, so for us to make a blanket statement wouldn’t be very constructive,” he said. But “we are looking forward to a time (that) actually isn’t that far off (when) existing orders run off, and then we are looking at the power of an even better supply/demand situation.”

Translation: Don’t worry, it’s unlikely we’ll be ordering new ships, and that means prices will be heading up once the current vessels on order finish coming out.

Royal Caribbean has just two ships on order, albeit big ones. The 5,400-passenger Oasis of the Seas, by far the largest cruise ship ever built, arrives late next year. A sister ship, Allure of the Seas, debuts in 2010. That means the 22-ship line won’t be expanding starting in 2011.

Other lines that are running out of ships on order include Princess, Holland America and Carnival. After the debut of the 3,080-passenger Ruby Princess next week, the Love Boat line will be in the rare position of not having a single ship on order. Holland America has just one ship on order, for 2010. Carnival has just two ships on order, for 2009 and 2011.

Norwegian Cruise Line, meanwhile, has just two ships on order, both for 2010, but even those orders have come into doubt in recent months due to a dispute between the line and the shipyard.

The only major mass-market line catering to North America travelers with a full slate of vessels on order is Celebrity Cruises, which is rolling out one new ship a year for the next five years.

Ordering cruise ships is a tricky business as it usually takes shipyards three to four years to build a vessel after it receives the order. In choosing not to order this year, cruise executives are making bets on what demand and pricing for cruises will be like in 2012 and beyond.

In addition to the state of the economy and the credit markets, factors that play a roll in the decision to order a ship include the strength of the dollar. Most of the shipyards capable of building big cruise vessels are in Europe and price in euros, so as the euro has soared in recent years, the cost of ordering a cruise ship has gone up.

Over the past year, the gyrating price of oil — and its devastating effect on cruise industry profits — also has weighed on executives considering orders.

The good news for cruisers who love new ships is that there will be plenty from which to choose in 2009. In addition to the big new ships planned by Royal Caribbean, Carnival and Celebrity, there will be smaller, luxury ships coming from Silversea Cruises and Seabourn, as well as several ships from European lines Costa Cruises, MSC Cruises and Aida. But after 2009, the order book begins to taper off, and by 2011 and 2012, only a handful of new vessels will be arriving.