The cruise industry has made a lot of noise about the introduction of Royal Caribbean International's (RCI) Oasis of the Seas, which at 225,000 gross tons is by far the largest cruise liner ever built. Obviously, the industry has every reason to tout the new ship - a sister will enter service late next year - not only because of its size, but also due to the many new features it introduces.
Still, it is also obvious to ask what next? In addition to Allure of the Seas, the second Oasis class newbuilding, the Royal Caribbean Cruises Ltd (RCCL) group has three 122,000 gross ton newbuildings due for its Celebrity Cruises brand. Meanwhile, the Madrid-based Pullmantur subsidiary of the group seems to live a life of its own: ships are moved from one market to another and the future of the Croisieres de France brand remains in doubt, at least as far as rumours are concerned.
But let us go back to RCCL proper: an industry source says that talks are in progress over a possible third Oasis class ship as well as a fourth 158,400 gross ton Freedom class unit for RCI. An option for the fourth ship has been held at STX Europe in Finland for a long time.
What will hapeen in case of these two depends on two things, the source says. First one is price and the second one is what kind of risks RCCL shareholders are willing to take. The global economy appears to be regaining some health again, which is obviously good news. This combined with the hope that Oasis of the Seas will prove to be the success it is expected to be would obviously reduce the level of risk involved with a third order.
A fourth Freedom class vessel might incorportate some features from the Oasis class to breath newlife into the design that dates back to the middle of the decade, wehen it was first unveiled as "Ultra Voyager," with a reference to the previous series of newbuildings of RCI.
Independence of the Seas, which was introduced in 2008, has operated an extended summer season from Southampton in the UK since delivery and starting in 2010/11, will remain in britain year-round. This indicates that a ship of this size can be employed with a greater choice of base ports than an Oasis class vessel. Assuming that the industry regains a path of solid growth in the future, an Oasis class vessel in Southampton could become possible.
The banking industry died first and committed suicide next as it gambled with sub-prime mortgages and financed other asset deals at hugely inflated prices, which then led to the infamous crash in 2007-08. Against this background, it may well be that RCCL will have to turn to the bond market rather than to its banks when it comes to raising - at least part - of the finance it needs to take delivery of Allure of the Seas.
In addition, Finnvera, the Finnish export credit institution that provided already part of the funding for Oasis, may well have to dig into its pockets for a second time. RCCL has financing in place for all the Celebrity Cruises' remaining newbuildings.
RCCL builds truly fine ships for both Celebrity and RCI. However, one question needs to be asked: are these in themselves excellent vessels cannibalising sales of cruises on other classes of ships of these two brands?
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I would guess the easy answer to the cannibalising question is the speed at which RCI moves it's ships to other brands. This is not happening at a rate that would indicate that they are just moving customers around. The industry as a whole is still growing and RCI is in need of more ships. The real key to success in my opinion is to take Oasis class design and squeeze it into smaller ships that are more flexible to service smaller markets.
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