Flush with cash and demand, cruise lines splurge on overhauls

Flush with cash and demand, cruise lines splurge on overhauls

Carnival Cruise Line’s decision to pour nearly $200 million
into the renovation of one ship, the 20-year-old Carnival Triumph, shines a
spotlight on a surge in refurbishment spending that has seized the cruise
industry.

The Triumph is the fourth ship in the past three years to be
scheduled for more than $100 million of improvements.

Where cruise lines once budgeted $10 million to $25 million
on drydocks, with $40 million being an exceptional amount, the expenditures are
now increasingly nine digits.

“The refurbishments are really going beyond replacing
the carpeting and cleaning up things,” said Roger Blum, principal at Cruise
& Port Advisors, a Miami consulting firm. “They’re trying to bring
this older tonnage up to the level of the newer tonnage with the bells and
whistles that the new ships have.”

A prime example is Celebrity Cruises, which last fall
announced a $400 million refurb project it calls “The Celebrity
Revolution,” which will change the look of its older ships over the next
several years.

Celebrity is taking delivery in October of the Celebrity
Edge, a $900 million ship that will be the first of four vessels in a new
class. Among other features, it has an exclusive new sanctuary for suite guests
called the Retreat.

In the Celebrity Revolution, all of the line’s existing
larger ships will be retrofitted with a Retreat Sundeck and Retreat Lounge,
both developed by Kelly Hoppen, a New York interior designer who has given the
Edge a light, neutral, contemporary look that differs from previous Celebrity
ships.

Celebrity recently raised the amount being spent on the
Celebrity Revolution to $500 million. 

“We wanted to do everything we could do,” said
Dondra Ritzenthaler, senior vice president of sales, trade support and service.

Initially, only some staterooms were going to be addressed.
That changed. 

“Particularly on the [older] Millennium class, we
decided we wanted to do everything right,” Ritzenthaler said. “So now
we’re doing all of the staterooms, all of the bathrooms. We couldn’t be more
proud of the fact we are spending a half-billion dollars, and we’re really
going to make these ships like brand new.”

That urge to be comprehensive, rather than piecemeal, may be
the hallmark of the new refurbishment trend.

The Carnival Triumph will be out of service for nearly two
months next year getting a “bow-to-stern” makeover, according to a
news release that listed 18 features that will be added to the ship.

When it was built in 1999, the Triumph cost $420 million.
That’s about half the price of a new Carnival ship today.

Considering that math helps put the new refurbishment wave
into financial perspective, Blum said. Older ships compete with new tonnage,
which commands better pricing, and cruise lines can’t afford to let that gap
grow too large.

“So if you can take essentially a really good ship and
turn it into a brand new ship again — or at least offer the features, the
amenities, the decor of a new ship for a price of $200 million — that’s a
bargain,” Blum said.

It doesn’t hurt that cruise lines are flush with money after
several years of rising demand and profits. Capital projects are always easier
in that environment.

Royal Caribbean International has 10 ships in its sights for
a refurb program called Royal Amplified. The first two ships to be “amplified,”
the Independence of the Seas and the Mariner of the Seas, have cost $110
million and $120 million, respectively.

In addition to adding new features such as the Skypad
bungee/trampoline, those two ships got additional cabins, including premium
suites. The Independence got a partial new deck, adding 107 cabins.

Turning unused spaces into more cabins helps pay for
expensive renovations by directly raising the return on investment.

Carnival will add 115 cabins to the Triumph, which will be
renamed the Carnival Sunrise. 

Luxury lines, too, are raising their refurbishment spending.
When Cunard Line overhauled the Queen Mary 2 in 2016, it put $132 million into
the effort, buying 594,000 square feet of carpeting and 4,000 framed pictures,
among other items. It also added 50 cabins and 10 kennels for canine and feline
passengers.

With Royal Caribbean Cruises Ltd.’s acquisition of 66.7% of
Silversea Cruises, it’s embarking on a revitalization program for that line,
including an overarching plan for a fleetwide “Musification” that
will take inspiration from the design of the Silver Muse. 

Earlier this year, Silversea became the latest line to split
a ship in half
and insert a new section, a $70 million overhaul of its
9-year-old Silver Spirit.

As the ship-splitting concept shows, there are few limits
when it comes to renovating cruise ships. Still, there are a few.

Carnival looked at adding to the Triumph the popular Havana
Cabana area featured on its latest ships, the Carnival Vista and the Carnival
Horizon. But those ships are 133,500 gross tons, compared with the Triumph’s
102,000 gross tons.

Gus Antorcha, Carnival’s COO, said that the Havana Cabana
area was designed with an aft pool. “We don’t have that real estate”
on the Triumph, he said.

To a degree, the refurbishment boom is also being driven by
the growing sophistication of shipyards that do renovations and their greater
number compared with the number of yards making newbuilds. 

“I think it’s exciting,” Blum said, “because
not only is it expensive to build new ships today, it’s hard to get the
shipyard space to do it. So to take this older tonnage which is really healthy,
strong ships with great layouts and everything else, and to be able to bring
them up to today’s standards, I think it’s great.”

Read More —> Source link