Royal Caribbean Orders New 4,100-passenger Ship

Mar 07, 2011

Royal Caribbean Cruises Ltd. has signed a letter of intent with the Meyer Werft shipyard to build the first of a new generation of Royal Caribbean International (RCI) cruise ships. Developed under the code name “Project Sunshine,” the new ship design incorporates new features as well as popular concepts that have proven to be the most successful for the brand. The design is the result of more than a year of dedicated research and development, and the name could be interpreted to mean a significant use of solar power, given chairman and CEO Richard Fain’s interest in environmental issues.

Fain expressed excitement about the energy-efficient and environmentally friendly technologies that have been incorporated into the design, which have become policies of the cruise line. According to Fain, Project Sunshine takes the company’s environmental policies a step even further.

Allure of the Seas was constructed with solar modules that annually generate 111,108 kWh of electricity for the ship’s shopping area. Further, in 2007, RCI’s customer service center in Springfield, Ore., received LEED Gold certification for features that included emergency generators that run on vegetable oil and the use of wood in accordance with the Forest Stewardship Council standards for sustainable forest management. The result was an office building that uses 72 percent less energy than the vast majority of U.S. office building. RCI also set up alternatives for commuters, working with local transit authorities and giving employees bicycle racks and showers. It doesn’t take a logical leap to conclude that RCI is planning something dramatic along these lines for the newbuild, but the company never comments on the features of new ships until much later in the process.

“Royal Caribbean has worked hard to earn a reputation of offering the most innovative ships in the cruise industry, and this next generation will not disappoint,” Fain said. “While we continue our policy of keeping our newest ideas and features under wraps during the early stages of construction, I can say that I am very excited about the passion and imagination that our teams have devoted to the project. Project Sunshine builds on the best ideas of our existing ships and adds exciting new activities and entertainment concepts. It will offer features for everyone from grand, spectacular spaces to small intimate settings, and from a plethora of dining alternatives to a cornucopia of opportunities for families.”

The order calls for one ship to be delivered in the fall of 2014 with an option for a second ship of the same size to debut in spring 2015. The 158,000 GRT newbuild will carry approximately 4,100 guests, somewhere in between the 5,400-passenger capacity of the Oasis-class ships and the 3,600-passenger capacity of RCI’s Freedom-class vessels. The estimated all-in cost per berth is approximately $210,000. This all-in cost includes the yard’s base contract price plus everything needed to design, operate and build the vessel, from architect fees to supervision costs and all loose inventories from computers to art and bed linens.

Robin Farley, UBS analyst, noted that Oasis of the Seas was built at a cost of $240,000 per berth and Allure of the Seas at $265,000 per berth. Freedom of the Seas cost $237,000 per berth. Carnival Corporation’s February 2010 order for two 3,600-berth ships for delivery in spring 2013 and 2014 was at a cost of approximately $210,000.

Farley pointed out that the orders are in line with the more disciplined approach to capacity growth seen today and leave a 20-plus month period in which RCI will not be adding any more capacity to its fleet.

RCI’s new order represents the third cruise ship planned for 2014 and perhaps the first for 2015, bringing capacity up slightly, as analysts had predicted. Industry growth predicted for 2013 remains unchanged, with an increase of 4.2 percent, and 2014 industry capacity will now increase by 3.2 percent, both a far cry from the compound annual growth rate of 8.3 percent found from 2000 to 2010.