RCI Most Likely Will Not Build Smaller

October 15, 2009

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Well after a lot of feedback on my Carnival will Not go Bigger post, lets have a look at their rivals, Royal Caribbean International.

Interestingly enough Adam Goldstein, Royal Caribbean’s President, posted some details about this exact theme earlier in the week at his blog, Nation of Why Not. Mr. Goldstein breaks the question into several parts:

  1. They do intend of having flexibility
  2. They wish to use more and more larger ships on routes that are new to large vessel deployment. (Think Europe a few years ago.)
  3. Simply enough: People want bigger.
  4. Economies of scale
  5. Why should Royal Caribbean Cruise Line have small ships for “nostalgia” reasons when RCI has Azamara Cruises and Celebrity Xpedition in its family of lines.

He makes some points but here are my responses:

  1. Flexibility. They are sending the vision class and Radiance class to new destinations. New deployments in Panama, Dominican Republic, Asia, and Dubai. So they do have this luxary, BUT, as that tonnage starts to show its age, they may run out of options. They already transferred out the Sovereign of the Seas. Monarch and Majesty are next. Then the vision will do 3&4 night trips and then what. Start sending Voyager to undeveloped markets?
  2. Using larger ships.  Isn’t that the way the industry goes? Alaska in the late 90’s and early 2000’s was the hot spot. New ships sailed there seasonally in inaugural seasons. Now the bog ship ply those waters (Think Saphire and Diamond Princess.). I think it’ll only be a matter of time before Mariner heads up there. Then it moved to European routes recently. New ships sail a European deployment the year they are launched. And if I could predict where the new hot spot was, I wouldn’t be writing this blog. I would be working for one of the lines as a strategist.
  3. People want bigger. That may be true, but as big as Oasis is, it may be too big. Yet this also brings up the question of when is big, too big. I feel that the size wars will max out at a point, where the general cruising public just don’t want to be on the ocean with 5000-6000 other people. There could an absolute economic disaster if RCI goes even bigger and no one wants to go on it due to crowds.
  4. Economies of Scale. Flashbacks of ECON 101 here. Basically the bigger the entity becomes the cheaper it is to do stuff because you are doing alot at the same time and waste is decreased. For more info see wiki about this. Now as things get bigger, there may be unforeseen issues due to operations. Mr. Goldstein uses the example of a captain. Regardless of size, a ship will have one captain. Think about crew in general. The more space there is to control, it may get to a point where you have to hire an proportional amount of crew just to keep up with the ship.
  5. RCI has other lines. Yes RCI has other brands but Celebrity Xpedition is one ship and Azamara is two. That’s not that extensive. Plus there is still a significant difference in terms of size, price, market, between Azamara and the smallest of RCCL’s ships.

Well that’s my take on RCI’s situation. Fell free to express your opinion below.

I wish RCI all the best and hope Oasis is a success. I don’t even want to think otherwise.

-Greg

Click here to read Adam Gold Stein’s Blog post

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