Why ultra-luxury cruises are at risk of running aground

{"text":[[{"start":4.25,"text":"The world might be at sea, but so are a growing number of wealthy holidaymakers. The cruise industry is thriving and operators are managing to raise ticket prices, despite rising costs of fuel, rerouted travel plans and disease outbreaks. Royal Caribbean, Norwegian, Carnival and Viking each reported record revenue last year. "}],[{"start":25.7,"text":"But the rising tide isn’t lifting all boats — and it’s at the high end of the market that trouble has struck. The Ritz-Carlton Yacht Collection illustrates how the core principles of luxury, namely that quality and scarcity drive profitability, can lose their efficacy away from dry land. "}],[{"start":43.349999999999994,"text":"Since launching in 2017, the Ritz-Carlton branded cruise operator — not actually an affiliate of the Marriott International-owned hotel chain — has accumulated nearly $700mn in net losses and required over $1bn in capital injections from shareholders, who include Oaktree Capital Management, Singapore’s GIC and Mohari Hospitality. Last week, creditors including Caixa Bank and Crédit Agricole agreed to loosen terms and delay repayment dates on part of its $1.5bn of net debt. "}],[{"start":76.39999999999999,"text":"One seeming problem is that, in order to be profitable, luxury cruises require a scale Ritz-Carlton Yacht Collection has yet to reach. Big ships can spread costs such as fuel, crew, port fees and food across thousands of passengers, keeping costs low. At Royal Caribbean, which can host more than 6,000 guests at a time, “gross cruise costs” work out to about $200 per passenger per day, at full capacity. The equivalent sum at Ritz-Carlton Yacht Collection is about five times as much, Lex calculates. "}],[{"start":null,"text":"

"}],[{"start":109.79999999999998,"text":"Being small — even if elite — creates other challenges too. Royal Caribbean spends about 12 per cent of its revenue on marketing, sales and administration costs. Last year, the Ritz-Carlton Yacht Collection spent close to a third of its revenue on marketing alone. And even once they do mature, luxury operators may have fewer ways to boost earnings. Lower-end cruises make more from onboard spending, where luxury cruises often take an all-inclusive approach."}],[{"start":138.7,"text":"The hope is that early losses will pay off once demand grows. But so far, take-up has been slower than expected. In the first quarter of this year, Ritz-Carlton reported that it had reached just 51 per cent occupancy. Incumbent cruise operators, by comparison, regularly sell out. For brands surfing on their luxury creds, it’s hard to cut costs in order to fill space."}],[{"start":163,"text":"A further challenge is that Ritz-Carlton cruises are targeting a small market, but one where customers have options. The cost to charter a private yacht can, per day, be pretty similar. And new rivals keep coming: the Four Seasons and Orient Express Corinthian’s superyachts embarked on their maiden voyages this year, and are both launching second ships next year, along with Aman at Sea. The waters are going to get crowded, even if the boats do not."}],[{"start":196.15,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780457334_9375.mp3"}