How Royal Caribbean’s Majority Stake in Silversea Could Impact Cruisers

Jun 21, 2018

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Last week, Royal Caribbean Cruises announced they had purchased a majority stake (67%) in Silversea Cruises for approximately $1 billion.

For Royal Caribbean Cruises, a line that (in the American market) includes their eponymous mass market, family-friendly ships — onboard bumper cars; surfing and sky diving simulators — as well as more upscale Celebrity Cruises and small-ship line Azamara Club Cruises, the purchase of Silversea allows the company to round out the top end of its portfolio.

Currently, Silversea comprises five luxury ships and four luxury expedition vessels that are a big step up in price point and experience from the existing fleet. (If you’ve never sailed on these ships, picture butlers, classic formal nights and white-glove service.)

The allure of new luxury vessels

The purchase of Silversea comes at a time when luxury and expedition cruises are seeing tremendous growth. In the next few years, Scenic Cruises, Crystal Cruises and Ponant are all launching new builds in the market.

Ponant’s Le Lapérouse — just one of six new vessels with underwater lounges — begins sailing in July; the Scenic Eclipse will debut in August as the river line’s first ocean-going ship; and the long-awaited Crystal Endeavor debuts in 2020.

The expedition segment of luxury is one that Silversea, by comparison, has had mastered for a decade.

But the traditional luxury market has also seen unprecedented growth recently, with new builds by Seabourn, Regent Seven Seas and Silversea making recent debuts and new builds by Crystal still in the works.

And there are even two promising new cruise lines on the horizon from long-established travel brands. Virgin Voyages and The Ritz-Carlton Yacht Collection are both debuting in 2020 and promise to leverage their existing customers and give cruising a luxurious, sexy edge.

The perks of consolidation

For industry watchers, it’s the consolidation that’s most interesting.

Cruise lines have consolidated in the past, of course. Industry giant Carnival Corporation, which includes the flagship Carnival Cruise Line, became the largest line in the world as it developed new brands and rapidly acquired a number of other companies, including Holland America Line, Cunard Line, Princess Cruises and the luxury Seabourn Cruises.

More recently, in 2014, Norwegian Cruise Line acquired Prestige Cruises International — both Oceania Cruises and Regent Seven Seas Cruises — creating a portfolio that ranges from mass market to all-inclusive luxury.

These consolidations largely give cruise lines the opportunity to cut costs by streamlining distribution and resources.

According to a statement from Royal Caribbean, “consolidation gives lines the opportunity to drive meaningful savings…[and] Royal Caribbean expects at least $50 million of synergies.”

Still, passengers can experience positive changes during consolidations, too.

When Norwegian Cruise Line acquired Prestige, corporate head Frank del Rio talked a lot about how the food standards at Regent and Oceania would push Norwegian to up their game, and about how the stage entertainment quality of Norwegian would propel entertainment forward at Oceania and Regent.

“I just returned from Norwegian Bliss and was impressed because you could see Frank’s touch all over that ship, in the colors and finishes. It was so much more elegant,” travel agent Linda Allen-Speer of Cruises by Linda in Harrison, Arkansas told The Points Guy.

These upscale details just wouldn’t have been there before the acquisition.

And Lynda Turley, an agent with Alpine Travel of Saratoga in California, agrees. “At first, you start to panic about these things, [like] when Norwegian bought Regent and Oceania [and] we sat there and we waited,” she said.

“But I have to say, what they said would happen, did happen. The buying power increased and they merged all the back-end stuff. The quality wasn’t compromised at all.”

She, too, was on a recent Norwegian Bliss sailing, and described positive results from the acquisition. “Some of the wine they had on Norwegian Bliss was a direct result of being affiliated with Regent Seven Seas Cruises.”

Basically, Turley isn’t worried that Silversea will suffer in this acquisition. “I really don’t expect a lot of big changes. And you think, a year or two from now, [Silversea] could have struggled and been gone — so this is OK compared to that.”

And the problems

That said, when it comes to luxury lines, there is always the fear that you’ll see a reduction in quality when the brand becomes part of a larger corporation.

While Cunard, for example, didn’t lose its inherent Britishness when Carnival Corporation acquired the line in 1998 (you can still have a Sunday supper in the dining room and bangers and mash in the pub) there was a feeling among aficionados that some of the smaller, over-the-top features went out the porthole.

“You can order caviar in the Queen’s Grill, but it’s not automatic anymore,” cruise line historian Theodore Scull told TPG.  “They also downgraded the library, which used to be a concession of a library called Ocean Books, with genuine librarians.”

These changes, however, seem minuscule to Scull, especially when considering the alternative.

“The bottom line is that Carnival saved Cunard from disappearing,” Scull said. “Cunard only had the one ship, Queen Elizabeth 2, which was ready to be retired. Micky Arison [then Chairman and CEO of Carnival Corporation] saw a market there…”

“[Now the] Queen Mary 2is the biggest ocean liner two times over. It’s also the most stable ship in the world, which is great for people who worry that they might get seasick. And then after that [Arison] built the Queen Victoria and Queen Elizabeth, which are cruise ships and not liners. But in the end, he saved Cunard.”

Featured image by jimfeng / Getty Images. 

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