Whats the story?

[bigque]

Irrelevant to the point that RCCL is pricing things much higher than they used to:rolleyes: Disney has always been high, has nothing to do with the OP's post........

 

You did this same thing in response to one of my post in another thread! Who are you .......... The go around and indicate "Your post is irrevelant" police????? Geeze..They were just making a general post in the thread!

[A2Mich]

There is also the factor of RCCL is pumping out all these mega ships, which are very expensive and who ends up paying for it, the customer. They are making the ship the destination as opposed to the ports. If you have been on many cruises, the ports all seem to blend in after awhile, so the only option is to change the ships. There is an article Royal borrowed 4 billion dollars to build these megaships and they need a return on their investment..

 

I was thinking the same thing. RCI has ramped up it's newbuild programs. The Oasis class ships have a price tag right around $1 Billion dollars, the Quantum class ships around $935 million dollars. Even the 3 Freedom class ships ring in at $800 million per copy. Carnival has slowed its newbuild program, and even then, their most expensive ship, the Carnival Vista has a price tag of $800M, the Carnival Breeze being the next newest, was a comparative bargain at $740M. Now I have no idea what financing arrangements are made on these ships, but I'm sure there's at least a 20 year loan term (or longer) with interest due on the loans as well. RCI likely has outstanding balances on at at least all of the Freedom class, Oasis class, and Quantum class ships. Carnival likely has nowhere near the same amount of outstanding debt (at least for Carnival Cruise Lines themselves - not including any of their subsidiaries here). Start throwing in insurance costs, fuel, food, maintenance, salaries and wages, fees for dock space, longshoremen, advertising, etc, and we're talking some serious cash here. not to mention that the cruise line still needs to show a profit to keep their investors/shareholders happy. Someone has to pay for all of these costs - and that someone would be their paying customers.

 

Many years ago, when smaller cruise lines were around, such as Premier, Commodore, Royal, Admiral, etc., they mostly operated older ships, where the upfront capital investment was lower. They were able to charge lower fares, as they had bought a ship for say $20M, spent another few million in renovations, and were sailing a viable ship, without the billion dollar investment in equipment alone. However, as USCG and SOLAS standards became more stringent, the ongoing costs for maintenance and modifications would become too costly. Many of the older ships contained asbestos as well as other toxic, dangerous, flammable materials, and the cost of stripping them would be prohibitive, not to mention the modernization needed for various safety and fuel economy requirements, and the smaller companies didn't have the resources, and/or couldn't get investors onboard to stay current.

[mark290]

I was thinking the same thing. RCI has ramped up it's newbuild programs. The Oasis class ships have a price tag right around $1 Billion dollars, the Quantum class ships around $935 million dollars. Even the 3 Freedom class ships ring in at $800 million per copy. Carnival has slowed its newbuild program, and even then, their most expensive ship, the Carnival Vista has a price tag of $800M, the Carnival Breeze being the next newest, was a comparative bargain at $740M. Now I have no idea what financing arrangements are made on these ships, but I'm sure there's at least a 20 year loan term (or longer) with interest due on the loans as well. RCI likely has outstanding balances on at at least all of the Freedom class, Oasis class, and Quantum class ships. Carnival likely has nowhere near the same amount of outstanding debt (at least for Carnival Cruise Lines themselves - not including any of their subsidiaries here). Start throwing in insurance costs, fuel, food, maintenance, salaries and wages, fees for dock space, longshoremen, advertising, etc, and we're talking some serious cash here. not to mention that the cruise line still needs to show a profit to keep their investors/shareholders happy. Someone has to pay for all of these costs - and that someone would be their paying customers.

 

Many years ago, when smaller cruise lines were around, such as Premier, Commodore, Royal, Admiral, etc., they mostly operated older ships, where the upfront capital investment was lower. They were able to charge lower fares, as they had bought a ship for say $20M, spent another few million in renovations, and were sailing a viable ship, without the billion dollar investment in equipment alone. However, as USCG and SOLAS standards became more stringent, the ongoing costs for maintenance and modifications would become too costly. Many of the older ships contained asbestos as well as other toxic, dangerous, flammable materials, and the cost of stripping them would be prohibitive, not to mention the modernization needed for various safety and fuel economy requirements, and the smaller companies didn't have the resources, and/or couldn't get investors onboard to stay current.

 

The build prices don't mean much if you don't also put in how many passengers each ship holds. I've always heard operating expenses are less

on the newer ships with technology enhancements.

[Paul65]

We have cruised with Rccl tree times and looked at their website for a Cruise and Got a chok. They are at least 20 percent higher than NCL and Carnival...... They lost a customer.....

 

It varies by ship, itinerary, etc. Whenever I've compared RCCL against other cruise lines, it comes up pretty close to the same. Sometimes Carnival has even been higher.

[mark290]

it was a little of a year ago where the Allure had propulsion problems. This a newer ship. Newer is more expensive. Technology is more expensive. Everything is more expensive. MOre passengers is more food, more employees, more services...MOre is not always better.

 

I had a friend hit the jackpot at an airport casino in Las Vegas.

This surely means all slot machines at the airport are a sure thing.

 

Could've sworn I saw some news items about a carnival ship without power

and maybe one limping back to port. Also pretty sure these were older than Allure. More passengers mean more money to pay for the more food, more employees and more services. Economy of scale. Is your car now more fuel

efficient than your 1972 Pinto ?

[COCKYMARK]

I don't care what they charge....it is ALWAYS worth it! it is simple really ....they have the best ships period!

[Charger2008]

Ahh yes, the infamous (brief) early May 2014 price drop. It was a good day, and nothing like it has been seen since.

 

I sometimes wonder if it was a mistake; I got some significant price drops that day for multiple cruises, as did many others. Haven't seen anything like it since.

 

I just looked at our reservation date and you are right, that is when we got our really great prices on the IOS cruise next week and the Oasis cruise in 2016. Sometimes it is better to be lucky than good :D

[tropical82]

I don't think families with children are a significant enough group but for us - for the same price of an inside stateroom on RCCL I could get a balcony room on Carnival - same travel week, same itinerary. Yet I stuck with RCCL because of the kids program.

 

I can actually take my infant and young toddler to a nursery to be watched whereas on Carnival there is nothing offered for such a young age group. That was a deal breaker as I wanted to be able to enjoy dinners. I'll have to pay extra for that service and it's still worth it to enjoy some quiet time and family time on a cruise with my family.

[A2Mich]

The build prices don't mean much if you don't also put in how many passengers each ship holds. I've always heard operating expenses are less

on the newer ships with technology enhancements.

 

Excellent point you've made. We'll have to use some simple math here, as we don't know the exact occupancy rate per week of each ship, nor do we have any details on financing terms on these ships. So let's assume that the ships sail at 100% occupancy (meaning all cabins filled at double occupancy - we can't account for 3/4/5 pax per stateroom, as we don't know the numbers involved here).

 

The Allure of the Seas, for example, had an MSRP (haha) price of $1,200,000,000 with a rated double occupancy capacity of 5,400 people.

 

Using those numbers (taken from Wikipedia, so take that for what it's worth), dividing the sale price of the ship by 5400 passengers, each berth needs to produce $222,222 to pay for the cost of the ship (and we're not even going to assume interest, financing terms, operating costs, etc, as we don't know any of these variables.

 

The Carnival Vista has a contracted price of $800,000,000 and a double occupancy capacity of 3,936. Each berth needs to produce $203,252 to pay for the cost of the ship. Again, not including interest, operational costs, etc just as above.

 

Obviously, sailing with a higher passenger load will reduce the per berth number needed to pay for the ship.

 

According to launch dates, Carnival has had 15 ships built or currently under construction since 2000. RCI has 16. Also important to note that RCI also tends to spend more on their ships than Carnival, so an overall initial higher cost per ship than Carnival is laying out. I apologize, but I'm not going to get into the passenger capacity of all 31 ships to do all of the math.

 

I can give you some approximate numbers on newbuild expenditures for both Carnival and RCI on all ships that have been launched since 2000, and for ones that are currently under construction.

 

Carnival has spent $8,127,000,000 on new ship construction in that time frame, and does not account for any money spent on drydock/refurbs.

 

RCI has spent $12,070,000,000 in the same time frame. I would say that RCI has an additional 4 billion dollars they need to earn to pay for these ships launched since the year 2000. If I had an idea what the length of financing terms averaged out to be, I could probably come up with more accurate numbers. Bottom line is that Royal Caribbean has significantly more money tied up in new ship construction in the same time frame, and even with variations in passenger occupancy per vessel, they will likely still need to charge more per passenger to pay for them.

[A2Mich]

I don't think families with children are a significant enough group but for us - for the same price of an inside stateroom on RCCL I could get a balcony room on Carnival - same travel week, same itinerary. Yet I stuck with RCCL because of the kids program.

 

I can actually take my infant and young toddler to a nursery to be watched whereas on Carnival there is nothing offered for such a young age group. That was a deal breaker as I wanted to be able to enjoy dinners. I'll have to pay extra for that service and it's still worth it to enjoy some quiet time and family time on a cruise with my family.

 

You can also but a fully loaded Chevrolet model for the same price that you pay for a mid-level Buick. A loaded VW Passat for the same price of a mid level Audi A4. Any of the vehicles will get you from point A to point B. Many people are of the opinion that the Buick is in fact a better vehicle than it's similar Chevy and the Audi is better than the similar Passat. Why? Because the Buick and the Audi cost more. They're both very similar, but the makers have determined to sell different products at different price points. RCI and Carnival offer similar products - they're both weeklong cruises on a ship where you have a room to stay in, 26 meals per day, entertainment (let's not get into THAT discussion), swimming pools to use, a few different ports to visit, etc. RCI probably feels that they offer a superior product, their ships on average, are larger than Carnival's, and tend to offer more features than Carnival. How much these different things matter to you is your opinion. For wanting to save some money and still get a decent product, Carnival would be the Chevy here. For those looking for a MAYBE slightly more upscale experience, enter RCI. I'm not going to debate which line is better, etc., but only that I feel that RCI may be marketed at a slightly different demographic.

[A2Mich]

It would take close to 20 years to pay off the loan with your numbers, factoring in interests. You add in operating costs and salaries and it might be longer. That ship will be outdated. You figure in those years how many times will that ship go to dry dock, plus emergency funds in case of a mechanical issue.. even at 222.222.00 per berth, you would have to factor in how much profit each berth makes per sail. As we know so many pay different fares. It would take an inside cabin longer to pay off the bill than a suite, yet there are fewer suites...Mind boggling

 

Yes, it is mind boggling. And, you're right that various cabin categories, rate calculations, etc will skew the actual numbers, but bottom line, using raw numbers, at least we can get an idea of how much it takes to pay off these ships. I was also thinking that 20 years is probably a realistic number. I remember reading elsewhere that the typical life expectancy of a ship is about 50 years. There's also no telling for sure that the cruise line will indeed keep the ship for that time frame, but it seems to be about right. Look at Carnival's oldest current sailing ship, the Fantasy - she is now 25 years old and is currently up for sale. The Sovereign class ships made it to roughly 20 years (actually a bit less) with RCI, but are still owned by the same parent company, just sold off to a different subsidiary under the Royal Caribbean Cruise Lines umbrella.

 

Bottom line is that it costs the cruise lines a lot of money to even pay the purchase price on the ships, and then increases when factoring in other ongoing costs. My point is that RCI has significantly more money wrapped up into newbuilds than Carnival does, and realistically, needs to charge more on average. However, the one big factor that I did not include, as I don't have any numbers, that you did mention is suites. Suites typically sell out quickly, and RCI does have some extremely expensive suites that Carnival pricing doesn't even approach.

[Lyneham1]

Just to complicate your calculations a bit more don't forget to factor in all of the on board sales - drinks etc etc.

[RCI Cruisers 004]

They have to pay for all the new ships somehow

[A2Mich]

Just to complicate your calculations a bit more don't forget to factor in all of the on board sales - drinks etc etc.

 

We could actually include them in the per berth average, would theoretically reduce the payback time. Either way, each berth still has to produce so much income over the amortization period of the ship. Obviously, any bookings over 100% are a bonus and can bring the average down, but there is never any guarantee that the ship will sail at 110% occupancy, but from what I can gather, rarely sail under 100%. Either way, it's still a staggering amount of money needed to run a cruise line. I'm sure the actual numbers are different once the actual occupancy rates of ALL ships are factored in, and contingency funds set aside, etc. I was simply trying to show that these ships have to generate tremendous amounts of income to stay viable, as some people probably don't have a clue what these ships actually cost to buy, let alone the operating costs, provisioning costs, salaries/wages, insurance, monies set aside for repairs, drydockings, not to mention ongoing maintenance and repair costs, salaries for land based staff, advertising costs, all of the costs associated with maintaining a business headquarters on land, overseas business costs, docking fees, fuel (likely figured into provisioning), and we have yet to even begin to show a profit.

 

Yet the cruising public wants cheaper cruises, as most people are likely wanting to save some money where they can (and we won't even get started on removing pre-paid gratuities - that's a whole other barrel of worms).

[thrifty99]

A2Mich - great posts!!! I am a "number cruncher" so I threw a quick spreadsheet together based on your numbers and some information I found from RCI's financial reports. Specifically regarding life span and residual value, they state:

 

"Ship Accounting

Our ships represent our most significant assets and are stated at cost less accumulated depreciation. Depreciation of ships is generally computed net of a 15% projected residual value using the straight-line method over estimated service lives of primarily 30 years."

 

I used the $1.2Billion cost, 5400 berths, 30 year life span, 51 weeks annually (deducted average 1 week per year for occasional dry-dock, unexpected problems, etc.), and a 15% residual value.

 

This comes out to 1,530 weeks of service and a weekly cost of $123.46 per berth.

 

Here is a screenshot of the numbers:

https://www.dropbox.com/s/tit8bc13lak9tlf/Screenshot%202015-03-04%2020.27.53.png?dl=0

 

Again, this does not include any cost of capital, operating costs, staffing costs, etc. It is a simple cost needed to cover the cash price to build the ship minus the residual value.

 

It would be interesting to know what the average passenger spends on top of the cruise price for everything (excursions, drinks, merchandise).

 

Edit: I did find some info on a recent 10Q filing. This shows the Passenger Ticket Revenue and Onboard and Other Revenue. The Onboard and Other Revenue is 26.6% of the total revenue or 36.3% of the Passenger Ticket Revenue.

https://www.dropbox.com/s/5ggxtw9y2x5wmvk/Screenshot%202015-03-04%2020.38.32.png?dl=0

 

I'd also be interested to know how many berths by type (interior, balcony, suite, etc) are on a ship like the Allure.

 

Anyway, thanks for the interesting posts regarding the cost to cover the construction of the ship. It gave a fellow "number cruncher" something fun to do.

Edited March 5, 2015 by thrifty99

[stewpapa]

Royal is not more expensive than Carnival in Galveston

[CountryMom27]

We've been on two cruises (Disney) and are headed on Oasis next week. I would NOT cruise on Carnival with my kids - lots of drunk people, an excess of food, and fairly crappy service & rankings. If I'm going to spend a week's vacation time off of work for each of us, and about $2k in flights and $5k on a cruise, plus a few hundred for the dog at the kennel... I'm going to want a certain level of quality. Disney is incredible - great service, I LOVE that there's no casino and that the booze is really tapered back. In Nassau, we docked next to a Carnival cruise, and a good portion of the people getting off the ship were drunk at 10a. We then went to a beach where there were more drunk people. If I was single and partying with my friends, sure, what the heck. But I'm relaxing with my kids. Not cool.

 

I'm a bit nervous going on a megaship - it's not really our thing, but we thought our kids (now 8 & 11) would really like the activities and we liked the ports. You pay for service, and since the price is blended (a portion of any cruise is fixed - a minimum floor, with a variable increase over that for cabin type, # cruisers, quality, ship age, brand, etc.).

 

As for the Buick/Chevy comparison, I found this funny. I'm in the midst of buying a new SUV and looked at a Chevy and Buick that are on the same platform. The Buick is about 10% more but offers more features than the Chevy and drives smoother and quieter. The Chevy drives more like a truck, and the interior is not as nice. So for 10% is it worth it? When I'm driving 7 hrs with the kids, or on my daily 100mi commute, yes, it is. I'll buy an older car for more features than a newer car that is less comfortable and has fewer options.

 

RCI has a different brand, target population, and value proposition than Carnival. We looked at Celebrity, but there wasn't as much for the kids. And FWIW - next year, we're planning to go on Disney again. The Disney ship/itinerary didn't work for us this year, which is why we're trying RCI. I'm not thrilled about the main dining room thing, or the formal nights, or the broadway-style shows... and especially not about the casino, but zip line, rock wall, sports, kids' clubs, ports of call - all work for me. We'll see how we like it next week!

 

A better analogy is the casinos. With so many states adding casinos, the industry is not doing well - demand is steady to down, and supply is increasing. Why go to Mohegan Sun when you can go to RI or MA? The casinos don't offer a unique value proposition - yet. I'm sure they'll figure it out. Right now, their only real barrier to entry is geography, and that's ending. The cruise lines have differentiated themselves on service, style, and offerings. Rather good business practices, if you ask me.

[thrifty99]

The 10Q for the first 9 months of 2014 also had this comment:

 

"an increase in ticket prices driven by greater demand for close-in European and Asian sailings, which was partially offset by a decrease in ticket prices for Caribbean sailings, all of which contributed to a $62.6 million aggregate increase in passenger ticket revenues".

 

Based on that, Caribbean prices were down overall in the first 9 months of 2014. I will have to look at the 10Q's later in 2015 to see if the price increases many are seeing now are individual cases or an actual overall increase in total ticket prices for 2015.

[A2Mich]

A2Mich - great posts!!! I am a "number cruncher" so I threw a quick spreadsheet together based on your numbers and some information I found from RCI's financial reports. Specifically regarding life span and residual value, they state:

 

"Ship Accounting

Our ships represent our most significant assets and are stated at cost less accumulated depreciation. Depreciation of ships is generally computed net of a 15% projected residual value using the straight-line method over estimated service lives of primarily 30 years."

 

I used the $1.2Billion cost, 5400 berths, 30 year life span, 51 weeks annually (deducted average 1 week per year for occasional dry-dock, unexpected problems, etc.), and a 15% residual value.

 

This comes out to 1,530 weeks of service and a weekly cost of $123.46 per berth.

 

Here is a screenshot of the numbers:

https://www.dropbox.com/s/tit8bc13lak9tlf/Screenshot%202015-03-04%2020.27.53.png?dl=0

 

Again, this does not include any cost of capital, operating costs, staffing costs, etc. It is a simple cost needed to cover the cash price to build the ship minus the residual value.

 

It would be interesting to know what the average passenger spends on top of the cruise price for everything (excursions, drinks, merchandise).

 

Edit: I did find some info on a recent 10Q filing. This shows the Passenger Ticket Revenue and Onboard and Other Revenue. The Onboard and Other Revenue is 26.6% of the total revenue or 36.3% of the Passenger Ticket Revenue.

https://www.dropbox.com/s/5ggxtw9y2x5wmvk/Screenshot%202015-03-04%2020.38.32.png?dl=0

 

I'd also be interested to know how many berths by type (interior, balcony, suite, etc) are on a ship like the Allure.

 

Anyway, thanks for the interesting posts regarding the cost to cover the construction of the ship. It gave a fellow "number cruncher" something fun to do.

 

 

Glad I could provide some entertainment for you!:D I'm not particularly a number cruncher, and didn't have quite as much information as you were able to uncover.

 

My numbers, I admit were rather basic, and likely rounded based on construction costs that I could locate easily. For example, Allure of the Seas had a cost of $1.2B, Oasis was $1.4B, the 3 Freedom class at $800M each, 4 Voyager class ships at $650M each, 4 Radiance class ships at $350M each, and 2 Quantum class ships at $935M each. The new Harmony OTS I had to guestimate at $1.2B.

 

For Carnival, we had 1 Victory class ship for $410M, 4 Spirit class ships at $375M each, 1 Splendor class at $697M, 5 Conquest class at $500M each, 3 Dream class ships at $740M each, and the one Vista class at $800M. As I pointed out earlier, Carnival's ships, on average, also tend to cost less per unit (also are generally smaller ships, and are probably getting preferential pricing from Fincantieri for all of those ships except the Spirit class, which were built by Kvaerner-Masa).

 

I'm glad that you were able to more accurately calculate a per week average per berth just to shed some light on the real costs involved. Guessing that RCI won't release actual figures for all of their other costs, but would be interesting to know the true cost needed by each berth to even break even after all costs are considered. And your number only accounted for the actual cash purchase price of the ship as well as mine did, let alone the interest paid over the life of the loan on the ship. While RCI considers a 30 year depreciation/valuation period, we still don't know the various financing arrangements (terms, rates, down payments made, etc.) We'll probably never know the true number, but still interesting!

[Stateroom_Sailor]

Why is the Prices so high at Rccl? Its absolutely crazy? They are good but not much better than NCL and Carnival.

 

Best regards

 

krydstosser

From Denmark

 

Good grief, more complaining about RCL prices. I just don't see it, they are comparable to Celebrity, Princess, and Holland... all premium lines. A couple years ago RCL was a couple hundred more than Carnival, what's changed?

[PegB87]

It varies by ship, itinerary, etc. Whenever I've compared RCCL against other cruise lines, it comes up pretty close to the same. Sometimes Carnival has even been higher.

 

Thanks for saying this! I've been wondering if I was just missing something in looking for these deals on other lines!

 

It does seem that RCI prices HAVE gone up a good bit over the last couple years (doesn't help that I can usually only cruise during peak times :( )

Since I kept hearing other lines are SOOO much cheaper, I began searching all different lines for next year's cruise, but I have NOT found a significant difference in the price of RCI vs the others. :confused:

[trev71]

I know i booked my next cruise last May, for this May and the rates have sky rocketed over 500$ a person.

 

I am looking at booking one for October but unless the price is right i wont bite. I blame it on this bogo sale

[TubbyMrT]

Comparing what we used to pay for a widget to what we pay today can also be the effect of the currency loosing its value.

 

As the value of the dollar plummets, the number of dollars required to purchase the same product increases. What used to cost $10, now costs $15.

 

The cost of a running a cruise ship, although very interesting, has nothing to do with the market price of a cruise. However, the margin between the two is very important to the survival of the corporation over the long term.

 

The market price is simply what the consumer is willing to pay for the goods/service. It doesn't mater how much it costs to produce the goods/service. Consumers will only pay market price no matter the cost.

 

When they charge $2000 for a room one week and then charge $1500 for the same room the next week, we know that they are trying to fill the ship and, at the same time, study and learn what the market is willing to pay for the room.

 

When a ship sells out, that tells them that the price is perhaps too low for that one cruise at a single point in time.

 

There are many factors to consider when setting market price. Each cruise is different and is influenced by the economy, weather, time of year, geo-political unrest, competition, capacity, service quality, entertainment, reputation of the corporation, etc. It is very difficult to guess the right number.

 

As all cruise lines introduce more capacity with new ships, there is a good chance that market prices will fall over time. However, the popularity of cruising is increasing so that will cause market prices to increase and be a wash with the capacity.

 

In summary, over time prices have been going up for most goods/services. Your challenge is to ensure that your salary increases by at least that amount.

Edited March 5, 2015 by TubbyMrT

[LuCruise]

cruiseguy, you want airfare sticker shock??? Try flying 4 people to Orlando during Spring Break.....I didn't quite account for that much effect from the House of Mouse.

 

That's what I find too...and not even just for Spring break. The cost of the cruise in itself is affordable (I didn't see prices back in May 2014 so I've heard it's gone up since then). But it's when you have to purchase 4 airline tickets on top of the cruise that it makes these trips very $$$.

 

Wish we lived closer to a port so we could just drive.

[LuCruise]

cruiseguy, you want airfare sticker shock??? Try flying 4 people to Orlando during Spring Break.....I didn't quite account for that much effect from the House of Mouse.

 

That's what I find too...and not even just for Spring break. The cost of the cruise in itself is affordable (I didn't see prices back in May 2014 so I've heard it's gone up since then). But it's when you have to purchase 4 airline tickets on top of the cruise that it makes these trips very $$$.

 

Wish we lived closer to a port so we could just drive.

 

PS - sorry for the double post...post kept timing out and seems like it did a double post (don't know how to delete this)

Edited March 5, 2015 by LuCruise