Insights into the Question, "Will Royal Caribbean Ever Build Smaller Ships?"

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A frequently asked question:  Will Royal Caribbean ever build smaller ships?  A few considerations:

First, even as the average cruise ship size increases over time, it is in our interest to have a balanced and flexible fleet profile.  There are both physical parameters (e.g., Panama Canal) and market parameters (e.g., starting up in Dubai) that dictate a mix of smaller ships as well as Oasis-class ships.  We are very fortunate to have the 1,800 guest Legend of the Seas and Splendour of the Seas in our fleet to spearhead our global expansion.

Second, we are able to utilize larger ships on routes that we would not have believed possible even ten years ago.  The fact that we will have a Freedom-class ship and three Voyager-class ships in Europe in 2010 is remarkable in comparison to our thinking in the late 1990’s that we would have a maximum of one or two Voyager-class ships and they would always be Caribbean-based.  Now our view is we will use any of our ships anywhere in the world where it makes economic and logistical sense.

Third, the preference of the clear majority of our guests for more features and options is clear.  There is simply more demand for larger ships than for smaller ships.  This is especially true of families but applies to couples and singles as well.  I know from personal interaction with cruisers that many don’t accept this to be true.  But this is our experience in our call centers and through our automated reservations every day.

Fourth, while economies of scale are not the controlling variable in the cruise equation, there are scale benefits that contribute to our brand’s preference for larger ships.  The simplest example: whether the ship holds 1,000 or 3,000 guests, it has one Captain.

Fifth, there is an undeniable nostalgia amongst some cruisers for ships under 1,000 guests that provide an extraordinarily high level of customer service.  Although the Royal Caribbean brand is not going to encompass such ships in the future, our company certainly does in the present with our two 700 guest ships in Azamara Cruises not to mention the 100 guest Celebrity Xpedition.  Our company across its six brands has a significantly more diverse fleet profile than the Royal Caribbean International brand has on its own and this will continue to be the case.

So will Royal Caribbean ever build small ships?  It is unlikely for the brand Royal Caribbean International.  But not out of the question for the company Royal Caribbean Cruises Ltd. through one of our other brands.