Orders for newbuilds are in decline, and there is a growing focus on fleet refurbishment. Rebecca Burgess talks to Royal Caribbean Cruises' Harri Kulovaara and Kevin Douglas, Holland America Line's Dan Grausz and Fincantieri Shipyard's Giorgio Rizzo about this new direction.
Until the recent announcement by chief executive officer Richard Fain of Royal Caribbean International's (RCI) intention to continue its pioneering reputation for newbuilds by ordering the first in a series of new vessels, the cruise shipbuilding industry's order book was looking sparse. The announcement, though, is a step forward from the past two years, which have seen a downturn in new orders and an increasing focus on refurbishing existing ships.
This year is the first since 2005 that RCI has not added a new ship to its fleet, the last being the launch of Allure of the Seas in 2010; however, the company is simultaneously entering its single biggest year of refurbishment projects. Liberty of the Seas sailed from dry dock in the Bahamas in January, following a seven-day revitalisation, and it will be followed by Freedom of the Seas, Radiance of the Seas and Splendour of the Seas during 2011. Planning is underway for the rest of the ships in the Vision, Radiance and Voyager Class fleets. Executive vice-president Harri Kulovaara believes the time is right for RCI to consolidate.
"The cruise industry has grown very fast and while I think it will continue to grow, the pace will be more moderate," he says.
"Royal Caribbean has focused very much on newbuilds, and the Oasis and Allure projects were huge and required a tremendous amount of work and focus. Cruising is to some extent cyclic and the industry is quite new with a lot of fleet out there. I think the product will continue to evolve and innovative newbuilds will come, but at the same time we are focusing on taking existing ships forward, too."
RCI's revitalisation plans
The seeds were sown for RCI's extensive refurbishment programme in 2002 when a dedicated Revitalisation Team was launched. Kevin Douglas, vice-president technical, newbuilds, is instrumental in leading the team through this year's $160m investment programme and similar-scale projects planned annually through to 2015.
"It is going to be challenging, but we have a confident and expert team," he says. "It's also interesting because we become our own 'internal shipyard' and are fully responsible for our own scope, budget and timeline."
The focus is on the efficiency of the turnaround, with Liberty of the Seas spending only seven days in dry dock in the Bahamas and Freedom of the Seas due to be refurbished to the same timetable.
"That was exceptionally quick," says Douglas referring to Liberty of the Seas, "and now that we have done it once, we can do it again."
As Kulovaara points out, demand is strong and ships are sailing full so the line wants to lose as little service time as possible. It is this time pressure that makes these major refurbishments so technologically demanding all round.
"Hotel refurbishments on land can take up to 12 months, but in the cruise industry we work on a month," says Kulovaara. "It is all in the planning, preparation and pre-fabrication. Revitalisations require a different mindset - it's all about timeliness, working in parallel and taking everything to the ship rather than the ship coming to you."
Giorgio Rizzo, executive senior vice-president of Ship Repairs and Conversion at Fincantieri Shipyard, agrees: "The out-of-service time in a shipyard is one of the largest expenses that owners have to consider. Without doubt, operators of cruise vessels will make every conceivable effort to keep their out-of-service time down to the minimum possible and will only undertake work which cannot be undertaken while the vessel is in operation."
Holland America's Signature of Excellence
Holland America, which has already progressed several ships through its $525m Signature of Excellence upgrades, attributes the success of its programme to a "tremendous team".
Vice-president of fleet operations, Dan Grausz, says: "I think our experience has been extremely positive. We are having a really strong booking pattern and I think it's reflective of the products we now have out there. I think the programme is a real success story for Holland America and we're seeing other lines copying ideas, which is very flattering."
The company is finishing its S-class ships with Maasdam, which is due to be complete in April, including cabin upgrades and the addition of a Mix bar and cabins with direct deck access. Zaandaam and Amsterdam follow in 2012 and 2013.
Grausz explains: "We want to make sure our ships remain premium and offer what our guests expect.
"Some of our classes were made 20 years ago so they are showing their wear and tear. Similarly, there have been tremendous improvements in the past 20 years and we want to take advantage of this. Our focus is quality and premium service so we are taking care that we are at the top of the game on that."
As the current programme ends, discussion are ongoing about what the third phase of the Signature of Excellence programme will entail, although Grausz does not expect it to continue on the current scale. He also believes newbuilds will be on the order books in the future, following the last additions in 2010 of Nieuw Amsterdam and Eurodam.
"The planning for newbuilds is made by the chief operating officer who considers the market and makes the decisions on where it is most positive to add to [parent] Carnival Group's fleet," he says. "It's a very dynamic situation and we are always looking to ensure that we continue the growth of the entire fleet. I have no doubt that other newbuilds are down the road."
So what impact is the slowdown of newbuilds and focus on refurbishments having on the shipyards? Giorgio Rizzo says that Fincantieri has felt the effect of the downturn: "It is foreseeable that orders will remain below pre-crisis levels for some time, but the cruise industry is still relatively healthy with a growth in passenger numbers and an overall positive trend for cruise prices. Owners and operators are; however, still hesitant to order new vessels due to the still-difficult global financial environment."
Fincantieri has been involved in several refurbishments and is pursuing a strategy of expansion into the sector.
"We are offering a range of services from feasibility studies to design, project planning, procurement, engineering, supervision and management of projects undertaken by owners and operators in other shipyards independent of geographical location," says Rizzo. "Currently, we are in discussion with leading brands in the cruise industry and already involved in refurbishment projects, which are due to be undertaken over the next two or three years."
However, Rizzo insists refurbishments will never replace newbuilds and are not in opposition to them: "Driven by customer preferences, the operators will have to continue their investment in new updated vessels, which look and feel different from the existing ships. Refurbishments are undertaken to maintain and upgrade the present, while new vessels are projected to ensure the future of the industry."