As cruise fleets age, the coming years are going to see busy refurbishment schedules. Ian Duncan talks to Carnival’s Peter Fetten and Royal Caribbean’s Kevin Douglas about how operators are getting ready for the deluge.
The bright young things that were the cruise ships of the early 2000s are beginning the descent into middle age. The boom in the delivery of new vessels in the late 1990s and early 2000s has long subsided and has not since been matched. The result is an average ship age that is slowly creeping up and, in the next couple of years, the refit schedule of most operators is going to get very busy.
As well as the average age of ships increasing, new vessels that do enter the fleet continue to improve on their forebears, despite the slower pace of construction. Passengers cruising on the latest ships therefore have raised expectations, which risks leaving older members of the fleet looking rather long in the tooth.
Combined with general wear and tear, that means that after about 15 years, most vessels find themselves hauled into the dry dock for a major revitalisation project.
"As a naval architect and a ship owner, when you design a ship you'd like to hope that it's going to be around forever," says Kevin Douglas, vice-president of technical projects at Royal Caribbean Cruise Lines (RCCL). In the competitive and demanding cruise market, that cannot be the case.
Peter Fetten, senior vice-president for corporate refits at Carnival, says that in the mid-20th century, ocean liners had a typical lifespan of between 30 and 40 years. He points to a slightly shorter useful life for modern cruise ships: around 25 years after two major revitalisations.
In some ways, the word 'revitalisation' understates what is happening to vessels. Douglas points to the recent project to transform Celebrity Mercury into TUI's Mein Schiff 2 as typical of a modern retrofit.
The ship was taken out of service in Baltimore this spring and major demolition work was carried out on the transatlantic crossing to Lloyd Werft shipyards in Germany. There, the vessel spent 36 days in dry dock where it gained 186 new balconies. The total cost was $70m.
"If we spend $1.5m per day in the dry dock, we know that it's a big project," Douglas explains. The Mein Schiff 2 conversion clocked in at almost $2m a day.
Every aspect of the ship is considered for upgrade, from food and beverage offerings to the propellers: it might only be the basic hull platform that remains. The planning required for such projects is almost as extensive as that for a new build, but the need to work in an existing framework can make them much more challenging.
"We take up to eight, 12 or even 16 months to come up with the conceptual designs," Fetten says. "It's hard work, because you have limitations with an existing platform and you have to make certain compromises because of the existing structure. Depending on how good you are as a designer or an architect, you can usually reach 95-98% of your demands - demands you would otherwise only get with a new building."
That impressive figure represents the level of maturity operators and suppliers have reached in their revitalisations. At Royal Caribbean, the same team has been working on most of its projects for the past seven years. After 17 major refits, they have a good idea of what works.
"In the past, the quality of a refit was regarded as somewhat inferior because you have more time on a new build," Douglas says. "It has been one of our goals to make sure there is no quality difference between a refit and a new build, and I believe we're heading in the right direction."
In part, that is because the suppliers and the partnerships they have with operators have also matured. When planning a project, operators work closely with all the contractors they will use, giving them time to visit the vessel early on and assess what is needed.
Fetten adds that there has been a cultural shift within operators' own organisations over the past decade. In the 1990s, he says, engineers took primacy when planning projects. They produced technically beautiful vessels, but often ran into problems when the operational groups started examining how they would actually use the ship.
"We're smarter than that today," says Fetten. "Now it's all about operational optimisation, customer experience, the 'wow factor', etc. The technician is secondary - he has to make it work for the operational group."
It is a change that has made possible the sophisticated refits now being undertaken. Refurbishing a ship is about bringing it closely into line with its newer sisters and meeting guest expectations as much as possible.
The strategy of sending older vessels to peripheral markets such as Asia and Australia has also been revised, as consumers around the world become more sophisticated cruisers. Therefore, the quality gap between the newest and oldest ships has had to be narrowed considerably.
Both Douglas and Fetten are confident this is a goal they have largely achieved. Douglas describes the 'quilt effect' - the differences between new and old aspects of a ship - as one important measure of quality. The average passenger, he says, is probably unaware of the difference.
The increasing quality of revitalisations does not come cheap, however - Fetten notes upcoming refits of the Costa Classica and Romantica will likely top $100m each - so the goal is to push yields up. For Fetten, that has meant replacing grand ballrooms with a wider variety of smaller spaces for entertainment and dining.
In a period when fewer new builds have been entering service, revenue-maximising refits are especially attractive, giving operators a means to adapt more quickly to changing conditions and so bolster profits. Smaller ships that do not have the space to add outdoor attractions can be reconfigured into high-end luxury cruisers.
"If you take the new Sea Dream ships, they're very small, they're about maximum space per passenger, real high levels of intimate service," Douglas explains. "We want to provide a very high level of service on a ship like our Oasis, but offer a completely different experience. Some ships are destination oriented, some are destinations in their own right."
The other aspect of revitalisations is one that the customer never sees. Lines work hard to maximise the energy efficiency of their ships by taking the opportunity to install systems such as smart generators to power air-conditioning systems, software-controlled stabilisers and LED lighting - all of which help cut operating costs. RCCL's Radiance of the Seas, initially built for high-speed cruising, even had new propellers installed when it was redeployed to a slower-paced itinerary.
RCCL and Carnival are also using refits to install early versions of environmental-compliance technologies to prepare for tightening IMO regulations. RCCL has invested heavily in advanced wastewater processing plants and plans to trial exhaust scrubbers soon.
What operators can now achieve through revitalisation is impressive, but there is one thing they cannot do: significantly improve their fleet capacity. While some projects do add extra berths, it is not enough to satisfy growing demand. In recent years, that has not been a problem, but as growth returns in the next few years, the only way to meet it will be with new builds.
Douglas expects new builds to start picking up again in the next two to three years. "A new build takes four to five years from conceptualisation to delivery, sometimes even longer than that. So it's a different thought process, you have to think beyond the current economic climate to long-term growth with new builds."
But, as Douglas points out, keeping the average age of the fleet down would require an exponential growth in the number of new ships entering service.
The long-term trend will be toward older ships, and that will mean more refurbishments and revitalisations. When Douglas rattles off an extensive list of upcoming projects, it's clear the number has already begun to climb, but the real change will come in the next three to four years, as more vessels hit the critical 15-year-old mark.
The shift is almost inevitable because, as Fetten says, "It's just sheer mathematics." ?