On a recent four-night cruise to the Bahamas on the 2,758-passenger Carnival Victory, a lively crowd was downing neon drinks at an equally fluorescent bar in the ship’s multi-story atrium. The casino was packed and smoky. This was old-school cruising, and everyone was loving it.
Most ships have an official lifespan of 30 years, the amount of time it takes for the asset to depreciate to 15 percent of its original book value. By that measure, the 18-year-old Carnival Victory has passed the theoretical prime of her life.
She’s still quite the moneymaker. By focusing on short, three- and four-night sailings from Miami to the Bahamas and back, the aesthetically outdated ship carries twice as many passengers per year as many similarly sized vessels. In fact, the Carnival Victory is just one of the many middle-aged and elderly ships that were built during a cruise boom in the 1990s but now make up a multibillion-dollar portion of the cruise industry.
Avoiding the Cruise Ship Graveyard
Typically, there have been three options for “senior” ships—none of which includes getting stripped for steel on a South Asian beach. Most often, they’re offloaded to a less-luxurious cruise line within the same company or rerouted to a different part of the globe with smaller market share. Sometimes they’re sold on the second-hand market to fledgling or budget cruise lines that don’t want to invest in new tonnage.
As these ships approach their retirement ages, they are also used for the booze-cruise set, who care less about cabin décor than the number of free drinks included in their fares. The Bahamas Paradise Cruise Line has just two ships: one built in 1987 (for Carnival) and another built in 1991 (for Costa Cruises). The itineraries, which largely consist of two-night forays from West Palm Beach to Freeport in the Bahamas, start at $129 per person and include 10 free drinks.
But as overhead continues to rise on new constructions—the largest cruise ship in the world, Royal Caribbean’s Symphony of the Seas, cost $1.5 billion to build—such major players as Carnival Corp. and Royal Caribbean Cruises Ltd. are catching on to the intrinsic value of an aging fleet, realizing that it’s more sensible to give older vessels a little Botox and a “demotion,” rather than letting a costly asset sail into the sunset.
One example: At age 20, the 1,970-passenger Dawn Princess left Princess Cruises last year for sister brand P&O Cruises Australia, where, after a multimillion-dollar makeover, it was renamed the 1,998-passenger Pacific Explorer. It now has a zip-line course, a bowling green, and a water park with two water slides. (One is disco-themed, with lights and music.)
Facelifts for Old Ships
As with humans, cosmetic surgery for cruise ships can be subtle or drastic—but it’s become increasingly common. In its annual “Cruise Lines Outlook,” UBS estimates that by 2020, at least 12 percent of global capacity will be 25 years old or older, and nearly 5 percent will be pushing 30.
Carnival, the largest cruise line on the seas, currently claims 26 ships—nine of them built from 1990 to 1998. The company has spent hundreds of millions of dollars refurbishing those ships, adding such features as poolside Guy Fieri burger stands. But Stein Kruse, group chief executive officer for Carnival Corp.’s Holland America Group and Carnival UK, says investments in older ships are worth it, particularly if one is in good shape and has a loyal following and low book value. “Some of the older ships in our brands are incredibly popular. They are well-kept, well-maintained, and they go on exciting itineraries,” he tells Bloomberg.