Royal Caribbean's Oasis of the Seas gamble has paid off. And at more than 220,000 gross tons, it is not only the largest passenger vessel in the world, but it is about the same size as the U.S.S. Nimitz aircraft carrier. Photo by Ereine/courtesy of Wikipedia Commons.
With fourth-quarter results in from major U.S. airlines and travel players, it appears that the gloom-and-doom predictions for travel were at least somewhat exaggerated. Five of the U.S.’s top nine airlines turned in profits in Q4, with other airlines beating what had been lackluster analyst expectations–and, surprise of all surprises, in some cases airline stock is even noticeably rising on Wall Street. .
Now, another major player in U.S. travel, Royal Caribbean Cruises, has also posted a profit of USD 3.4 million in Q4 2009—more than double that of last year—while projecting 2010 share earnings at between USD 2.00 and USD 2.20 a share, a level well-beyond the previously predicted USD 1.48 Thomson-Reuters estimate.
And how did they do it? In part by adding new liners to its 38-ship fleet, including the massive Oasis of the Seas ocean liner, which at 225,282 gross tons is by far the largest of its kind in the world.
To put this in perspective, at a time when the travel industry looked about to topple—not only from the fallout of the U.S. mortgage crisis, but from renewed terrorist efforts—Royal Caribbean put, among others, a passenger ship roughly the size of an aircraft carrier on the market.
An ensuing 30-percent increase in bookings over the previous year makes the Oasis addition, in particular, no less than a stroke of genius.
The Oasis gamble has genuinely piqued the interest of both the traveling public and the travel press. Despite gloomy travel forecasts, someone up top happened to remember (and have the courage to push the gamble through) that the U.S. has a long history of following the “if you build it, they will come” mantra. Las Vegas is the prime example, but so are fun parks, water parks and gaming centers all over the country.
Then again, you could say that the Oasis of the Seas was a no brainer—a risk-laden, investment-heavy no brainer, but still a smart, logical move with the potential to further establish Royal Caribbean’s dominance in the U.S. cruise sector. After all, bigger is better in the States, so the gimmick is bound to work. Moreover, while at first glance the cost of building the Oasis seems astronomical, as anyone in catering or the service industry knows, you get bigger savings with more volume. In the cruise biz, this is doubly true, as transferring stock onto multiple ships is going to be much more expensive than stocking one huge boat that still services almost half again the number of tourists of a typical cruise liner.
Then there is the fact that the Caribbean is not only fantastic, but close to home. In the modern world—for U.S. tourists anyway—this translates as “terrorist free.” While Europeans may be inured to the sight of thuggy security services patrolling with machine guns in places like Egypt or even Bali, U.S. tourists want to relax on their vacations. Something about guns and police seems to tarnish the experience.
And as far as the Oasis of the Seas goes, well, mega cruise liners have never been this blogger’s thing. However—and maybe this is the American in me—the concept is intriguing. It’s just so big, so new and so… Caribbean.
Perhaps it is even that much more intriguing to know that the Oasis of the Seas will soon have a sister ship, the equally large and audacious Allure of the Seas, which should hit the market in November of this year.
What can you say but “wow”? Yet another gamble that for sheer size and risk simply cannot be denied.
Then again, the message is clear. RCC knows what they are doing. And it’s hard to get it wrong in the Caribbean.
By Preston Smith
This blogger can be contacted directly at preston.smith@psiloc.com
