Economics and small ship cruising

Last month it was announced that Princess Cruises was selling Ocean Princess to Oceania Cruises. Ocean Princess is a small ship by today's standards, coming in at just over 32,000 gross tons.

Originally, this ship was the R4 of Renaissance Cruises. She was one of eight nearly identical ships. When Renaissance went out of business, the eight ships were scattered and ended up in the fleets of Azamara, Oceania, Princess and P&O Cruises. Interestingly, although the eight ships have different they are still nearly identical.

Azamara and Oceania sell cruises on their ships as luxury crusing. Princess and P&O Cruises characterize their ships as offering the same main stream cruise experience as the rest of the ships in their fleet.

The sale of Ocean Princess is not surprising. It is difficult for a main stream cruise line to offer a small ship experience. The cost per passenger of running a small ship is greater than the cost per passenger of running a large ship because of the economies of scale. It thus follows that if you are charging the same or similar fares as you do for a large ship, you are not going to make as much money. (Bear in mind that the cruise lines are businesses with fiduciary responsibilities to their investors).

A luxury cruise line is able to charge more per ticket. Thus, the additional cost of providing a small ship experience is not as significant an issue.

People often ask me why isn't anyone building small cruise ships anymore? In fact, there are small cruise ships being built. To illustrate, Regent Seven Seas has one on order now and Viking Cruises is building a series of ocean going small cruise ships. Seabourn and other luxury brands have also added new small ships to their fleets in recent years.

The question then becomes why aren't the major cruise lines building any small cruise ships? The answer lies in the same econimcs discussed above. Looked at on a per passenger basis, small ships cost more to build and more to operate because they lack economies of scale. Thus, if you can only charge the same price for a cruise on a small ship as you can for a cruise on a large ship, it does not make sense to invest in building a small ship.

This week on Beyondships, we return to Princess Cays, Princess Cruises' private resort in the Bahamas. Our section on Princess Cays has been re-done http://beyondships.com/Princess-PrincessCays.html and a new video of Princess Cays has been added. http://www.beyondships3.com/princess-cays-6.html