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CBR Odo Commentary – Growing orderbook puts pressure on supply driven business model

Cruise shipping companies have increased the rate of ordering newbuildings and the orderbook of Norwegian Cruise Line now amounts in value to 51% of its balance sheet (excluding effect of recently unveiled acquisition of Prestige Cruise Holdings), according to Odo Maritime, the research arm of Cruise Business Review.

At the same time, it would appear that the question of valuations of existing tonnage is gradually gaining importance after Royal Caribbean Cruises Ltd (RCCL) sold Celebrity Century at a loss. Meanwhile, a senior official of the group in the UK warned that new ships alone may not be enough to fill the new capacity that will come online, unless the public’s perception of cruising will change.

In the opinion of Odo Maritime, this highlights concerns over the future of the supply driven business model of the cruise industry.

For more, please go to: www.odomaritime.com/#!news-and-analysis/c2t8

Ctrip and RCCL plan joint venture to manage Celebrity Century, explore deepening cooperation

Ctrip, the Chinese travel company that acquired the 1995 built Celebrity Century of Celebrity Cruises unit of Royal Caribbean Cruises Ltd (RCCL), says the two companies plan a joint venture agreement and the ship will be refurbished

“Ctrip has entered into a Memorandum of Understanding with Royal Caribbean Cruises Ltd. to form a joint venture to manage the operations of the acquired cruise ship and potentially broaden the relationship,” Ctrip said in a statement.

"China is becoming one of the largest cruise markets in the world," said Min Fan, Vice Chairman of the Board and President of Ctrip. "As the largest cruise agency in China, Ctrip has sent over 120,000 guests to cruise trips so far and acquired more than 10% of market share in China. We are excited about the strong growth of the cruise industry and strive to strengthen our leadership in this market.

"We are thrilled about our acquisition of Celebrity Century, which is one of the top-tier vessels in the world," Min Fan continued," Century will be renovated to provide an outstanding cruise experience to China's leisure travelers, including premium hotel services, diversified dining options, exciting on-board facilities, varieties of entertainments, and inspiring excursions and tours.”

“ Ctrip will capitalize on our strong brand, large customer base, and superior service quality, as well as our partner's extensive cruise operating experience to generate great value to our customers and shareholders."

Royal Caribbean Cruises Ltd. to sell Celebrity Century to Ctrip

Royal Caribbean Cruises Ltd. announced today that it has entered into an agreement to sell its cruise ship Celebrity Century to Exquisite Marine Ltd., a holding company led by Ctrip.com International Ltd. (NASDAQ: CTRP).  The sale will result in a non-cash loss of approximately $20 million dollars. This loss will be excluded from our adjusted net income in our third quarter results. Royal Caribbean Cruises Ltd. will continue to operate Celebrity Century until April 2015.

"Since its inaugural sailing, Celebrity Century has created many wonderful memories for hundreds of thousands of guests, and we expect this successful history to continue as she transitions to the Chinese cruise market," said Richard D. Fain, chairman and chief executive officer of Royal Caribbean Cruises Ltd.  "The vessel's sale is an excellent business opportunity for both Royal Caribbean and Ctrip, and will generate strong value for both companies' shareholders."

Celebrity Century will complete its scheduled sailings through the March 22, 2015, itinerary. The 15-night, Dubai to Rome sailing on April 5, 2015 is being redeployed to a 14-night sailing from Dubai to Singapore. Guests with affected individual bookings and named group bookings on Celebrity Century's April 5, 2015 sailing from Dubai to Rome have the option to either cancel their booking and receive a full refund or move to an alternative sailing and receive a re-accommodation onboard credit as well as compensation to cover air change fees. Guests with reservations affected by the transition will be proactively contacted by Celebrity Cruises. Guests and Travel Agents with specific questions are welcome to call 1-888-283-7275.

Celebrity Century joined the Celebrity Cruises fleet in December 1995, and was built by Meyer Werft in Papenburg, Germany. The 71,545-ton ship carries 1,814 guests (double occupancy) and 860 crew.

Earlier Celebrity Century was expected to join CDF next spring to operate in the French market.

Ctrip.com International, Ltd. is a leading travel service provider of accommodation reservation, transportation ticketing, packaged tours, and corporate travel management in China. Ctrip aggregates accommodation and transportation information to enable business and leisure travelers to make informed and cost-effective bookings. Ctrip also helps customers book vacation packages and guided tours. In addition, Ctrip corporate travel management services help corporate clients effectively manage their travel requirements. Since its inception in 1999, Ctrip has experienced substantial growth and become one of the best-known travel brands in China.

Upper end of cruise market less focused on ship

The upper end of the premium market and the luxury market differ markedly from the contemporary market in terms of what is focal, said Kevin Sheehan, president and ceo of Norwegian Cruise Line Holding.

In the contemporaty market segment, in which the group's Norwegian Cruise Line brand operates, the ship itself and on board activities are focal to the guests. However, in the higher end of the market, the picture changes.

"Ship is not the focal pointof the guest experience," said Frank del Rio, chairman and ceo of Prestige Cruises. In the upper premium and luxury markets, outstanding service, fine food and calls at ports that allow passengers to truly see the world are more important, he said at a webcast conference call related to the acquisition of Prestige by Norwegian.

"These ships age like fine wine, provided that they are well maintained," Sheehan said, referring to the upper end of the market vessels. 

Prestige acquisition widens Norwegian group's market segments, geographical range and earnings base

The acquisition of Prestige Cruise Holdings will gve Norwegian Cruise Line Holdings a 46% stake in the upper end of the cruise market, said Kevin Sheehan, president and ceo of the Norwegian group.

Prestige is the parent company of Oceania Cruises that operates in the upper end of the premium market and Regent Seven Seas Cruises, which is a luxury operator.

Sheehan said that Norwegian had been transformed since 2008, when the private equity group Apollo acquired 50% stake in the company. As it now has delivered an improved EBITDA for 24 consecutive quarters, the time had come to expand it beyond the contemporary market segment of Norwegian Cruise Line.

The choice was between launching a new brand or an acquisition. To acquire Prestige was a natural choice as Apollo had acquired that company as well, so that the board and senior management of both management had close contacts.

The new three brand Norwegian group will cover the age range of passngers from families with small children to retired people and it also covers all segments of the industry. However, the passenger experience on each brand will not be affected.

The acquisition will also expand the geographical reach of Norwegian as vessels of Regent and Oceania call at ports which Norwegian does not visit at the moment. It will be financially accreditive from the start, Sheehan said.

Sheehan noted that the acquisition "married well" by bringing togetherthe best brands in their respective market segments and the best practises would be employed from each company. Norwegian Cruise Line itself would benefit as the acquisition opened the doors to agents that focus on the top end of the business, which are important for its Haven accommodation, but which it has had difficulties in reaching so far.

Viking Star