Report: Oasis of the Seas hurting prices

Equity research firm Majestic Research has released a report indicating that the brand-new mega-cruiser Oasis of the Seas is having an impact on the pricing of other ships in owners Royal Caribbean Cruises Ltd’s fleet.

Oasis of the Seas

The worlds largest and newest cruise ship Oasis of the Seas. Royal Caribbean Internationals newest ship has a capacity of 5,400 passengers; its 15 decks house four main swimming pools, a park promenade, surf simulators, rock climbing, and miniature golf. Photo: AP

Oasis of the Seas will launch on its Caribbean maiden voyage on 12 December and is a 17-deck behemoth capable of holding 5,400 passengers. It is considered to be the first of a new era of huge cruise ships, with seven ‘neighbourhoods’, 37 bars and a central park area.

A note to investors indicated that pricing for Royal Caribbean’s Freedom-class ships was seven per cent higher than their other ships in the first quarter of 2010. That compares unfavourably from the 27 per cent during 2009’s third quarter – the last before the launch of Oasis of the Seas. Celebrity Cruises, which are owned by Royal Caribbean International, are displaying a similar price displacement. Their Solstice-class ships’ pricing has dropped from 68 per cent to 30 per cent higher than Royal Caribbean Cruise Ltd.’s other ships in the first quarter of 2010 compared to the third quarter of 2009.

Matthew Jacobs, a leisure analyst at Majestic, said that investors may have expected the new cruise liner to lift bookings across the board but the opposite may be true.

‘While some investors are expecting Oasis to have a halo effect, it appears that the ship is actually cannibalising the rest of Royal Caribbean Cruise Line’s fleet.

‘The Oasis is garnering initially high premiums for the quarter because of the honeymoon period accompanying the launch of a new ship. We expect the ship to continue to generate strong premiums throughout most of 2010; however, we expect Oasis’ premiums to drop significantly over time, as we have seen with other recent new ship introductions.’

Elsewhere, cruise companies continue to invest in their vessels. Crystal Symphony, which visits Grand Cayman, recently enjoyed a US$25 million makeover that included revamped restaurants, upgrades to the accommodation and brand new deck furniture.