The capital expenditure landscape of the cruise industry is changing as refits and technology investments are gathering pace, while billions are needed to cover existing new building orders.
This message has come from the Finnish technology group Wartsila and Royal Caribbean Cruises, Ltd (RCCL), the world’s second largest cruise shipping group.
Most cruise ship building yards have full orderbooks far into the future, which means long lead times for new orders. The existing orderbook may also satisfy the industry’s capacity needs for the time being.
As RCCL made clear in its third quarter result presentation, upgrades of existing ships will include adding more cabins and other sources of revenue. This trend, which also means at least a gentle decrease in space ratio, has been evident for a few years now.
Such investments,, plus ones in technology and e.g. destinations on land, may have a shorter depreciation profile than newbuildings, which means that the impact is felt on the bottom line sooner.
The industry’s capital expenditure may continue to rise even if not a single newbuiding contract was place for several years as growing needs of ship upgrades and technology will add to those of massive orderbooks for newbuildings.
