Hospitality ace Ritz-Carlton proposes to bring something new to cruising

With the announced entry of Ritz-Carlton into the luxury end
of the North American cruise business, the segment may get its first major new
player since a cluster of lines first weighed anchor in the late 1980s and
early 1990s.

The Ritz-Carlton Yacht Collection plans to build three
298-passenger ships, starting service as soon as 2019.

Although larger lines have tried to horn in on the luxury
segment with exclusive areas such as Norwegian Cruise Line’s Haven and MSC
Cruises’ Yacht Club, there hasn’t been a new name in small-ship luxury in
nearly a quarter century, with the exception of SeaDream Yacht Club in 2002,
which sails two 112-passenger ships that originally sailed under the Sea
Goddess name.

Experts say the luxury segment, while potentially lucrative,
isn’t as simple a bet as it might seem.

“Luxury hotel brands extending into cruising creates
thousands of opportunities for ‘brand failure’ which the best brands can ill
afford,” said Chekitan Dev, professor of hospitality branding at Cornell
University’s School of Hotel Administration.

“Margins can be razor thin and easily eroded by a few
miscalculations,” Dev said.

However, Douglas Prothero, one of two managing directors of
the Ritz-Carlton Yacht Collection, said the Miami-based brand was several years
in the making and was based on a careful study of the field.

“In comparison to other luxury cruise offerings, our
yachts will offer guest amenities, suite size and sea access that is unlike
anything else available in the smaller luxury cruise market,” Prothero
said.

Three competitive weapons give Ritz-Carlton a fighting
chance to crack the market, Dev and other observers said.

The first is spaciousness. At 24,000 gross tons, the
Ritz-Carlton ships will offer about 80 gross tons of space per guest. That
compares to a space ratio of 69 at Seabourn, 66 at Silversea Cruises and Regent
Seven Seas Cruises and 60 on the two current Crystal Cruises ships.

The public space will be devoted to five restaurants, a
Ritz-Carlton-run spa, three pools and a lounge/wine bar (but no casino), as
well as suites that start at 312 square feet and run up through a pair of
modern penthouse suites that measure 1,663 square feet, including their
verandas.

A dozen duplex cabins will offer innovative layouts ideal
for in-room entertaining, Prothero said, while other cabins can be combined
into larger rooms through soundproof, blind doors.

A second hallmark of Ritz-Carlton at sea will be a sleek
design.

“We envisioned an exterior look that was very slender,
long and elegant, and we wanted to evoke the Maserati effect, where people
would see the yachts and wonder what the insides would look like,”
Prothero said.

The cabin interiors will take their cues from contemporary
properties such as the Ritz-Carlton Residences in Sunny Isles, Fla., and Los
Angeles.

“All suites onboard will have a far greater ceiling
height than in any cruise ship suite,” Prothero said, which should
contribute to the spacious feel.

A third potential differentiator is service. Ritz-Carlton is
known for its extensive staff training and service “gold standards,”
including the idea of “ladies and gentlemen serving ladies and gentlemen”
that serves as the company motto.

“Because hospitality is such an integral part of the
cruise experience, it makes sense for Ritz-Carlton to extend into cruising,”
Dev said.

It hasn’t worked out for everyone, however. In 2004, Four
Seasons Hotels Resorts announced it planned to build a 42,500-ton,
700-passenger luxury ship with cabins that would be sold as condos.

The project stayed alive for several years, but disappeared
in the maelstrom of the 2008 financial crisis.

‘Completely different offering’

The existing luxury lines were all born after Royal Viking
Line, perhaps the original luxury cruise specialist, was sold to Norwegian
Cruise Line in 1985. Seabourn emerged in 1987, Crystal in 1988, Regent in 1992
and Silversea in 1994.

More recently, a spate of expedition ships with some luxury
attributes have been ordered. Prothero said the Ritz-Carlton yachts are “a
completely different offering” from such ships being built by France-based
Ponant and Crystal.

As to fears of oversupply, Prothero pointed to a survey that
found 405,000 Ritz-Carlton hotel guests had also taken a cruise in the past
year.

“So we believe we already have a strong, interested customer
base,” he said.

Ritz-Carlton Yacht took a big step forward on June 26 when
it signed a contract for its first ship at the Hijos de J. Barreras shipyard in
Vigo, Spain. The terms call for delivery in 30 months, with options for two
more ships. The price was not disclosed.

Prothero said the first ship will sail in the U.S., Canada,
the Caribbean, Latin America, the Mediterranean and Northern Europe. A second
ship would add summer sailings in the Great Lakes to that list, while a third
ship would deploy on Asia-Pacific itineraries.

Ritz-Carlton Yacht has a long-term agreement to manage the
venture, including its marketing which will be done by a dedicated sales staff
in Miami. But it won’t own the ships, which are being financed by the private
equity firm Oaktree Capital Management and senior management.

One competitor, who declined to be named, said a management
agreement shows a lesser commitment to the venture than ownership.

Ritz-Carlton Hotel Co. chairman Herve Humler said that the
business plan of parent company Marriott International “revolves around
managing and franchising hotels rather than owning the real estate.”

Travel agents said they were pleased to have another potential
sales avenue for their luxury clientele.

Valerie Wilson, founder and chairman of Valerie Wilson
Travel in New York, said she had a chance to learn about the project directly
from Humler.

“I told him, ‘ladies and gentlemen serving ladies and
gentlemen at sea. How fabulous to be sailing in one of 148 suites with the
genuine and personal Ritz-Carlton service,'” she said.