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- [00:01]
Jamie Rollo
Welcome to Thoughts on the Market. I'm Jamie Rollo, Morgan Stanley's European leisure and travel analyst. And today I'm talking about an intriguing trend. The cruise line's accelerating expansion into private islands. It's Tuesday, February 25th at 2pm in London. Now, the lure of a private island cruise is simple. You get almost exclusive access to a tropical retreat. Aloha, welcome to paradise. You can lounge or snorkel on a pristine beach. You can enjoy a meal in a private cabana. You can even book a massage or a yoga class.
- [00:39]
Unnamed Yoga Instructor
And inhale, hold that pose.
- [00:42]
Jamie Rollo
The only other people around are fellow passengers on your vacation. So this isn't just stuff of popular TV shows. It's potentially the future of cruising. Cruise lines have actually been offering private islands for more than a decade, so it's hardly a new phenomenon. In fact, in 2019, we estimate the majority of Caribbean cruise passengers visited a private island. As it happens, the Caribbean is the world's largest Cruise destination. About 36 million cruise calls were there last year. That's about 40% of global passenger capacity. And that's surpassing the second largest region, the Mediterranean, at about 17%. Of course, the Caribbean's proximity to North America and its year round tropical climate make it a prime location for cruising. But despite those advantages, historically the Caribbean's been seen as more of a lower yielding market compared to regions like Europe or Alaska, which arguably have even more amazing scenery or historic sites. Interestingly, recent trends suggest that reputation might be changing. And new private islands in the last few years have reinvigorated the Caribbean cruise market. So what do private destinations or islands offer for your guests? They get a seamless integration with the cruise experience. There's no transfer required to a destination. There's no external visitors coming into the resort, no hassle, no traffic and very low crime. And for the cruise lines, well, they get greater control over the customer experience. They create superior customer satisfaction, which generates more repeat business. In addition, they can get that on island spend that the guests would have spent with external vendors. And they can charge premium rates for more exclusive areas. On top of that, many of these islands are quite close to the U.S. mainland. So you're saving on fuel because the ship doesn't have to steam so far and on port fees. And then finally, proximity to the US also can increase the short cruise duration market, which widens the addressable market for new to cruise passengers and also can limit anti tourism or anti cruise sentiment because it moves guests out of congested areas and prevents unwanted visitors. All in all, the private island model offers a very high return on invested capital and may well be the future of the cruise line industry. In fact, if we add up the expansion plans of the biggest listed cruise lines, we think their private island guest count will double over the next few years and that could add over 10% to top line sales and 30% to earnings per share for the fastest growing cruise lines. So very considerable financials. But also it's a private paradise within reach and an idea we can all set sail to. Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today.
- [03:35]
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- [03:52]
Unnamed Yoga Instructor
And inhale. Hold that pose for 3, 2, 1 and exhale, letting that breath out slowly before we move into the warrior pose.