The two recent cancellations of cruise ship charters for major world events prove what people in the business already know: resell charters can be risky business, especially when the chartered ships are to be used as stationary hotels.
A German company last week canceled the charter of two Holland America Line ships, the Noordam and Westerdam, for next month's FIFA World Cup soccer tournament in South Africa, where the ships were to be floating hotels.
In February, a Canadian company canceled a charter of the Norwegian Star, which was to be used as lodging for the Winter Olympics in Vancouver.
A resell charter, where a charterer takes the risk on inventory and fills the ship with individual bookings, is different from a corporate charter, where an organization pays for the charter and then picks the passengers.
Using cruise ships as floating hotels can be successful. But as Bruce Setloff, director of charter, incentives and specialty sales for Azamara Club Cruises explained, a cruise ship chartered as a floating hotel is like "a fish out of water."
"[Charterers] take ships and don’t do what the ship is meant to do, which is go sail," he said. "They put them in a berth where they are used as hotels. So you are now up against the local hotels."
Wolfgang Petrusch, president of Cruise-Ship-Charter.com, added that when there already is enough hotel capacity for an event, or perhaps too much, it sends hotel rates down and can make cruise accommodations seem less attractive.
"A cruise ship stateroom is nice on a cruise, but compared to a hotel room it lacks a lot of space," he said.
Setloff has been doing charters for 20 years. He said that doing a resell charter of a ship for a world event is inherently more risky than a corporate charter.
But Setloff was careful to say that charters are still good business when done right.
"It’s very rare I don’t see a success story," he said, adding that these blemishes don’t hurt the business long-term. "If anything, it [creates] more of an awareness of what you are getting into. The success I’ve had is that I’m very upfront about the risks and responsibility you take on with a charter."