Tom Stieghorst
It seems like it's always been true in the cruise industry that bigger ships are better because they offer economies of scale and make more money.
The expansion of the average size of cruise ships has been relentless over 30 years, with the current standard for contemporary capacity at about 4,000 passengers.
But it wasn't always so, according to Richard Fain. The chairman of Royal Caribbean Cruises Ltd., said that before Royal built the Sovereign of the Seas in 1988, big ships were suspect in the industry's board rooms.
The Sovereign, delivered 30 years ago, was the first of a new breed for Royal, the product of a strategy that changed the direction of the cruise industry and is still a driving influence today.
The ship was conceived in 1985 after new research by the company, and the appointment of a newbuild board steering committee headed by Fain, who at the time served as joint managing director of Royal.
"The concept that they had in mind originally was a bigger ship with economy of scale. Otherwise, it was just a bigger version of Song of America," recalled Fain. And directors were nervous enough about doing even that.
The first worry was that it had only been five or six years since Song of America debuted. Was the industry ready for such rapid growth? A second concern, Fain said was that the board was comfortable with the line's four itineraries. Was there really a fifth or sixth itinerary out there? And the third doubt was whether the public would tolerate a 1,600-passenger ship. Song of America seemed big enough at 1,400 passengers.
But, Fain said, the more the steering committee looked at the consumer research, the more their thoughts went in a different direction.
"We did some surveys that found people wanted more. They wanted more choice, they wanted more selection. And so they wanted ships that were more like resorts, more activities, but also easier ways around the ship."
To Fain, that translated to more amenities. Sovereign was the first ship to have an atrium, a soaring 5-deck space that wowed passengers on arrival. The dining room seating was moved closer to the galley so the food stayed hotter, Fain said.
Royal's indoor caf, what became the Windjammer, was first introduced on the Sovereign. "So the idea was that for the first time we were offering a slew of amenities people had never seen before."
Fain said that up until that point, larger ships commanded economies of scale, but lower revenues per cabin.
"The tradition in the industry was the smaller ships are more luxurious and get paid more but have lousy economies of scale," Fain said. Because Royal took half the savings from economies of scale and poured them back into ship improvements, the 2,200-passenger Sovereign broke the mold, becoming the first big ship to have not only better economies of scale but higher per diems.
"We've evolved to a situation where [Royal's latest ship] Symphony of the Seas is probably getting the highest price levels in our competitive set, and yet it's the biggest ship with the biggest economies of scale," Fain said.
It all started thirty years ago with the Sovereign of the Seas.