Viking River Cruises heads out to sea
Steve’s breakdown: Viking may have realized how to get around the ocean floating resort. Old school destination based ocean cruises. They have used O&M for a while for their river cruises but a big change in course into the oceans is a good time to test the waters. (Boom! Double Pun)
LOS ANGELES, CA: Viking Cruises is launching a fleet of smaller ocean liners that the company says is the future of ocean cruising.
Earlier this month, Los Angeles-based Viking, known for its upscale river cruising ships, announced plans for an ocean line. The company claims it is the first new cruise line to launch in nearly a decade and will “return the focus of cruising to the destination” as opposed to onboard activities.
Viking’s decision to get into the ocean business follows a string of recent mishaps. A fire on board a Royal Caribbean ship this week in the Bahamas comes after the February debacle aboard a Carnival cruise line in the Gulf of Mexico in which power was lost leaving hundreds of passengers stranded for days.
Yet the company is not deterred. Viking Ocean Cruises will begin sailing its first vessel, Viking Star, in the spring of 2015. The 464-cabin ship will sail to Scandinavia and the Baltics as well as the Mediterranean, between Barcelona and Venice and Venice and Istanbul, the company says.
A second Ocean Ship is on order for delivery in 2016. Viking also has conditional orders and options for four more ocean vessels.
Viking says it has an opportunity in the ocean cruising space because of who it is targeting — sophisticated baby boomers — a market Viking’s founder and CEO says has been forgotten by the wider ocean cruise industry when cruise lines started becoming “everything for everybody.”
It also believes the future of ocean cruising is in smaller ships (less than 1,000 passengers).
“It is our view that in the race to build bigger ships, many cruise lines have lost sight of the destinations to which they sail,” Hagen said in a May 17 launch release. “With our new ocean cruises, we are applying the same principles behind our award-winning river cruises to our itinerary and ship design; privileged-access excursions; and onboard experiences to make destinations the true focus.”
While Viking is a private company, the stocks of larger cruise ship companies Carnival and Royal Caribbean have suffered. Carnival’s stock is down 9% this year; Royal Caribbean’s stock is up just 4%, compared to the S&P 500, which is up roughly 16% for 2013. Norwegian Cruise Line is an exception. The Miami-based company filed an initial public offering in January. The stock is up roughly 27% since then.
According to the U.S. Census, the median net worth for householders 65 and older in 2011 was $170,516 compared to the national average of $68,828.
Of the 20.3 million global passengers in 2012, 17.2 million were from U.S. and Canada, according to the Cruise Lines International Association.
The 55-year-old and older group has worked hard in their careers, they have a reasonable amount of money saved, are a well-educated group and like to continue to develop themselves, and may or may not be retired, Hagen says, who is also the company’s only shareholder.
“They want to experience culture, they want the glass of wine or two, but they don’t want to sit there with a big cocktail with a green umbrella in it and slosh around on the sun deck,” Hagen told TheStreet in a follow-up interview. “They have a lot of spending money. They have a lot of time.”
Viking plans to emulate the experience guests have through its river cruise line on its ocean cruises.
“Itineraries are curated for maximum time in port, often with late evenings or overnights, so guests can experience local nightlife or evening performances. Ports include both cosmopolitan cities and ‘collector ports,’ and appeal to those with an interest in history, art and culture,” the company says.
Viking also charges customers all-inclusive pricing, which includes a veranda stateroom, shore excursions, all onboard meals, and port charges and government taxes and offers amenities not typically found in ocean cruising like free wi-fi and beer and wine with lunch and dinner.
Originally from Norway, Hagen has had extensive experience in the cruise industry. He served as CEO of the now defunct high-end Royal Viking Line for 25 years. He started Viking River Cruises in 1997.
With the launch of 10 new Viking Longships in 2013 and 12 in 2014, Viking is building ships at twice the rate as all of its competitors combined, the company says. By the end of 2013, they will have 38% of the North American market share through its fleet of 35 vessels that sail along the rivers of Europe, Russia, Ukraine, China, Southeast Asia and Egypt through nine to 14-day trips.
“We’ve seen what people want on the river the growth in river cruising in the past few years has been phenomenal,” Hagen says. The company has grown 35% each year over the past four years, according to Hagen.
“It’s quite a remarkable growth,” he says. “If we had more ships we could have grown more quickly.”
Hagen says they decided to launch the ocean cruise line based on research that determined when customers weren’t sailing with Viking they were on more traditional ocean cruises – and not exactly happy.
After hearing what customers didn’t like about other cruise companies – including ships that were too big, high on-board expenses, too short of a time at destinations – Hagen thought that Viking could do it better.
Viking’s introductory 9-day ocean cruise starts at $2,999, not including discounted airfare.
“Our lowest price in balcony is 38% less” than competitors, Hagen says. “We are able to offer a better product at a lower price.”
How is that? Hagen says that smaller ships are much more efficient than larger ships. The company does away with extra amenities necessities such as casinos and rock-climbing walls, things that are unnecessary since passengers spend more time in port.
Technology and fuel and safety innovation on newer, smaller ships is also a huge factor to making the vessels more efficient.
“Some of the things that have happened and read about could never happen to a ship like this,” Hagen says. “But we take safety very seriously.”
Viking is up against competitors already in the market, such as Oceania, Azamara (owned by Royal Caribbean) and Windstar, but Viking “has never been part of the pack,” says
Carolyn Spencer Brown, editor-in-chief of Cruise Critic, an online cruise review publication and a subsidiary of TripAdvisor . “Everything that it does stretches the industry a little bit further.”
Viking offers so-called luxury lite, which has some of the hallmarks of luxury cruising, such as excellent food and service, as well as cool amenities, such as fire pits and infinity pools, but in a smaller, cozier atmosphere and at a more affordable price point, Spencer Brown says.
Hagen’s “taking a little bit of what’s makes river the hottest niche and translating that into ocean and I think that’s really cool,” Spencer Brown says.
Access Confidential Link: Viking River Cruises, Inc.