Friday, December 5, 2014

Virgin Is Going Into the Cruise Business

We are excited to hear the news that Virgin Group announced on Thursday. Virgin Cruises will be an attempt to shake up a monopolized industry dominated by three big companies that all offer a similar flavor of family-friendly entertainment on the high seas.
Personally, I am not a huge cruise fan. I love to be on land, be adventurous, no time to be anywhere to eat, or stuck in one place. Some people love crusies. But for Virgin, I could make an exception.
I've flown their airlines, which is life changing. I am now spoiled and dread other airlines. 
With backing from Bain Capital, the private equity firm, Virgin Cruises will build two new ships that are “more informal, fun, sexy, hip and cool” than those operated by Carnival, Royal Caribbean and Norwegian Cruise Line, said Evan Lovell, a partner at Virgin Management Limited.
“We believe there’s an opportunity to be a disruptor,” Mr. Lovell said. “We think we can program the ship in ways that is different than what is being done today.”
Instead of creating a Las Vegas-like atmosphere with casinos, theaters and all you can eat buffets, Virgin Cruises will give passengers more opportunities to experience life at sea.
“The whole point of being on a cruise ship is to be connected to the ocean, to be connected to the sun and the wind,” Mr. Lovell said.
Virgin Cruises said it was beginning work on the two new ships soon. New ships can cost upward of $1 billion to construct and take years to complete, and Mr. Lovell said that voyages would not begin until “the end of the decade.”
Though the company didn’t release many details about its plans, Mr. Lovell said the ships would both be designed to give passengers more nature when they want it, and also more sophisticated amenities while indoors. Parts of the ships interior would appeal to clientele more at home in “downtown Manhattan, SoHo and the West Village,” than on a cruise, Mr. Lovell said.
Ryan Cotton, a principal with Bain Capital, said Virgin Cruises would aim at an untapped segment of the market, largely appealing to customers who are uninterested in the gaudy atmosphere offered by most big cruise companies. But he said the same qualities that attract tens of millions of customers to cruise ships every year would also make Virgin Cruises a winning business proposition.
“As we look at the cruise industry the value proposition is unbelievable,” Mr. Cotton said. “The ability to see multiple destinations — that is attractive to a very large number of people.”
Virgin Cruises will be a new stand-alone company, with Virgin Group and Bain each having significant stakes. The company’s chief executive will be Tom McAlpin, the former head of The World-Residences at Sea, and a former president of Disney Cruise Line.
“We plan to shake up the cruise industry and deliver a holiday that customers will absolutely love,” Mr. Branson said in a statement. “They’ll be sailing on the latest ships offering great quality, a real sense of fun, and many exciting activities all delivered with the famed Virgin service.”With interests already in airlines, space tourism, hotels and trains, billionaire entrepreneur Richard Branson confirmed Thursday that his Virgin Group also has its sights set on the sea.
The Branson family’s investment group announced that it is partnering with investment firm Bain Capital to form Virgin Cruises, a South Florida-based company that plans to operate two ships. News about a possible cruise venture for Virgin had been floating around since March, when Branson told a newspaper in Abu Dhabi that he was seeking investors for a $1.7 billion ocean cruise project.
Tom McAlpin — a former president of Disney Cruise Line and, most recently, president and CEO of The World, Residences at Sea — was named CEO of Virgin Cruises.

“Cruise guests deserve something better and different to what is being offered today, and Virgin Cruises is committed to creating breathtaking experiences for them and a new generation of guests,” McAlpin said in a statement.
Beyond some basic facts, and the appointment of a CEO, few additional details were available, including how much the companies are investing in the startup line, who will build the ships, what size they will be or when they will set sail.
But from the statement’s headline to prepared quotes, the partners made it clear that they intend to “make waves” in an industry they believe is ready for reinvention.
“With a small number of global players, an experience in need of refreshing, and consumers ready for something new and exciting, the industry exhibits all the characteristics of one that is ripe for a new entrant,” Ryan Cotton, a principal with Bain Capital, said in the statement.
The world’s three largest cruise companies — Carnival Corp., Royal Caribbean Cruises and Norwegian Cruise Line Holdings, all based in Miami-Dade County — have been trying in their own ways to refresh the cruise experience by moving away from traditional dining and entertainment models and creating more activities and attention-grabbing amenities on board. Just last month, Royal Caribbean International introduced a new ship boasting a skydiving simulator and bumper cars; Thursday, Norwegian Cruise Line announced a new partnership with Margaritaville.
Still, Branson promised his company’s ships would offer “great quality, a real sense of fun, and many exciting activities all delivered with the famed Virgin service.”
“We plan to shake up the cruise industry and deliver a holiday that customers will absolutely love,” he said in the statement.
Nick Fox, Virgin Group director of external relations, elaborated in an email: “I think it's best to presume that we will be bringing the Virgin sense of style, fun and adventure to the market. We will be looking to deliver real quality, in a more modern setting with more choice for the customer. We will also be trying to attract a broader market than traditionally goes cruising over time.”
Branson is known for the sometimes-wild antics of a showman: A few years ago, to mark the 25th anniversary of Virgin Atlantic's first flight to South Florida, he arrived at a press conference via Cigarette boat to the theme song of Miami Vice. Wielding a fake gun and gold handcuffs, he made his way to a second speedboat and proceeded to pretend-arrest supermodel Karolina Kurkova.
“Richard Branson has a legacy of using creative marketing and has developed a travel empire while building sexy brands,” Vicky Garcia, chief operating officer and co-owner of Cruise Planners, an American Express Travel Representative, wrote in an email. “Branson’s innovations and entrepreneurial spirit will bring a fresh perspective to the industry and adding the Virgin Cruise brand into the mix will help drive healthy competition and consumer demand.”
But recently his ambitions have been marred by tragedy. During an October test flight for space tourism enterprise Virgin Galactic, a spaceship broke apart, killing the co-pilot and injuring the pilot. The Associated Press reported that the company might resume tests next summer.
In Thursday’s news, Virgin said “competitive reasons” kept it from revealing when the cruise line will start operating, but UBS Investment Research analyst Robin Farley wrote in a note to investors that she would not expect a new ship to be designed, built and launched earlier than 2018.
Farley wrote that some investors have worried about the potential impact of a new player in an industry that has struggled to raise prices amid a glut of supply in markets such as the Caribbean. She said similar concerns accompanied the establishment of Disney Cruise Line in 1998, an addition she called “a big positive for the industry” since it attracted first-time cruisers.
“While Virgin is not the powerhouse vacation brand that Disney is, we still believe it would attract more attention to the cruise market than the capacity it will represent,” she wrote.
What do you think of Virgin starting a cruise line? 

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