On July 27, 2017, the construction of the cruise ship for Ritz Carlton at the Vigo shipyard Hijos de J. Barreras was made public.
Article from CruisesNews magazine
The ship will have a length of 190 meters, a beam of 23.8 meters and a draft of 5.65 meters and a value of around 250 million euros.
Since the delivery of the Sea Cloud II in 2001, no cruise ship had been built in Spain. But on June 27th, it was announced that The Ritz-Carlton Yacht Collection had chosen Hijos de J. Barreras to build a super-luxury cruise ship, with an option for two more. The innovations of the Ritz-Carlton ship concept will also pose a significant technical challenge for the historic Vigo shipyard.
The event was presided over by the President of the Xunta, Alberto Núñez Feijóo, who celebrated Barreras' entry into such a competitive market and highlighted the unprecedented commitment represented by financing more than 250 million euros. Feijóo, who was accompanied by Regional Minister Francisco Conde, linked the contract to the project and urged Barreras to achieve "top marks" with this ship, aiming to make Galicia an international benchmark in the luxury cruise segment.
There is some concern about overcapacity in the luxury cruise segment.
The president of Barreras, José García Costas, acknowledged that this vessel is a challenge for his company, although he is confident that it will be met “with flying colors.” The shipyard hopes to finalize the contract for the second vessel before the end of 2017. The delivery time, around 30 months, is not exactly generous considering that it is a prototype.
The Ritz Carlton
will have a gross tonnage of around 25,000 and will be able to carry up to 298 passengers in 149 suites, all exterior with balconies. These figures place it midway between the latest ships built by Seabourn and Silversea (both approximately 40,000 GT) and the ships of Ponant (around 15,000 GT).
Given the tight deadline, the shipyard quickly began selecting manufacturers and subcontractors for the vessel, including renowned brands such as MAN for the four diesel engines that will generate electricity on board, ABB (for the azimuth control systems, for which they already have experience from the Reforma PEMEX), and Otis Marine for the elevators (which will be manufactured at the Enor plant in Galicia). Barreras has also reached an agreement with the Austrian company Proman, one of the world's largest manufacturers of bulkheads, carpeting, and interior fittings for megayachts and luxury cruise ships.
Hijos de J. Barreras is one of the oldest shipyards in Spain.
The Ritz-Carlton ship will have a crew of approximately 240, giving it one of the highest passenger-to-crew ratios on the market: 1.5 passengers per crew member, ensuring the most exclusive service possible. This ratio is in line with the latest Silversea and Seabourn ships, although it is slightly lower than that of the Seven Seas Explorer and the new Crystal ships.
Regarding propulsion, it will feature two Azipods providing a modest service speed of 16 knots and a maximum speed of 17.8 knots. This type of propulsion is not very common in small cruise ships. To address this, ABB has launched a line specifically for this segment, called Azipod D, which will be used by the Ritz-Carlton ship, as well as Crystal's new Endeavour-class ships and the Scenic Eclipse.
The
Hijos de J. Barreras shipyard is one of the oldest in Spain. Founded in 1892, it is currently the largest private shipbuilder in the country. Over the years, it has transformed itself from producing wooden sailboats in its early days to offering vessels with advanced technology. Almost the entire fleet of Spanish shipowners such as Balearia, Trasmediterranea, and Naviera Armas has been built in its slipways, and it has also served international clients like Western Geco, Pemex, and Ostensjo Rederi AS.
In its 120-year history of designing and building ships, Barreras has no experience in the cruise ship sector, but it is a recognized world leader in the design and construction of technologically advanced, high-value-added vessels. It has delivered numerous ferries to national and international shipowners, ro-ro vessels, hotel ships, seismic research vessels, and some of the most advanced fishing vessels in the world. Throughout this time, Barreras has delivered more than 1,600 ships. Many of them are pioneers in design, construction, or outfitting. And all of them meet the most demanding technical and environmental standards. Particularly noteworthy are its ferry projects: since 2000, Barreras has delivered seventeen ferries, representing invaluable experience in areas such as cabins, common areas, and lounge facilities, which will be crucial to the Ritz-Carlton project. Their latest delivery is the Reforma Pemex, a hotel ship used for offshore platform crews capable of accommodating 699 people.
This contract will create six hundred jobs by the end of 2019, and includes two construction options that should be delivered in 2021 and 2022.
At the end of 2013, the Mexican group Pemex, one of the world's four largest oil companies, acquired 51% of Barreras' shares through its subsidiary PMI. The arrival of this significant industrial partner represents a considerable endorsement of the shipyard's solvency and versatility.
The selection process for the shipyard was rigorous: Ritz-Carlton initially requested bids from seventeen European companies. Only three shipyards reached the final stage, with the Vigo-based firm ultimately prevailing due to its experience, transparent management, and professionalism, as well as the strong capabilities of the Galician auxiliary industry. Even more importantly, Hijos de J. Barreras offered a substantial financing package: six Spanish financial institutions (CaixaBank, Abanca, Banca March, Ibercaja, Sabadell, and Pastor-Popular) are participating in the project, with a tax lease structured by CaixaBank and Banca March, and backed by the Official Credit Institute (ICO), the Spanish Export Credit Insurance Company, and the Galician Institute for Economic Promotion.
The
Ritz-Carlton Hotel Company's reason for entering the cruise market is to fill a gap in the ultra-luxury segment. And according to Herve Humler, its president, they've been considering it for over ten years.
According to Ritz Carlton, there is a real gap in the luxury cruise market because traditional operators, such as Seabourn and Silversea, have opted for larger ships, following the lead of Regent Seven Seas Cruises (with a capacity of around 500-600 passengers). The segment of luxury ships with fewer than 300 passengers is dominated by operators like Sea Dream and Windstar, whose vessels are between 20 and 30 years old, which will create a shortage of supply in the medium term.
The fleet of all luxury cruise ship owners has grown remarkably in the last two years.
The other reason is that in 2016, Ritz-Carlton hotels had approximately 405,000 guests, many of whom stated they had taken a cruise. The loyalty programs of the Ritz-Carlton hotels themselves, plus those of the Marriott and Starwood brands within the same group, could already generate the 12,000 passengers per year needed to fill their first ship. Furthermore, Ritz-Carlton hotels, with an occupancy rate of 78%, are profitable, while the occupancy rate in the luxury cruise industry is much higher, in the range of 85-90%.
With a solid customer base and a niche market lacking short-term supply, Ritz-Carlton saw a real opportunity in the luxury cruise market to attract not only its own current customer base, but also other luxury cruisers, with The Ritz-Carlton Yacht Collection.
Furthermore, the Ritz-Carlton brand's goodwill is immense, and its managers had previously used it in "brand extensions" such as The Ritz-Carlton Residences, The Ritz-Carlton Destination Clubs and Ritz-Carlton Reserve, so the marketing of this venture is not something unknown to its executives.
But Ritz-Carlton didn't create The Ritz-Carlton Yacht Collection alone; from the beginning, he had Douglas Prothero and Lars Clasen, two executives with extensive knowledge of cruise ships and yachts. Both have broad experience in shipbuilding, maritime finance, freight, and related fields.
Ritz-Carlton Hotel Company's reason for entering the cruise market is to fill a gap in the super-luxury segment.
Thanks to these experts, financing for the operation has been secured through Oaktree Capital Management, a Los Angeles-based alternative investment management firm. At the end of 2016, Oaktree managed $101 billion for its clients, which include 75% of the largest pension plans in the United States, as well as public funds, foundations, insurance companies, sovereign wealth funds, and others. Oaktree has considerable experience investing in the maritime and hospitality sectors and has been instrumental in making the project viable. As with many of its hotels, Ritz-Carlton will operate its ships offering ultra-luxury service on a long-term bareboat charter basis.
The itineraries will range from seven to ten days and, although they have not yet been made public, will include trips through the Mediterranean, Northern Europe, the Caribbean, and South America, with stops in ports such as Capri, Portofino, St. Barts, etc. Overnight stops, as well as multi-day excursions, will be emphasized.
Destination immersion will be another hallmark, with unique experiences at local restaurants and with local chefs, as well as performances by musicians and artists from each destination. Ritz-Carlton has also partnered with Jean-Michel Cousteau to add another unique feature to its itineraries. The ships' smaller size will also allow access to areas and ports inaccessible to larger vessels.
The interior design of the ship
The interior design will be handled by the renowned Swedish interior designers Tillberg Design, whose experience is proven in the more than one hundred designs of cruise ships since the late sixties.
The ship will feature 149 suites, all with their own private balcony, including two duplex penthouse suites of nearly 140 square meters, with a maximum capacity of 298 passengers. All cabins will have a bathroom with a double vanity, similar to those in Ritz-Carlton hotels.
Externally, the ship will resemble existing large yachts such as the Dilbar, Eclipse, or Azzam. Furthermore, the Swedish designers face another challenge: creating a visual link with some of the Ritz-Carlton hotels. One of their goals is to generate a sense of interior spaciousness, and therefore all cabins on board will have higher ceilings than those on a conventional cruise ship. This design, along with other innovative details, will also help it compete in the incentive travel market, with full charters available.
Ritz Carlton has been developing its entry into luxury cruises for more than ten years.
The first ship will feature five restaurants, including an à la carte Aqua restaurant by chef Sven Elvereld, the three-Michelin-starred restaurant at the Ritz-Carlton in Wolfsburg. Other options will include an Asian restaurant; the main restaurant, serving international cuisine; a poolside grill serving fish and meat; and a lounge with international offerings. Each ship will also have an exclusive Ritz-Carlton Spa and a stern platform for watersports.
client
is Marriott International, the world's largest multinational hotel company, which traces its origins back to 1927 when J. Willard Marriott and his wife, Alice, opened their first restaurant, Hot Shoppes, in Washington. It eventually became their flagship brand and the seed of Marriott International.
The ships ordered by Marriott in Vigo are not their first foray into the cruise industry. In 1972, Marriott invested in Sun Line, a cruise line founded in 1957 by the Greek businessman Charalambos Keusseoglou. Although the Keusseoglou family always maintained control of Sun Line, Marriott thus became the first hotel company to invest in the cruise business. In 1987, the Keusseoglou family bought back two of the fleet's ships from Marriott (the Stella Maris and the Stella Oceanis). And in 1992, Marriott completely divested from Sun Line, selling its stake in the third ship in the fleet, the Stella Solaris, back to the Keusseoglou family.
Destination immersion will be another hallmark, with unique experiences in local restaurants and chefs, with musicians and artists from each destination.
This divestment from cruise lines coincided, between 1986 and 2011, with an unstoppable expansion process, both organic and through acquisitions of competitors, which led Marriott to become the world's largest hotel company. Its growth model (one company, many brands) was also adopted by the major players in the cruise industry. As a result of this strategy, in 1995, Marriott introduced ultra-luxury hotels into its portfolio with the purchase of 49% of The Ritz-Carlton Hotel Company. In 1997, it acquired Renaissance Hotel Group. And this expansion strategy reached Spain in 2011 with the acquisition of AC Hotels.
The culmination of this strategy came in 2016, when Marriott International (then the world's third largest hotel company) bought Starwood Hotels & Resorts for $12.2 billion (€11.3695 billion), creating the world's largest hotel company: more than 5,700 establishments, offering more than 1.1 million rooms, thanks to 30 brands established in 110 countries.
This corporation will have a turnover of the same order of magnitude in 2017 as Carnival Corp, the cruise giant, which gives an idea of its scale.
A Different Approach:
The Ritz-Carlton product will be based on several concepts: top-notch service, an intimate and modern interior design, and unique yacht itineraries. A distinctive appeal to attract new audiences who previously hadn't considered taking a cruise.
The Luxury Cruise Market:
There are many definitions of the luxury cruise market, but the most widespread is that it is the market whose products are aimed at individuals with an income exceeding $300,000 annually, which represents, for example, 1% of the population in the United States. Other theorists broaden the range to $200,000, in which case the percentage rises to 8%.
Externally, the vessel will have the same lines as the large yachts that exist today, such as the Eclipse or the Azzam.
This segment has experienced massive growth in recent years, which led executives of the prestige of Harry Pimental, the president of Azamara Club Cruises, to declare in May 2016 that "the luxury cruise market is growing suddenly, too much already at an excessive pace.".
This growth rate is worrying and could have implications for prices, which would significantly affect this sector, based on margin rather than volume. The largest shipowner in this segment, Silversea, with a fleet of nine vessels and a capacity of 2,888 berths, took delivery of the Silver Muse this year, representing a 26% increase in capacity. In 2020, it will receive the Silver Moon, which will bring another 20% increase.
The new Ritz Carlton ship will cost more than 250 million euros.
Another major operator, Seabourn Cruise Line, has a fleet of four ships. Last December, it took delivery of the 604-passenger Seabourn Encore, increasing its capacity by almost 45%. In 2018, it will receive the sister ship of the Seabourn Ovation, adding another 30% to its capacity.
Regent Seven Seas currently has a fleet of four ships following the addition of the Seven Seas Explorer in 2016, with a capacity of 2,664 beds. In 2020, it will receive a new ship, a sister ship to the Explorer, representing a 27.7% increase in capacity.
Crystal Cruises, which currently has three ships, has changed its strategy. From building large, 1,000-passenger super-luxury ships, it has shifted to promoting three smaller cruise ships and river cruise ships. But when its expansion is complete in 2022, it will have grown by 100%.
Capacity is a very sensitive issue. The luxury sector is experiencing incredible growth with existing operators. If new operators like Scenic or Ritz-Carlton also emerge, will that 1% of the super-rich be able to fill the current fleet and the new generation of luxury ships... not to mention the new expedition cruises? Today it seems so, as evidenced by Crystal Cruises' EBITDA for the last three fiscal years, which have been the best in its 26-year history.
But in the future, we may see cruise liners in this segment disappear, merge, or at least collaborate with each other; this will be the only way for them to survive. Thus, Larry Pimentel concluded in 2016 that the only growth path for his cruise line was through acquisitions, never through new ship construction.
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