A charter occurs when a single entity or group acquires some or all of the cabins on a cruise ship. Most often, this charter involves a group renting a ship for the purpose of private cruising.
Article from CruisesNews magazine no. 70 – September 2024
The most well-known case, though not the only one, is when the charter is related to the purpose of offering a themed cruise. In addition, companies or institutions can also organize charters. Sometimes, ships are chartered not to sail, but to become floating hotels, as happened, for example, at the Barcelona '92 Olympics.
These trips are not available to book directly through the shipowner, but can sometimes be booked through the charter group. Charters often involve different dress codes, schedules, and onboard entertainment, including special events or the closure of certain venues, always in accordance with the contract between the chartering entity and the cruise line.
Types of Charters:
Depending on the number of people enjoying the charter, the charterer can opt for a full vessel charter. In this modality, a company or entity, generally a corporation or a large special interest group, negotiates with the shipowner to use the vessel exclusively between two calendar dates, without it being marketed by the shipping company through its usual sales channels. To facilitate this option, the potential client can use a broker. The most important is Landry & Kling, which has been in the market since 1982. For example, in 2016, with the NCL Holdings group alone, it carried out as many as six full charter operations.
• The Regent Seven Seas Mariner was chartered for a seven-night corporate incentive program in Alaska.
• The Riviera was chartered for eight nights, which Landry & Kling creatively divided into two separate four-night corporate incentive cruises, sailing the Caribbean between Miami and San Juan.
• The Norwegian Getaway was chartered for 40 nights as a floating hotel during the 2016 Rio de Janeiro Olympics.
• The Norwegian Pearl was chartered for four nights on a reggae-themed cruise with a stop in Jamaica.
• The Norwegian Escape was chartered for a three-night Bahamas cruise to Helms Briscoe, a Landry & Kling strategic partner, whose corporate client requested an incentive program for more than 4,000 qualified candidates.
If the group isn't large enough to reserve an entire ship, there's the option of a "part charter": technically, this involves reserving a significant number of cabins for a large group on an otherwise publicly available itinerary. These groups must meet a minimum booking requirement: Carnival, for example, requires a minimum of 16 passengers. Many smaller or more specialized themed cruises are part charters, where participants share the ship with regular passengers. Major cruise lines offer special booking channels for corporate groups, special interest groups, and even large family groups, which often include discounted cabin rates, assistance with planning private events on board, and more.
Depending on the nature of the group, there are three types. Pre-formed groups are those in which passengers are members of a club, association, etc. These organizations communicate regularly with their members and schedule regular events for them to enjoy. This could be a professional association, an alumni association, etc. They are particularly popular in the United States. They are also known as affinity or promotional (or resale) groups. The organization chartering the ship intends to resell all or part of the cabins to consumers who share a common interest. However, there have also been cases of general resale to unrelated consumers. Typically, the client creates a unique onboard program, intending to charge a premium for the exclusive opportunity.
A company chartering a whole boat as an incentive is the ultimate in privacy, exclusivity, and personalization, offering a unique and lasting memory that will continue to motivate your employees or clients for years to come. It is undoubtedly the best incentive getaway
The main affinity programs are:
• Music and entertainment. On August 18, the Oosterdam offered a fully booked charter from Piraeus, bringing together Irish music enthusiasts from around the world. The charter was organized by Gertrude Byrne Promotions.
• Lifestyle. This August, two full charters of this type departed from Barcelona: the Californian agency Atlantis Events, specializing in cruises for the LGBT community, offered two charters aboard the Resilient Lady. Both are fully booked.
• Religious. Between 1960 and 1976, Ybarra's two ocean liners, the Cabo San Vicente and the Cabo San Roque, were chartered for pilgrimages to the Holy Land.
Another type of group is the speculative or promotional group. In this case, the passengers don't know each other, nor do they share a common interest. Their only commonality is the desire to take a specific cruise. For example, a travel agency might reserve a number of cabins on a particular departure, obtain a very special price, and then promote it through various channels, reselling the cabins. These groups are more difficult to sell and require more time, money, and promotion.
Sometimes, the charterer tries to narrow their target audience and may appear to be a pre-selected group. The line between the two isn't always perfectly clear. One of the selling points of this type of charter is hiring a well-known brand ambassador.
The last type of charter, generally a full charter, is corporate, usually linked to an incentive. The main difference from the previous types is that the passenger doesn't pay anything; there are no charges. The charter fee is paid by a company to reward suppliers, employees, or clients with the experience of a sea (or river) cruise, which also includes attending some kind of meeting or event, etc. In this segment, competition is fierce: a full charter from a company to motivate its employees to achieve better results is a very tempting prospect for all cruise lines.
The main incentive cruises can include:
• Congresses and conventions.
• Product launches.
• Incentive programs.
• Trade shows.
• Corporate anniversaries.
• Consumer promotions.
In 2009, prior to the Panamera's launch, Porsche chartered the Crystal Serenity to Crystal Cruises for comprehensive training of over 1,800 dealers from around the world. Hundreds of subcontractors completely gutted the Crystal Serenity's decks and public lounges to accommodate five Porsches and thousands of pieces of specialized equipment, spare parts, and other components, transforming them into showrooms for intensive training. Crystal Cruises and Porsche planned three-day circular itineraries departing from Barcelona for five groups of 350-400 Porsche dealers. While at sea, the ship served as a floating training center where dealers could absorb all the Panamera's specifications while enjoying the ship's amenities. Passengers only disembarked the Crystal Serenity in Marseille to test drive the Panamera in St. Tropez.
Planning a “full charter”
One of the main criteria to consider when booking a charter is planning. A year in advance is the minimum lead time. For example, Royal Caribbean International does not usually consider “full charter” requests made less than 12 months before the requested departure date.
Some studies indicate that a "full charter" is 30% cheaper than a comparable event at a land-based resort.
This advance booking period is only going to increase. Most cruise passengers book well in advance, at least a year, and in some cases, two or more years. In the case of resale full charters, it's best for the charterer to have enough time to promote the charter. The cost of compensating or relocating cruise passengers who have already booked for a specific date will be a significant factor in any negotiation with the cruise line, and this cost will generally be lower if the charter is booked further in advance. To maximize the profit of a full charter, the number of participants should be approximately the capacity of the ship in question. If the full charter doesn't achieve 100% occupancy, the charterer can increase their revenue by being responsible for the onboard income, which is usually very substantial. The charterer is responsible for determining the pricing model for a full ship resale cruise. Furthermore, in the United States, the paradise of full charters, due to antitrust regulations, cruise lines cannot legally advise charterers on how to price cabins on a full charter. Current retail prices can be used as a guide, but they are really just a snapshot of prices on a particular day.
The price of a full charter is based on the shipping line's standard product. Any requested changes to the standard operation may affect the charter rate or result in additional charges. If the charter involves the closure of any of the shipping line's onboard revenue streams, such as the casino, art auctions, bingo, etc., the charter rate will be higher.
A full charter with a customized itinerary affects fuel consumption, port fees, and other costs. This will be reflected in the charter price. A more complex itinerary change, involving the creation of a unique itinerary for the full charter, can also be considered. For example, a full charter itinerary can be generated by combining shorter cruises, creating a seven-night itinerary by combining two sailings of three and four nights; or conversely, a shorter itinerary can be created by splitting a seven-night itinerary into two sailings (one of three nights and one of four nights), provided the shipowner is willing to sell the remaining itinerary. While these types of changes are possible, they can incur significant costs for the charterer, and it is always best to schedule a full charter based on an existing itinerary.
Another determining factor is the home port. It's not advisable to schedule a full charter by changing the vessel's usual departure port. If necessary, the charterer must bear the significant costs involved; in some cases, this has even made the charter impossible. This type of itinerary customization is usually expensive.
Other options for customizing your cruise include:
• Menu changes (Halal, vegetarian, etc.). Customized printed menus.
• Special food and/or beverage events.
• Customized entertainment.
• Special services such as fireworks, flyovers, banners, decorations, digital signage, etc.
• Delivery of special products on board during the charter. Special merchandising.
Financial Requirements for a Full Charter:
Although charter terms are usually confidential, the cost of a full charter of a cruise ship with more than 1,000 cabins will exceed one million euros per week. Given the potential for lost profits associated with such a charter, cruise lines protect themselves with instruments such as irrevocable standby letters of credit (LOCs) issued by the client's bank and confirmed by a bank designated by the cruise line, to ensure the client's ability to meet the contract terms. If the client's bank has a BBB rating or higher from both S&P and Moody's, confirmation is not required.
As the beneficiary, the shipowner can invoke the Letter of Credit (LOC) to collect payment if the client breaches the contract. The LOC is required from the date the contract is signed and remains in effect until 60 days after departure to ensure that all expenses are paid, including any potential damage to the vessel. The LOC is reduced each time a payment is received, but it will be maintained at a minimum threshold until the agreed expiration date.
A letter of credit is necessary for a full ship charter program because the cruise line loses all ability to market and sell the chartered sailing once an agreement is signed. If the client breaches the contract, the shipowner will most likely be unable to fill the vessel and suffer significant financial losses. This year, the Renaissance, owned by Compagnie Française de Croisières (CFC), was chartered as a floating hotel for the Africa Cup of Nations. The charterer failed to fulfill the contract, and the ship was out of service for six weeks, docked in Marseille. The charterer who had signed the full charter for the Renaissance did not meet its contractual and financial obligations, and CFC did not have time to sell the scheduled cruises during the off-season. CFC also initiated legal action in the appropriate courts. During the World Cup in South Africa, Holland America also found itself in a similar situation, with two empty ships during peak season. Shipowners are concerned about potential default by charterers in the case of full vessel charters. While the chances of being affected by such a situation are slim, it can happen, and shipowners try to protect themselves.
A full vessel charter should be planned at least one year in advance
While most charter companies plan their cruises as far in advance as possible, it's not uncommon for others to negotiate with cruise lines to take over a ship after it has already been opened for public booking. When a potential charterer approaches a shipowner to inquire about a voyage that has already received bookings, the cruise line will assess the current booking volume and how full the ship is.
For example, Carnival closely monitors voyages to minimize any impact on currently booked passengers before allowing a ship to be chartered. Royal Caribbean, on the other hand, emphasizes that they do not consider a full ship charter if the sailing is already more than 25% booked.
Although rare, all cruise lines have the right to cancel individual bookings for almost any reason. However, cruise lines will generally only sign a charter if it affects a small percentage of already booked passengers. And when this exceptional situation arises, cruise lines are usually generous, offering similar travel options, a full refund, or a comparable future cruise option, even on the same ship, with a significant discount, and often with additional onboard incentives such as cabin upgrades or cruise credit.
"Floating Hotel" Chartering:
A very specific type of vessel charter involves chartering a ship to be docked in a port and provide, or increase, accommodation for a limited period. Chartering a cruise ship has many advantages: it reduces the necessary investment, avoids creating a surplus of hotel rooms later on, and enhances security by operating in a controlled area like a port. Furthermore, if the port has OPS-type facilities and good MARPOL service, the environmental impact is minimal.
It's a solution that has been used for a long time. At the 1966 World Cup in England, two floating hotels, one Spanish, the Monte Umbe, and the other Brazilian, the Princesa Leopoldina, were moored on the Thames, each accommodating around four hundred fans. The 1992 Barcelona Olympics saw a real boom in floating hotels, which filled the docks of the Catalan capital, a phenomenon that was later repeated in Athens, Sydney, London, and other cities. The Paris Olympics also featured a floating hotel, not moored on the Seine, but anchored in Tahiti. The Aranui 5 anchored in a bay near Teahupo'o, a town just outside Papeete, where surfing competitions were held during the Games.
Cruise ships have also been used as accommodation for refugees and rescue teams in natural disasters, such as Hurricane Katrina in 2005, when three Carnival ships were chartered to house victims, or the earthquake in Turkey last year, where the Gemini cruise ship was chartered for the same purpose.
Advantages of Full Charters
• Freedom to personalize and greater control over the product.
• Complete customization of the program and itinerary.
• Unlimited brand promotion opportunities.
• Camaraderie: everyone sailing is part of your group.
• Prestige and exclusivity: people feel honored and excited when they embark on a private charter.
• Exclusive crew attention: all officers and crew members dedicate 100% of their attention to the charterer's guests.
• Exclusivity: It's an experience that cannot be duplicated.
• Unlimited and complimentary access to state-of-the-art audiovisual equipment.
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