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Explorer of the Seas
THE
WINNING
EQUATION

Captain Bill Wright, Senior Vice
President of Marine Operations,
discusses Explorer of the Seas
and the history of Royal
Caribbean

By Richard H. Wagner
(originally published in The Log, Navy League of the
United States, New York Council (Spring 2007)
EXPLORER OF THE SEAS is Royal Caribbean International's primary entry into the New
York cruise market.  In 2007, the ship will begin sailing from the Liberty Cruise Ship Terminal
in Bayonne, New Jersey on a year-round basis to destinations such as Bermuda, the Caribbean
and Canada.  This follows a successful season in 2006 during which EXPLORER sailed from
Bayonne for part of the year.

By deploying this one ship to New York, the world's second largest cruise line has become a
major player in this market.  This is because EXPLORER is one of the world's largest cruise
ships - - a megacruise ship at 137,308 gross registered tons, capable of accommodating 3,835
passengers.  In fact, she is larger in terms of gross tonnage than any passenger ship in service
except Cunard's QUEEN MARY 2 (
See The Log, Winter 2006 at p. 17) and fleet-mate
FREEDOM OF THE SEAS (See The Log, Summer 2006 at p.9).  (FREEDOM's sister ship,
LIBERTY OF THE SEAS, will also be larger when she goes into service in May 2007).

Royal Caribbean is well-known for its large cruise ships but it does not build such ships
merely to awe the public.           As we shall see, they are key to Royal Caribbean's business
strategy.  "These have been a huge success. We wouldn't continue to march down the path
toward large vessels if it wasn't something that we weren't more than 100% convinced was the
right thing to do from a business perspective," commented Captain William Wright, Royal
Caribbean's Senior Vice President, Marine Operations, when The Log spoke with him onboard
EXPLORER.

The Line

In order to put Royal Caribbean's strategy in perspective, it is necessary to look briefly at the
growth of the line.  Royal Caribbean was born in the late 1960s when an American, Ed
Stephens, flew to Oslo, Norway, with the hope of interesting Norwegian businessmen in
investing in a company that would offer Caribbean cruises out of Miami on ships that were
expressly built for that purpose.          At that time, there were a few pioneers offering cruises
out of Miami but they were using ships that had been designed for other roles.  For the most
part, these were ships that had once competed in the transatlantic passenger market, which had
been all but wiped out with the advent of commercial jet service to Europe.  Stephens
recognized that the calm waters of the Caribbean did not require ships with the strength needed
to handle the rigors of a transatlantic crossing.  A Caribbean cruise ship could be lighter, which
would create fuel savings and shallower draft, which would allow it to enter more island ports
than the former ocean liners.  Furthermore, the ships could be less streamlined, more box-like,
and thus able to carry more passengers and have more revenue producing amenities in the same
physical space.

Stephens also saw the jet airliner, not as an enemy, but as a key to the future success of the
cruise business.  Instead of marketing the cruises just to Florida residents as the other lines
were doing, the new company would sell its services nationwide, offering cruise packages that
included air travel to Miami.

Norway was a good venue for seeking potential investors because a number of Norwegian
businesses had done very well in the oil tanker and cargo ship businesses and were looking for
ways to expand.  Also, with the discovery of North Sea oil, the country was poised for growth.  
Stephens convinced three large investors, I.M. Skaugen, S/A, Anders Wilhelmson and
Company, and Gotas Larsen Shipping Corporation, to form a partnership.  The resulting
company was called Royal Caribbean Cruise Line and was incorporated in 1968.

By 1972, Royal Caribbean had three purpose built cruise ships in operation, each of
approximately 18,000 gross tons and carrying about 750 passengers.  The concept proved a
success and these ships are viewed as the prototype  for all subsequent cruise ships.

Other companies and businessmen saw the potential of the cruise ship business and adapting
some of Royal Caribbean's ideas as well as developing their own, they too began to flourish.  
As the industry grew, Royal Caribbean was placed in the position of having to expand to meet
the competition.

The traditional way a passenger ship company expands is by acquiring more ships.  However,
the more hulls a line operates, the greater its cost of operation.  For each ship in the fleet, there
is the cost of a crew, fueling the ship, docking fees, etc.  From an operating cost perspective, it
thus would be more efficient to somehow grow the line's capacity by increasing the passenger
capacity of its existing ships rather than purchasing more ships, provided that the cost of
increasing the capacity of the existing ships was less than or equal to purchasing more ships.

Accordingly, Royal Caribbean took a bold and innovative step in 1977 when it sent SONG OF
NORWAY back to the builder.  The Wartsilia shipyard in Helsinki, Finland cut the ship in two
and spliced a new 85-foot section in the middle, adding more passenger cabins.  In 1980,
NORDIC PRINCE was similarly "stretched."  While this had often been done with cargo ships,
it had never been done with a passenger ship before.  But, the experiment worked and Royal
Caribbean was able to meet the competition with larger ships.

Of course, a line cannot expand indefinitely by chopping up and stretching its existing fleet.  
However, the same economics that led to the stretching of the two existing ships made it
attractive to build bigger ships rather than purchase more ships of similar size to the existing
fleet.  Due to economies of scale, it is less expensive, for example, to operate one ship with a
2,000-passenger capacity than two 1,000 passenger capacity ships.  As a result, in 1982, Royal
Caribbean introduced SONG OF AMERICA, a 31,000 gross ton ship with a 1,400 passenger
capacity - - one-third larger than the company's stretched ships.

The competition also began to build larger ships but Royal Caribbean was planning yet another
revolutionary move.  In 1987, it took delivery of SOVEREIGN OF THE SEAS - - the first
megacruise ship.  Her 73,129 gross tons were more than that of any prior passenger ship save
only the superliners QUEEN MARY, QUEEN ELIZABETH, and NORMANDIE.          It is
important to recall that gross tonnage is a measure of revenue producing area, not physical
weight.  Thus, while SOVEREIGN OF THE SEAS was smaller in size than the largest
passenger ships then in service, QUEEN ELIZABETH 2 and NORWAY, her more box-like
structure enabled her to accommodate more passengers and have more revenue-producing
amenities.

During the remainder of the 1980s and the early 1990s, Royal Caribbean added to its fleet three
sisters for SOVEREIGN as well as six slightly smaller megacruise ships.  It also acquired
Celebrity Cruises, which it operates as a separate premium brand.  This acquisition resulted in
a change in the company's corporate structure.  A holding company, Royal Caribbean Cruises,
Ltd., was set up to own Celebrity and a newly-formed subsidiary, Royal Caribbean
International ("RCI"), which would operate the Royal Caribbean line.

Reflecting its new owner's business strategy, over the next few years, Celebrity would also be
equipped its own with megacruise ships including the 90,000 gross ton Millennium-class.  Four
similarly-sized ships would also be built for RCI.

The competition was not idle and they too were building megacruise ships.  In 1998, rival
Princess Cruises unveiled the first cruise ship of over 100,000 gross tons, GRAND
PRINCESS.  However, Princess did not hold the record for long.  In 1999, RCI eclipsed all
ships then in service by a wide margin when it put the 137,000-ton VOYAGER OF THE SEAS
into service.  Four sisters would follow.

In 2003, Cunard's QUEEN MARY 2 became the world's largest passenger ship.  Although
QM2 also does cruises, she was designed to do transatlantic crossings and as such, Captain
Wright sees her as being in a different category than the RCI ships.  "There is a whole different
look and feel about it.  She has a much comparatively narrower beam, she is long, long and
slender, and that is what gives her that extra speed that they need for the transatlantic routes.  
And, I think the ships just have a whole different feel to them.  Clearly, the Royal Promenade
which we have here on the Voyager-class sets her in her own class by herself."

Nonetheless, in 2006, RCI introduced an even larger ship, FREEDOM OF THE SEAS.  At
154,407 gross tons and serving up to 4,400 passengers, she is now the world's largest
passenger ship.  "FREEDOM for all intents and purposes is a stretched Voyager.  It was
purpose-built at that length."  

The net result of this is that in terms of number of ships in service, Royal Caribbean with 34
ships in its two brands is approximately 40 per cent of the size of industry leader Carnival
Corporation with its eleven brands.  However, when looked at from the perspective of how
many passengers each company is capable of serving, Royal Caribbean is approximately half
the size of Carnival.
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Cruise ship feature/inside interview - Explorer of the Seas - Royal Caribbean - Captain William Wright -page 1
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discussion of Explorer

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