Ritz-Carlton, Four Seasons and Aman are brands associated with land-based hospitality. But the triad of luxury hotel operators, along with Accor’s Orient Express brand, are bringing their motifs of opulent style and obsequious service to the high seas. But don’t say they are getting into the cruise business, per se. To a tee, these companies are branding their new sea-worthy brand extensions not as cruise ships, but as yachts.
Ritz-Carlton introduced its yacht collection in 2017, although, thanks to shipyard delays and COVID, its first ship didn’t set sail until October of 2022. Four Seasons announced its yacht product last year, with first sailings scheduled for 2025. Aman and Orient Express sent out press releases introducing their entries into the yachting world earlier this year.
Why is this all happening right now? The luxury travel industry is thriving, with a projected compound annual growth rate of 7.6 percent through 2030, according to Grand View Research. International consultancy Deloitte says that means “luxury travel providers are striving to offer the most extravagant experiences money can buy, using descriptors such as "ultra-premium," "rare," and "exotic" to entice travelers.” That’s why, according to the JLL 2024 Global Hotel Investment Outlook, hotel brands “are expanding into non-traditional areas such as residences, private member clubs, and yachts.” These moves, according to Zacariah Demuth, global head of hotels research for JLL, have been on the upswing since the pandemic, due to the meteoric rise in wealth among millionaires. “Sourced from our own JLL research in partnership with Capgemini’s World Wealth Report,” says Demuth, “the high-net-worth population—defined as those with a net-worth of $1M+-- comprises only 0.3 percent of the world’s population but contributes 70 percent of the world’s spend on luxury travel.”
The yacht plot
Given this wave of wealth, luxury hotel brands are banking on the fact that offering seaworthy producs can expand their brand ecosystems while enhancing guest loyalty and enticing younger consumers. Profits, according to some experts, are almost beside the point at this point.
“These cruise ventures are more of a brand marketing loyalty play and a market share play than a revenue play,” according to Amir Eylon, president and CEO of Longwoods International, Luxury branding consultant Piers Schmidt agrees, calling these ventures potential “loss leaders”. The big cruise ships actually make their profits on ancillary sales rather than the cost of the journey itself. “A cruise ship normally has to sell at nearly 100 percent occupancy or it won’t make money,” says Schmidt. That’s because cruises are priced relatively low in order to get as many people on board as possible so that they can then spend on retail, gaming, food and beverage, and day trips. That strategy, says Schmidt, “doubles what the customer actually pays, and that’s where the profit is.” Given the size of the announced luxury yachts (the smallest has room for about 100; the largest for about 500 passengers), and the need for a high staff to client ratio, Schmidt wonders how and if the ultra-luxury yachts will actually make money.
JLL’s Demuth disagrees, noting that Ritz-Carlton’s Evrima has already proven to be more lucrative, on a profit basis, than hotels. “Yes, there’s certainly a halo effect that will drive loyalty, but at least for the public companies, they have to show profits,” he says. So far, high demand paired with sky-high prices has led the Evrima, a craft that can hold 298 passengers, to be “ridiculously profitable,” according to Demuth.
The loyalty play
But there’s more at play than profits. As Eylon suggests, broadening beyond land-based hospitality is a way for hotel groups to keep customers within their ecosystem and attached to loyalty programmes, giving them new options for earning and redeeming points. A recent article in the Financial Times notes that about half of the nearly 300 passengers on the maiden voyage of Ritz-Carlton’s yacht were members of Marriott’s Bonvoy loyalty programme.
At the same time, adding new products is a way to attract a younger demographic. “Younger people who have the money will migrate to the brands they are already familiar with,” says Eylon. “So, it’s a smart play for the hotel brands that are doing this.”
While the cruise industry writ large is not known for youthful clients, Schmidt notes, “The cruise industry has woken up to the fact that it won’t have customers unless they have new products. So, you are seeing high-end cruise brands like Virgin Voyages and Celebrity offering ships designed to attract younger markets.” He adds, “The luxury hotel industry is not a great innovator, but if these brands can succeed in the yachting space, they could help bring the next generation to cruising.”
Status of the Seas
All four brands declined repeated requests for interviews from Hospitality Investor, However, here’s a summary of the information we were able to glean from press releases and industry news reporting.
The Ritz-Carlton Yacht Collection first sailing on the Evrima was in October, 2022. A second ship is debuting later this year, and one more will be added to the fleet in 2025. The Evrima has a capacity for 298 guests (149 suites), while the other two ships can accommodate up to 450.
Reservations opened this year for Four Seasons Yachts. The first ship will sail in late 2025. According to Alejandro Reynal, Four Seasons’ president and CEO, the move “represents a key pillar of our future growth and strategic vision, as we look to capitalize on new opportunities and build brand differentiation through immersive luxury experiences." The yacht will have 95 suites. A second ship is scheduled to be delivered toward the end of 2026. Four Seasons has appointed a veteran cruise executive, Damien O'Connor, as senior vice president, yacht operations. He will manage the vessel's hotel operations and land excursions. However, in February, Marc-Henry Cruise Holdings, joint owner and operator of Four Seasons Yachts, confirmed the departures of President/CEO Larry Pimentel and Co-Founder Philip Levine, so whether this portends trouble in paradise is an open question.
During the first quarter of 2024, two more new entries have been announced. In January, Orient Express, part of Accor, announced its plan to build two ships, The first, called the Silenseas, is set to debut in 2026. It will have 55 suites. In March, Aman at Sea, a joint venture with Cruise Saudi, announced the commencement of construction of its new luxury yacht. The 600-foot ship, complete with 50 suites, is anticipated to debut in 2027.