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| Richard Branson, founder, Virgin Group // Photo from Virgin.com |
When Virgin Cruises announced last week that it will definitely enter the cruise industry with two ships and headquarters in South Florida, the feedback began to flow.
Financial analyst Robin Farley revealed her perspective on a new cruise line with additional tonnage and what that means for capacity and competition. Travel agents and travel industry leaders also provided their initial perspective on the "cruising" move by Richard Branson, founder of Virgin Group.
An Analyst’s Perspective
Farley, an analyst for UBS Investment Research, says her group has been following the situation since April when Branson was actively fundraising for the brand and confirmed his group had secured most of the funding for its two new builds. Cost for the ships at that time was reportedly about $1.7 billion, according to Farley.
On Thursday, after the Virgin announcement, Farley told her firm’s investors that it will take at least three years from the time of a new ship order for the capacity to enter the marketplace. That’s particularly the case with a new ship design. “So this [the new line and additional berths] is not likely to be in operation much before 2018,” Farley said.
Second, she noted that investors have expressed concern about a new entrant with a strong brand that is adding capacity to the cruise market. Pointing out that similar high concern existed prior to Disney's entrance into the cruise market some years ago, Farley stressed that ultimately, that “ended up as a big positive for the industry, raising awareness of cruising as a vacation option and attracting first-timers to the market who are then likely to repeat.”
Farley also said: “Virgin is a well-regarded travel brand and with only one ship in service perhaps by 2018, it will represent less than 1 percent of the market but will likely, in our view, attract more than 1 percent incremental attention to cruising.” Once first-timers sail on Virgin, they’d typically want to try a different itinerary, which Farley says could mean going to a different brand.
“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 noted.
Trade Feedback
From the trade perspective, here’s a sampling of feedback from across North America.
Andi Mysza, president of Montrose Travel, an Ensemble member agency, Montrose, CA: Mysza points to Virgin’s past achievements at “shaking things up.” She says they’ve advantage of complacency in various industries and have pushed the boundaries to deliver the wow factor for consumers. “Initially, it was enhancing the airline experience beyond being a commodity,” Mysza said, stressing Virgin's record of fresh thinking.
With Virgin’s brand recognition, Mysza believes they also should become a factor in the industry immediately, and “knowing them, they will deliver.” Recently, Mysza says the only real cruise industry “game changers” have been Royal Caribbean International's Quantum of the Seas (for its hardware differentiation, which translates into a unique onboard experience), plus the planned launch of Viking’s ocean product (“taking their successful river cruise strategies and parlaying them into the ocean market”).
She hoping Virgin’s entrance will expand the market by stimulating non-cruisers to consider a cruise vacation. “Bring it on,” adds Mysza.
Mara Hargarther, franchise owner, CruiseOne, Ponte Vedra Beach, FL: The trade certainly can expect “lots of buzz” from Virgin’s announcement, Hargarther said, noting that Virgin’s cruise product will likely be entirely different than what’s currently available.
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| Jonette Shepherd, general manager, Unique Travel of Palm Beach, FL, a Virtuoso agency |
She also points to the positive track record achieved by Virgin’s management team, and says agents can probably expect a high-end product, which means healthy competition for other luxury lines if that’s the case. “Increased competition and innovation is always good for the industry,” Hargarther added.
Jonette Shepherd, general manager, Unique Travel of Palm Beach, FL: Shepherd, who is member-at-large on Virtuoso’s cruise committee and godmother for Scenic Cruises’ Scenic Jade, would personally love seeing another cruise line in the luxury market.
“Sometimes it seems our existing luxury suppliers rest on their laurels, as well as cutting back on amenities they used to offer,” Shepherd acknowledges. “I’d love to see a line which would bring its standards up to that of the Royal Viking Line…back in the day.”
Based on what’s best said thus far, “I believe advisors can expect a high-end product,” Shepherd said. As for other cruise lines, she believes they can expect “healthy competition, if indeed it is a luxury product.”
Ruth Turpin, owner, Cruises Etc., a Virtuoso agency, Fort Worth, TX: Describing last week’s announcement as a “very interesting development,” Turpin says “Virgin always has high quality products, so I am very excited to see what they are going to offer for our cruising clients.”
Michelle Fee, CEO and co-founder of Cruise Planners/American Express Travel Representative, Coral Springs, FL: Fee loves new ships, new innovations and new trends being introduced to the industry. “Richard Branson has a legacy of using creative marketing and has developed a travel empire while building sexy brands and cruising can be sexy,” Fee said.
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| Michelle Fee, CEO and co-founder, Cruise Planners, at the group's 2013 conference |
She stressed that if Virgin Cruises invests in the travel agent community and views agents as the best way to market to consumers, it would benefit the new line: “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."
Fee also looks forward to his creative marketing efforts to drive new cruisers into the marketplace. “His travel industry experience makes him relevant and he is being backed by really deep pockets,” Fee stressed, adding, “it’s always healthy to have a competitive marketplace for travel agents and travelers.
Brad Tolkin, co-chairman and CEO, World Travel Holdings: Citing Virgin’s well-recognized, quality brand, Tolkin envisions a positive impact as the Virgin name will expose first-time cruises to cruising as a vacation choice: “The likely impact to the cruise industry is an overall increase in people cruising at higher prices.”
What do you think of the entry of Virgin Cruises into the cruise industry? Is it good for the cruise industry and agents who sell the products? If so, why? If not, why not?
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