In a stunning announcement, Royal Caribbean Cruises Ltd. (RCL), the parent of Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, said it will buy a 67 percent stake in ultra-luxury Silversea Cruises, which also operates Silversea Expeditions. The investment is a $1 billion transaction, and expected to take effect after regulatory approvals, likely toward the end of 2018.
Today, Richard Fain, chairman and CEO of Royal Caribbean Cruises Ltd., and Manfredi Lefebvre, executive chairman, Silversea Cruises, talked to financial analysts about the new partnership on a morning conference call.
Shortly thereafter, Roberto Martinoli, Silversea’s CEO, and Barbara Muckermann, Silversea's chief marketing officer, both spoke to Travel Agent one-on-one by phone.
How Long Has This $1 Billion Deal Been in the Works?
Fain and Lefebvre have known each other for 20 or so years. Actual discussions about a potential partnership started about a year ago and "accelerated" over the past three months, said Martinoli.
What’s the Prime Benefit to Royal Caribbean Cruises Ltd.?
“It allows us to become brand leaders in every segment,” Fain told the financial analysts and noting that ultra-luxury Silversea and its expedition product complete the company’s brand portfolio: “Ultra-luxury and expedition cruises were gaps in our product portfolio.”
While RCL “could build into that market over time” this is an easier, more efficient way to go, Fain indicated.
Now, all-suite, all-inclusive Silversea will give RCL’s portfolio an “extremely strong global brand with nine all-suite vessels” and options for ultra-luxury or expedition cruises to more than 1,000 destinations across the globe, he noted.
Competitively speaking, Carnival Corporation has Cunard and Seabourn as its luxury and ultra-luxury brands, while Norwegian Cruise Line Holdings owns ultra-luxury Regent Seven Seas Cruises. Now, RCL can similarly appeal to both the highest level of luxury customer and experiential adventurers eager for an expedition cruise.
Industry experts also believe this gives RCL long-term capacity in these spaces that is much larger—and more cost-efficient—than what it likely could establish itself from scratch.
What Will Happen to Silversea’s Management Team?
Lefebvre will continue to lead Silversea, and Martinoli will continue in his role. Martinoli also told Travel Agent that Mark Conroy, managing director for North America; Barbara Muckermann, Silversea’s chief marketing officer; and others will also remain in their roles.
Fain also said Manfredi Lefebvre is responsible for taking Silversea to the level that brand is at today. Fain also said that the line's "very successful management team" was crucial in his firm's decision, as RCL wanted to enter a relationship with a “strong and experienced partner." He sees great value in the existing management team.
What Are the Prime Benefits to Silversea?
Certainly, Silversea will gain with RCL’s sizable clout for project financing and future fleet expansion. Martinoli stressed that it also will gain commercial economies of scale in everything from fuel purchases to credit card processing fees. He's impressed with RCL’s large, complex data base and sees “considerable opportunities on the commercial side—it’s fantastic for all of us.”
On the sales side, Muckermann acknowledged that any line the size of Silversea can’t have the same penetration of the travel agent distribution system as a bigger company can. The RCL brands have sizable "reach" within the agency distribution system, and, with RCL as a partner, she believes Silversea's travel agent reach will go farther.
Customer-wise, Silversea sees a great benefit for “trading up between Celebrity and Silversea,” says Muckermann, as premium customers begin to move to another stage in life—and, in turn, to an ultra-luxury or expedition product. That’s already happening now, so with the closing of the partnership later this fall, agents can expect more. “We’re seeing it as a huge opportunity,” she stresses.
Travel Agent asked about whether Silversea plans to use Espresso, Royal Caribbean International’s reservation system: Muckermann said they’d definitely review any synergies “as they do have a solid system." No specifics are known right now, but it's on her radar for review.
What’s the Agent Reaction?
Travel Agent will post feedback from agents and host/franchise/consortia groups as it's received. Here's the first: “We are excited to hear about the Royal Caribbean Cruises Ltd. (RCL) and Silversea partnership since both brands win,” said Michelle Fee, CEO and founder of Cruise Planners, an American Express Travel Representative; her group is a top-producing travel agency for both brands.
Fee said that it allows RCL to expand its portfolio in the luxury market and allows Silversea more exposure to both consumers and travel agents. “I look forward to see what Royal Caribbean’s creative and innovative thinkers come up with next now that they are playing in the premiere ultra-luxury space with Silversea.”
She said her group has “great relationships with both brands and I am confident that travel agents will benefit from streamlined processes as they market RCL’s complete portfolio with an increased focus on the luxury and expedition cruising markets, which are high demand growth markets for Cruise Planners.”
Is Silversea Being Absorbed Into RCL? Or, Will it Remain an Independent Company?
Silversea is a privately held firm owned by the Lefebvre family; it was founded by Manfredi Lefebvre’s father. While RCL is investing and will be a majority shareholder, agents can look at it as a partnership more in the way of the RCL-TUI deal, than an outright, full purchase and absorption of a company.
Silversea will remain an independent company with RCL as the biggest shareholder. Again, Martinoli stressed that “this is indeed a partnership…We have no intention of changing the way we do business.”
Thus, he’s not worried about RCL approaching the Silversea brand the way it did years ago when acquiring Celebrity (for several years, the brand personality was blurred). That was a long time ago, Martinoli noted, calling it a “good learning exercise” for RCL. Today, that era is over with Celebrity performing as a strong "Modern Luxury" brand and quite different from the Royal Caribbean International product.
Fain too indicated that RCL sees the power of the Silversea brand the way it is now as a positive. RCL has a “particularly strong relationship with our network of travel agent partners,” said Fain, and “we now have an offer [the ultra-luxury and expedition brand] that was previously missing from our group.”
Will RCL Add More “Razzle-Dazzle” Amenities to Silversea’s Ships?
Certainly, sister brands Royal Caribbean International and—in some ways, too—Celebrity Cruises have a reputation for “wow” or “impactful” amenities and features. Royal Caribbean has such razzle-dazzle features as the Ultimate Abyss, surfing pools, skating rinks and the Perfect Storm, while Celebrity’s newest ship, Celebrity Edge, will have a Magic Carpet, a cantilevered exterior platform that will move up and down the outside of the vessel.
Will RCL bring that thinking to Silversea? For example, we asked Martinoli if agents can expect to see such amenities as waterparks added to the top deck of Silversea’s ships? His answer was a resounding “no” on the waterpark front.
But it’s also clear that while the ultra-luxury line desires to steadfastly retain its brand attributes and deliver the ultra-luxury product guests have come to expect, RCL as a partner may bring a mindset for innovation as the two lines tap into obvious synergies.
And while the partnership will help bring down costs for both companies, “I believe we can find those efficiencies without impacting the [Silversea] brand,” said Fain, acknowledging that Silversea’s brand is attractive to a very demanding clientele.
Will Silversea, With North American Offices in Downtown Miami, Move Into RCL’s PortMiami HQ?
Certainly, the closeness of the two groups—with RCL at PortMiami and Silversea in downtown Miami—makes it easy for partner meetings. Martinoli said the logistics are already good. But it's not known what may happen in the future. For now, it's business as usual.
What’s the Future Vision for the Partnership?
Fain stressed that Silversea’s draw for RCL wasn’t just because it’s ultra-luxury, but also because it’s “a major player on the expedition side." Experienced travelers and new-to-cruise guests alike are seeking something different, a more experiential vacation; while guests who've "been there, done that" in contemporary or premium cruising are also looking to step up.
Any overlap between brands is okay, according to Fain, who says Azamara has already established a very strong destination approach, for example, and thus its own market segment: “We are seeing that people do understand the personality of the different brands. Our objective is to continue to be the best player in each of our market segments, and it’s working out very well.”
This new partnership “adds one segment in which we haven’t been a material player," Fain added.
Lefebvre stressed that Silversea operates in a luxury space, and “it’s not about buying another watch” but rather “living the experience of a lifetime with the family.”
In discussing the partnership, Lefebvre said: “We shared a vision about the future of luxury...RCL was in my mind the only partner. It shares our passion for innovation and experiential travel.”
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