Tom McAlpin says no 3rd Ship yet

[Horace Horsecollar]

A quick question, if the exchange rate is so bad, why don't they build one in the US? I take it there are shipyards, or does it work out more expensive?

It would be even costlier to build a cruise ship in the U.S.

The S.S. Brasil and the S.S. Argentina (both launched 1958) were the last large passenger ships built in the United States. They were built as luxury ocean liners, and later became cruise ships. At around 15 thousand GRT, they were small compared to the 85 thousand GRT Disney ships. But that was the end of the passenger ship building era in the United States.

More than 40 years later, there was an unsuccessful attempt to revive the American passenger ship business. American Classic Voyages contracted with Litton Ingalls Shipbuilding of Pascagoula, Mississippi, for two modern "Project America" cruise ships, with an option for a third. Construction began, but ran behind schedule and over budget. American Classic Voyages folded, and NCL bought the hulls. NCL had the hulls towed to Germany for completion. The NCL-America Pride of America will begin service this year as a U.S.-flagged ship, even though primarily German-built.

See The Strange Story of the Ship that Died Twice.

 

[jrabbit]

As a West Coast stockholder of the Disney Company, I feel that they should be investing their money doing what they do best - and that's creating imersive experiences that people will love comming to and paying for the experience. Bringing the Magic out to California is generating a lot of interest in the ships and how do you put a "cost" on this type of exposure. This is long term thinking once again instead of looking to the short term "profits"

DCA (the new "land" at Disneyland ) is an example of how out of touch the Disney exec's were back when they approved this project in its current form. The "Pressler Era" exec's thought that all of us Disney fans wanted out of Disney was someplace where we could go and spend a lot of money to get into so we could go shopping With Matt O now onboard at the Disneyland Resort, we are starting to see the care being applied to Disneyland (because it was falling appart from neglect) and are going to see more investment in DCA.

There is not a problem getting people into Disneyland, there is in getting us to go to DCA. This is Disneyland's 50th anniversary however and there should be some "spotlight" cast on this resort. I believe that by bringing the Magic out to California is a good move - it will "drive" more tourists (even you east coasters that feel it's way to far and expensive to come out here) into visiting the parks, and therefore more revenue here and more willingness from Eisner / Iger to invest in and fix DCA.

As a Disney fan, I see Disneylands golden aniversary as "Hey, it's Disneylands 50th birthday, let's build a lot of new attractions at WDW and get everyone to come to Florida for Disneyland's (California) birthday"

 

[tap & dap]

If you go back to the 1996-1998 timeframe the Euro-Dollar was about 1.10 to 1.20 so it appears that from the current rate it would have to fall another .10 - .20 cents to be in the ballpark.

With all that is going on with the EU this is entirely possible in the next few months.

 

[Horace Horsecollar]

If you go back to the 1996-1998 timeframe the Euro-Dollar was about 1.10 to 1.20 so it appears that from the current rate it would have to fall another .10 - .20 cents to be in the ballpark.

It wasn't until January 1, 1999, that the Euro became the currency of eleven European Union members (Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland). Then, on January 1, 2002, Euro notes and coins replaced the country-specific notes and coins.

So, if you're looking at 1996-1998, you wouldn't be looking at the Euro. You'd be looking at German Marks, French Francs, Italian Lire, etc.

At one time, the Euro was trading below 88 cents. A Euro is now approx. $1.22.

 

[mikimous]

As someone who just returned from the 14 day repositioning and heard Mr. McAlpin speak, I can tell you that he seemed pretty serious to everyone that while there are drawn up plans for a 3rd ship, a lot of things have to fall in place to make that happen. Sure the fluctuating Euro is a key piece of it. However, there are other considerations with expansion....

1. Infrastructure. DCL has enjoyed the relationship and control they have in Port Canaveral. They already learned with debarkation on 5/28 that being a guest in someone else's terminal leaves a lot to be desired. It would be costly to get San Pedro or any other port to give Disney the same reign as they have in PC.... especially to service just one ship!

2. No Castaway Cay... Mr. McAlpin discussed the costs of what it took to develop CC. It is more than just leasing an island. There is a lot of capital that would have to go into place to justify an island for one ship.

3. One ship is not enough... Another comment he made was that they started with two to get the economies of scale and return on capital on all the infrastructure. So.. you see having a 3rd ship running outside of their home territory (caribbean) is expensive. Not that it can't be done.. but his point was at what cost? Since one boat wouldn't have the luxury of shared reasources. And let's face it folks.. with the programmed entertainment on board (not only shows, but dining menus, ammenities, etc.) Disney's fleet is certainly high maintenance.

Mr. McAlpin's mentioned the competition and discussed at length the luxury that DCL has in the fact that it is a division of a diversified company. There is no pressure for DCL to expand with new ships as their competitors as they do not have to answer directly to shareholders (unlike RCL, Canival, etc.)

Oh.. and one other tidbit... it cost Disney about $225K in tolls to cross the Panama Canal. They'll pay the same going back. Nearly 1/2 a million dollars. That's a lot of $$$ for the 50th publicity stunt. Which is just that.. a stunt. Introducing the Magic to the West Cost is getting DCL a lot of free publicity and will most likely increase bookings for the FL trips. After all, Castaway Cay is certainly a more appealing port stop than Acapulco!

 

[JenKatt]

A quick question, if the exchange rate is so bad, why don't they build one in the US? I take it there are shipyards, or does it work out more expensive?

Per the spiel given by Tom, the only shipyards that can build ships the size DCL wants are in Europe and Asia. Not sure if the orginal builders are even still on that list.

 

[Tigfanjeff]

Oh.. and one other tidbit... it cost Disney about $225K in tolls to cross the Panama Canal. They'll pay the same going back. Nearly 1/2 a million dollars. That's a lot of $$$ for the 50th publicity stunt. Which is just that.. a stunt. Introducing the Magic to the West Cost is getting DCL a lot of free publicity and will most likely increase bookings for the FL trips. After all, Castaway Cay is certainly a more appealing port stop than Acapulco!

Taking a couple of lowball figures into play

$3000, average per person cost of taking the 14 day canal cruise.
2000 - number of guests,

revenue - 6 million dollars.

If each of those 2000 spent another $500 on board (again a very low figure) its another million dollars in revenue.

Further, according to several people, the toll was not $225k, but around $180k, but even taking the higher figure, the toll is only 3% of the revenue generated. Hardly a large amount of money when looked at in perspective.

 

[mikimous]

Not everyone paid nearly $3k/person.. keep in mind that is for double occupancy. $180k was the basic toll... there were other costs involved too. I'm not the accountant.. but it is still a chunk of change. Frankly, no doubt they made it up by selling all those pins!

Don't get me wrong.. I hope that Disney does expand... but honestly, a lot of the value of their premium has to do with the "extras" they can offer. Their Mexico sailings will certainly be popular this year. The question though is will the guest surveys reveal that people are normally willing to pay a higher price when you don't get something like Castaway Cay thrown into the mix?

Mexico isn't all that impressive... even Disney had problems with some of their excursion operations in Acapulco. They also have to consider those external factors in order to keep their image up. It would be a challenge.

The capital improvements that they are making on the Magic in October I think prove a sound fiscal policy. After all, it is cheaper to rebuild/remodel certain aspects of an existing ship than it is to have to start completely from scratch... especially if the plusses enhance the guest experience (the jumbotron does sound intriguing).

 

[txaggie94gigem]

curious...how long does it take to build a ship once the designs are set?

 

[Horace Horsecollar]

curious...how long does it take to build a ship once the designs are set?

Allow me to address that question by quoting the first paragraph of a recent announcement from NCL:

MIAMI, MAY 3, 2005 -- NCL Corporation (“NCL”) today announced a further new ship order with Meyer Werft, in Germany, for delivery in October 2007 to its Norwegian Cruise Line brand. The vessel, currently referred to as hull S.670, will have a capacity of 2,384 lower berths and be a sister to Norwegian Jewel, which is scheduled for delivery in August of this year. Total contract price, including Owner’s Supply, is €391 million (approximately $510 million at today’s exchange rate).​

So, in this case, the time from contract to delivery will be a around 29 months.

This new NCL ship will share the same design as the Norwegian Jewel, which is currently nearing completion. By reusing detailed engineering designs, it may be possible to save some time compared to the first ship in a new class.

Various factors affect the time it takes from contract to launch, including the size of the ship and the schedule of other projects at the same shipyard.

Others on this board have mentioned 18 months as the typical time from laying the keel to the actual launch. That seems awfully short for such a complex project, but it's probably in the right ballpark.

In any case, I wouldn't expect a 3rd Disney ship until late 2007 or early 2008, even if Disney were to announce a contract this month.

By the way, did you notice the price tag of "approximately $510 million at today’s exchange rate" in NCL's announcement? The new ships from NCL are 92,000 GRT, Panamax-sized ships -- and any DCL fleet expansion will involve one of more ships of essentially the same volume and dimensions. That means that Disney is also looking at price tags of over a half billion dollars each. No wonder Disney is being careful about spending that kind of capital, when they're still dealing with debt from adding to their broadcast and cable empire.