Richard Branson seeks to disrupt the cruise industry with Virgin Voyages

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From Virgin Atlantic in the sky to Virgin Galactic in space, Richard Branson has now set his sights on the high seas.

The business mogul who launched Virgin Group, the company behind dozens of Virgin-branded businesses, seeks to disrupt the $ 100 billion cruise industry – at a time when major established operators are still looking to manage Covid.

Virgin Voyages, the first cruise line to be launched from Azamara in 2009, began service last summer in the UK. It was supposed to be launched last year in the United States until the pandemic struck. Virgin Voyages’ first departure to the United States, out of Miami, is scheduled for October 6.

Branson said the fact that he never liked cruising is what actually motivated him to start Virgin Voyages. “Do you know that I have never been interested in cruise ships, and I suspect that there is something like 90% of the people who listen are not interested in cruise ships,” he said. he told CNBC. “This is the reason why I have started a lot of businesses over the past 50 years.”

Despite the challenges facing travel and hospitality operators, who are still recovering from the pandemic, Branson remained confident his cruise line will stand out from the crowd. “We want to try to attract a lot of people who would never dream of getting on a cruise ship,” he said. “It will just be a fun boat for adults. No children are allowed on board, and I think people are having a lot of fun.”

Private equity firm Bain Capital is Virgin Voyages’ largest investor. Sources close to the deal said the total investment, largely by Bain, in the cruise line and its three ships is around $ 3 billion, with each ship costing around $ 800 million.

“We have an amazing fairness story, and I think a lot of people will want to participate in it. I think government procurement is a really viable option for us,” Ryan Cotton, head of consumer and sales, told CNBC. Retail Bath. . “In some ways, this is pure play on new ships, and you don’t have to buy the entire existing fleet. “

Virgin Voyages is trying to build a narrative that their ships will be cooler and more daring than what’s currently on the market. Industry experts said the challenge will be figuring out how to stand out from the big brands to attract younger customers without alienating cruise ship loyalists.

“We want people young at heart,” Branson said. “So I don’t want to exclude myself from getting on board, but we want it to be a fun ship. We want people of all ages to come on board and have a good time.”

Cruise lines have been more successful in bringing on board highly dynamic millennials in recent years, but it remains a long-standing struggle. According to Morgan Stanley, the average age of US cruise passengers has fallen and is currently 49 years old. Cruise Lines International Association, an industry trade group, said the average age is closer to 47.

One way for both Carnival and Royal Caribbean to get younger people to book cruises is to offer shorter crossings compared to a full week on a ship.

While visiting Virgin Voyages’ 16 Scarlet Lady Decks on the Port Miami dock this week, I noticed the ship’s focus on well-being and fun, including a late-night cabaret at the interior of the disco.

Inside one of the suites was a fully stacked cocktail bar and record player. On the terrace adjoining each bedroom, two beach chairs sat with a striking red hammock for guests to relax in.

Like Royal Caribbean’s Oasis of the Seas and Celebrity Edge, Virgin Voyages has invested heavily in fitness, from bikes and yoga to a boxing ring on the upper deck.

Some of the experiences, like a tattoo bar where guests can get permanent and temporary stamps, seem fancy but arouse curiosity, said some of the travel agents the company invited to visit the ship.

However, when Branson and Tom McAlpin, president of Virgin Voyages, were asked about reservations, they were both hesitant to make it clear whether October’s first trip to Miami was full.

“People know who Virgin is. But they haven’t experienced Virgin Voyages. And we’ve just had a successful UK season. Good rave reviews,” McAlpin said on ‘Power Lunch’ on CNBC this week.

At Seatrade, the world’s largest cruise conference, in Miami, CEOs of the two largest cruise lines said on Tuesday they felt far from threatened by Branson’s latest bet.

“It’s important to look at the industry and say that the new players are an advantage for us because they get attention,” Royal Caribbean CEO Richard Fain told CNBC.

Fain reflected on Disney’s foray into the cruise industry many years ago. He said he was then asked, “This is such a powerful brand name; won’t that take away customers? His response then about Disney and now Virgin Voyages is: “Absolutely not.” He recalled that Disney has added “2% to the supply of our industry and they have added 10% to the demand”.

Carnival CEO Arnold Donald gave Branson a piece of advice: “Listen to your potential guests and the travel agent professionals you work with.”

It will be the numbers and booking data ahead that will ultimately tell Wall Street whether Virgin Voyages can move smoothly into publicly traded stock, experts said.

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