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Currently 12 private destinations in the Caribbean, with

more on

the way

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Royal Caribbean's CocoCay boosts revenue by 43% since 2019

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Carnival plans $600 million investment in Celebration Key

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Direct bookings rise, reducing reliance on travel agents

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Public Caribbean destinations see decline in cruise visits

By Doyinsola Oladipo

NEW YORK, Oct 29 (Reuters) - Major cruise operators are

steering their ships - and millions of dollars in investments -

into their own private destinations packed with excursions,

beaches, bars and restaurants.

The phenomenon appears to have started with Royal Caribbean

Group, which in 2019 opened "Perfect Day at CocoCay," an

amusement park-like private destination in The Bahamas that has

caught the eye of Wall Street.

By operating their own private destinations on small

Caribbean islands, Royal Caribbean and other cruise operators

have managed to grow revenues faster.

"By having their own port and not having to pay passenger

fees and government taxes, they are able to capture more of that

total revenue," said Bob Levinstein, CEO of cruise marketplace

Cruise Compete.

For example, Royal Caribbean spent $250 million to renovate

CocoCay. Since its opening in 2019, the company's expenses

including commissions have increased 34% while ticket revenues

are up 43%.

Now, competitors Carnival Corp ( CCL ) and Norwegian Cruise

Line Holdings ( NCLH ) are scrambling to recreate that success.

"Royal is getting some of the best returns in all of cruise

right now, and the big edge they have is CocoCay, and everybody

else is trying to catch up," said Kenneth Kuhrt, executive vice

president at Ariel Investments.

Cruise companies have been posting banner earnings as the

affordable price of cruises attracts consumers itching to travel

in the post-COVID era. Royal Caribbean shares are up 69% so far

this year, while peers Carnival and Norwegian are up 27% and

30%, respectively.

"Perfect Day at CocoCay has been a game changer for both our

guests and our business," Royal Caribbean CEO Jason Liberty said

in a statement.

Cruise companies are shuttling a record number of travelers

into the region on three- and four-day itineraries with stops at

private destinations, according to industry experts.

Meanwhile, rising direct bookings allow Royal Caribbean to

save on commissions, which are about 10% to 20% of the ticket

price, said Patrick Scholes, Truist Equity analyst.

"Travel agents are getting cut out of the mix," Scholes

said. "Cruise companies are extremely reluctant to acknowledge

this because they are still very dependent on travel agents and

don't want to highlight that they are seeing more direct

bookings."

MORE PROPERTIES ON THE WAY

There are currently 12 private destinations in the

Caribbean, including two set to open in 2024 and 2025, with more

on the way.

Carnival plans to invest $600 million to develop Celebration

Key, its private destination in Grand Bahama.

"The returns must be pretty good if Carnival is willing to

put a half-billion dollars into development of their private

island rather than either trying to clean up the balance sheet

or build another ship," Kuhrt said.

Carnival CFO David Bernstein told Reuters that the rate of

return on investment for Celebration Key is similar to those of

its new ships, which is "high teens" with a three- to four-year

payback period.

Royal Caribbean has three more private destinations set to

open between 2025 and 2027. The company will spend $650 million

to develop a private destination in Mahahual, Mexico, and $165

million on another destination in the Bahamas. The company has

not disclosed its investment in the third destination in

Cozumel, Mexico.

Norwegian announced plans in April to invest $150 million to

develop a new pier at the company's private island Great Stirrup

Cay in the Bahamas.

THE PRIVATE-ISLAND EFFECT

Based on itineraries published as of July 2024, passenger

capacity for private islands increased 41% year over year to

about 10 million passengers, according to Tourism Economics'

Christian Savelli. Non-private island Caribbean destinations

increased 18% to about 57 million passengers.

Visits to some public Caribbean destinations, however, are

falling compared to before the pandemic, even though the region

is expected to see a record 14.5 million in visitors in 2024,

according to the Cruise Lines International Association.

The Cayman Islands saw a 36% decline in cruise visits from

the first half of 2024 compared to 2019, according to the

Caribbean Tourism Organization. Certain other destinations,

including St. Kitts and Nevis, Belize and St. Maarten, saw

declines of more than 20%.

"I don't think they can deliver the same authentic

experience guests are still looking for," said Natasha Chalwell,

the British Virgin Islands Port Authority marketing director.

"But it pushes us as well to deliver on our unique offerings."

Visits to the Bahamas, where major cruise operators all have

or are developing private destinations, were up 66.5% in the

first half of 2024 compared to the same period in 2019.

"The consumer has changed," Liberty told Reuters. "They want

to immerse themselves in the experience and as much as we can

tell local providers to do that, they also need to up their game

because that's what the customers expect."