Richard Branson looks to disrupt cruise industry with Virgin Voyages

Versie Dortch

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

The business tycoon who started Virgin Group, the company behind dozens of Virgin-branded ventures, is looking to disrupt the $100 billion cruise industry — at a time when the major established operators are still figuring out how to manage Covid.

Virgin Voyages, the first cruise line to launch since Azamara in 2009, began service this past summer in the U.K. It had been due to launch last year in the United States until the pandemic hit. Virgin Voyages’ first U.S. sailing, from Miami, is set for Oct. 6.

Branson said the fact that he had never enjoyed cruising is what actually motivated him to start Virgin Voyages. “Do you know I was never interested in going on cruise ships, and I suspect there’s something like 90% of people who are listening are not that interested in going on cruise ships,” he told CNBC. “That’s the reason I started a lot of businesses over the last 50 years.”

Despite the challenges facing travel and hospitality operators, which are still in the midst of a recovery from the pandemic, Branson remained confident his cruise line will stand out from the rest. “We want to try to attract a lot of people who would never, ever dream of going on a cruise ship,” he said. “It’s just going to be a fun ship for adults. No kids allowed on board, and I think people have a great time.”

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

“We’ve got an amazing equity story, and I think a lot of people are going to be keen to participate in that. I think the public markets are a really viable option for us,” Bain consumer and retail head Ryan Cotton told CNBC. “In some ways, it’s a pure play on new ships, and you don’t have to buy all the legacy fleet.”

Virgin Voyages is attempting to build a narrative that its ships will be cooler and edgier than what’s currently on the market. Industry experts said the challenge will be figuring out how to set itself apart from the big brands to attract younger customers while not alienating cruise loyalists.

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

Cruise lines have done better at getting highly spirited millennials on board in recent years, but it remains a longtime struggle. According to Morgan Stanley, the average age of U.S. cruise passengers has come down and is currently 49. Cruise Lines International Association, an industry trade group, said the average age is closer to 47.

One way both Carnival and Royal Caribbean have been able to get younger folks to book cruises is offering shorter sailings versus a full week on a ship.

From touring all 16 decks of Virgin Voyages’ Scarlet Lady on the dock at Port Miami this week, I noticed the ship’s emphasis on wellness and fun, including a late-night cabaret inside the nightclub.

Inside one of the suites was a fully stacked cocktail bar and record player. On the deck attached to each room, two beach chairs sat along 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 a lot in fitness, from bikes and yoga to a boxing ring on the top deck.

Some of the experiences, such as a tattoo bar where guests can get permanent and temporary stamps, seem gimmicky but do spark curiosity, said some of the travel agents the company invited to tour the ship.

However, when Branson and Virgin Voyages President Tom McAlpin were asked about bookings, both were hesitant to provide a clear picture on whether October’s maiden Miami trip is sold out.

“People know who Virgin is. But they haven’t experienced Virgin Voyages. And we just had a successful season in the U.K. Great rave reviews,” McAlpin said on CNBC’s “Power Lunch” this week.

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

“It’s important to look at the industry and say that new players are a benefit to us because they attract 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 asked then: “It’s such a powerful brand name; won’t that take away customers?” His answer then about Disney and now about Virgin Voyages is: “Absolutely not.” He recalled that Disney added “2% to the supply to our industry and they added 10% to the demand.”

Carnival CEO Arnold Donald offered Branson a piece of advice: “Listen to your prospective guests and listen to the travel agent professionals that you’re working with.”

It will be the forthcoming numbers and bookings data that will ultimately tell Wall Street whether Virgin Voyages can progress smoothly toward becoming a publicly traded stock, experts said.

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