Royal Caribbean shares why it will build smaller cruise ships

Utopia of the Seas will sail three- and four-day itineraries.

You can't build a cruise ship quickly. It takes years and even longer when a cruise line builds a new class of ships.

Planning for new ships has to begin many years in advance partly because construction takes so long but also because only so many shipyard slots are available.

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That's why Royal Caribbean has its second and third Icon-Class ships already under construction and has ordered a fourth with options for a fifth and sixth. If all those ships get built, that will take the cruise line into 2029. The cruise line also has a seventh Oasis-Class ship planned for 2028.

Both those megaship classes could add more members as Royal Caribbean seems happy with tweaking them instead of building something new. Icon of the Seas was, of course, a white-paper build. The cruise line did add some features from Oasis Class, but Icon-Class ships were designed from a blank slate.

It's a robust order book and CEO Jason Liberty has made clear that the cruise line and its sister brands, Celebrity Cruises and Silversea, have even bigger plans ahead.

Royal Caribbean plans new ships

"We're always designing the next classes of ships really for all of our brands," Liberty said during Royal Caribbean's second-quarter-earnings call. "We specifically pick segments and brands in those segments and deployments and experiences that we believe have a very long runway to generate demand globally, as each of our brands are globally sourced business."

Liberty also explained the practical reasons that Royal Caribbean might soon need to create a new class:

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"And, of course, the other thing I think that's important when you think about ship classes, whether they could be small, they could be larger, is kind of also a consideration that we also have ships that are reaching 30, 35 years. And so some of this is not just about we want to build same-size ships, smaller ships. It's also replacing ships that will eventually kind of reach their end of life."

Royal Caribbean's smaller ships are generally its oldest ships. The cruise line has said that it's working on a new smaller ship class, named Discovery Class.

No order has been placed for a Discovery Class ship and it's unclear where the cruise line stands on the design process.

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Royal Caribbean: It's all about the ports

Royal Caribbean has been investing in private destinations to give its larger ships places to stop. The biggest ships can't stop in many ports, forcing them to call on Nassau and Cozumel, two ports many experienced cruisers have visited many times.

To make those ports better for recurring guests, the cruise line is building beach clubs. The Nassau and Cozumel beach clubs will offer private-island-like experiences for an added fee. In addition, Royal Caribbean has purchased the port in Costa Maya and plans to turn it into Perfect Day Mexico.

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Liberty made clear that smaller ships would give the cruise line more port options.

"[I] think when your question comes about the drivable market, the ships that you're referring to that we're looking potentially at, smaller ships will probably replace some of those older ships," he said.

"It's a little bit less about the sourcing market. It's more about where those ships can go. It's getting them into maybe some of the more unique and bespoke destinations and further diversify our footprint around the world."

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Royal Caribbean clearly wants to be able to visit more ports.

"We go to about 1,000 different destinations today and we keep more and more trying to spread out where our guests go, and the size of the ship can sometimes matter," he added.

"And I think our brands are always designing to how do we have the most flexible platform to deliver the experiences in which our guests are looking to go on."

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