Richard Branson, who never liked cruising, looks to disrupt the industry with Virgin Voyages

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  • Richard Branson aims to grow the $100 billion cruise industry with the US debut of Virgin Voyage’s Scarlet Lady.
  • Virgin Voyage’s largest investor, Bain Capital, said taking the company public is a “viable option.”
  • The CEOs of the two biggest cruise lines, Royal Caribbean and Carnival, said they do not see Virgin as a competitive threat.

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

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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 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 in the UK last summer, with it due to launch in the United States last year until the pandemic hit. Virgin Voyage’s maiden US sailing, from Miami, is scheduled for October 6.

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Branson said that he had never enjoyed cruising, the fact that inspired him to start Virgin Voyages. “Did you know I was never interested in getting on cruise ships, and I suspect that 90% of what people are listening to are not interested in going on cruise ships,” he told CNBC. “That’s why I’ve started so many businesses in the last 50 years.”

Despite the challenges facing travel and hospitality operators, who are still in the midst of recovering from the pandemic, Branson was confident his cruise line would stand out from the rest. “We want to try to attract a lot of people who would never dream of getting on a cruise ship,” he said. “It’s going to be a fun ship just for the adults. Kids are not allowed on board, and I think people are having a great time.”

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

Ryan Cotton, Bain Consumer and Retail Head, told CNBC, “We have an amazing equity story, and I think a lot of people will be willing to participate. I think the public markets are a really viable option for us. ” . “In some ways, it’s a pure play on new ships, and you don’t have to buy all the legacy fleet.”

Virgin Voyage is trying to create a narrative that its ships will be cooler and faster than the market. Industry experts said the challenge would be how to differentiate itself from the big brands to attract younger customers while not alienating cruise loyalists.

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

Cruise lines have outperformed overly enthusiastic millennials on board in recent years, but it remains a longstanding struggle. According to Morgan Stanley, the average age of American cruise passengers has dropped and is currently 49. The 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 enable young people to book cruises is by offering less sailing than a full week on a ship.

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

Inside one of the suites was a fully stacked cocktail bar and record player. On the decks attached to each room, there were two beach chairs with an attractive red hammock for guests to rest in.

Like Royal Caribbean’s Oasis of the Seas and Celebrity Age, Virgin Voyage has invested heavily in fitness, from bikes and yoga to boxing rings on the top deck.

Some experiences, such as the Tattoo Bar, where guests can get permanent and temporary tickets, seem gimmicky but arouse curiosity, with some travel agents saying the company had invited them to tour the ship.

However, when Branson and Virgin Voyage president Tom McAlpine were asked about bookings, both were hesitant to give a clear picture of whether the first Miami trip in October was sold out.

“People know who Virgin is. But they haven’t experienced Virgin trips. And we had a successful season at UK Great Rave reviews,” McAlpine said on CNBC’s “Power Lunch” this week.

At Seatrade, the world’s biggest cruise conference in Miami, CEOs of the two biggest 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 an advantage for us because they attract attention,” Richard Fein, CEO of Royal Caribbean, told CNBC.

Fenn reflected on Disney’s entry into the cruise industry several years ago. He said he was then asked: “It’s such a powerful brand name, won’t it move customers?” Regarding Disney and now Virgin Voyage, his answer is: “Not at all.” He recalled that Disney “added 2% to supply to our industry and they added 10% to demand.”

Carnival CEO Arnold Donald advises Branson: “Listen to your potential guests and listen to the travel agent professionals you’re working with.”

Experts said it will be upcoming numbers and booking data that will ultimately tell Wall Street whether Virgin Voyage can make smooth progress toward becoming a publicly traded stock.

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