Silversea’s Conroy On The Rise Of Expedition Cruising
The Silver Explorer
"If you're not making money in the luxury cruise industry right now, you should be doing something else for a living," says Mark Conroy.
The Managing Director-Americas for Silversea Cruises made the statement on the 10thanniversary of the brand's expedition cruising launch, and the success of this small but growing sector is one reason for the line’s success.
Back when Silversea launched its expedition cruising component in 2008, Conroy was President of Regent Seven Seas. "I thought they were crazy," he says.
Conroy reasoned that the capacity of expedition ships was so limited that the margins would be too narrow to justify the effort: "It's fine when the economy is strong, but when things go wrong with the world, as happened in 2001, or with the economy, as happened in 2008, it's too close for comfort."
Another cause for his concern was that the costs of operation are higher than traditional small ship luxury cruises: "There are special requirements, like you have to burn marine gas oil instead of heavy fuel in most places, gas oil being more expensive," as one example.
But, as it turned out, while the operating costs are greater in relative terms, Conroy notes, "They're not drastically higher than traditional small-ship ocean cruising."
But what really surprised him was how high the per diems wound up being for luxury expedition cruising. "That really changed the game," says Conroy. "The per diems are still much, much higher than traditional luxury ocean cruising."
Making Expeditions Comfortable
When Silversea entered the business, most of the expedition ships were old. "The leaders were Lindblad and the like -- many ships were built in the '60s," recalls Conroy. "They were old with small cabins, sometimes with bunk beds. Some of them even had the facilities down the hall; many were Russian icebreakers. And then you had really average food, mostly buffets."
However, the expedition experience itself was great. "Where Silversea changed things is that we combine that great expedition experience with the same hospitality that we have on our other ships."
The result, Conroy continues, is that the luxury customer can go on an expedition and not have to compromise their lifestyle. "So, you go see the penguins, you go see the polar bears, and that night you have a nice martini and a good steak or whatever you want to have. And that has really worked well."
10 Years On, Expedition Competition
"Theoretically there are 28 new expedition ships in the pipeline," says Conroy, who doesn't seem overly concerned by the expansion. "While the expansion doesn't keep me awake at night, I do wonder how successful some of them will be, because it's easy to make money in the Arctic and Antarctic, but not so easy for the repositioning voyages."
In the case of Silversea, says Conroy, these repositioning cruises are themed along the lines of "Wild Expeditions," because, "We end up going to places like West Africa."
Those types of cruises are tougher to fill than Antarctica. "Even so, we've done OK," he continues, "and I think the reason that Silversea has been more successful than most is that we've got 80,000 households, past customers, who've done everything."
The strength of business is also helped by strong demand for year-round Galapagos and Asia/Pacific.
Vast Majority Sold By Agents
Conroy says the vast majority of Silversea Expedition cruises are sold by agents, citing that as a factor in the success of the market. "I think the actual percentage of business sold by agents is higher than traditional luxury ocean cruises in part because the expedition customer is spending a lot of money, so they need direction."
For these particular cruises, customers have a bucket list in their minds: "They want to see Antarctica, they want to see the Arctic. But they don't know really what they're thinking about. They think there are polar bears in Antarctica and things like that."
About half of Silversea's expedition business comes through travel retailers specialized in expedition. "And then the other half comes from our traditional travel agent partners who are fulfilling that bucket wish list for their customer," says Conroy.
In both instances, the customer benefits from agents' destination and product knowledge. The business helps the North American market in particular. "The U.S. is still the dominant market for expeditions -- about 65% of the business, including the incentive business," he says.
Expeditions Bring First-Timers
The great news in expedition is that Silversea is attracting people who Conroy says, "wouldn't be caught dead on a regular cruise. On a regular ship 85% of our customers have been on a cruise before, and not just one, but many cruises."
On the expedition side, he says 50% of them are new to cruising: "They're the kind of folks that are usually well-educated, and their perception of a cruise is midnight buffets and overeating. So, they're not into it. They take the expedition because they want to get to that destination and you can't get to that destination otherwise."
Looking Ahead: Pricing Pressure
Does Conroy worry that pricing will go down when all the new capacity comes online and profit margins will suffer? "The one thing that this extra capacity will probably do is it will proletarianize the expedition business, because right now in Antarctica it's hard to find a cruise for less than $900 per person per day," he replies.
But because expedition ships carry fewer than 200 passengers, he doesn't expect too much erosion.
Meanwhile, during Silversea's anniversary celebration of its expedition fleet being held aboard the Silver Wind this week, Conroy told CruiseWeek's Art Sbarsky that plans for a big entry into the Cuba market are near. It's not finalized yet, but there are expected to be multiple calls later this year, many more in 2019, and even bigger plans for 2020.