Rising fuel costs push cruise ship operators to buy up private islands

The world's second-largest cruise liner company, U.S. Royal Caribbean is welcoming thousands of families every day on their private island in the Bahamas, the CocoCay, showcasing a shiny, new trend in the maritime hospitality industry. Beyond their ships, cruise operators have started building land-based portfolios, acquiring and developing beachfront properties across the Caribbean and in countries like Honduras and Belize, exclusively for their guests.

These secluded ports of call are convenient, safe, and cherished to families. To cruise lines, they're cash cows and increasingly essential in navigating rising costs and tightening regulations at popular ports. According to an article by Business Insider, this shift has ushered in a private island boom, with the major cruise lines such as Princess, Holland America, and MSC collectively owning 17 private destinations in the Caribbean, some still under development.

Royal Caribbean, for example, has heavily invested in their money-making CocoCay retreat, creating attractions like a 14-slide waterpark, expansive pools, and premium beach clubs. According to Michael Bayley, Royal Caribbean International's CEO, demand has been strong, and the $350 million spent on CocoCay has delivered exceptional financial returns. The success has spurred plans for a new destination, Perfect Day Mexico, set to debut in 2027.

Cruise lines are leaning into private ports for three main reasons: fuel costs, profit retention, and restrictive public ports.

Rising Fuel Costs

Fuel represents a significant expense for the cruise industry. With costs increasing, nearby destinations like private islands are becoming more appealing. By limiting travel distances, cruise lines reduce fuel consumption and associated expenses. Carnival Corp's CEO, Josh Weinstein, highlighted the environmental and economic benefits of Celebration Key, an upcoming private port in the Bahamas. Its proximity to Florida homeports allows for fuel-efficient itineraries, benefiting both the company and the environment.

Keeping Profits In-House

Private destinations allow cruise operators to control spending opportunities, cutting out third-party excursion providers and retaining profits. For instance, entry to CocoCay's exclusive Hideaway Beach can cost up to $89 per person, while access to its upscale beach club approaches triple that amount. Even complimentary areas encourage additional spending with options like cabana rentals and snorkeling gear.

Attractions like CocoCay's Thrill Waterpark are particularly enticing for families, with day passes exceeding $100 per person. A family of four could easily spend over $400 on a single visit. These controlled environments ensure that cruise lines capture more guest spending compared to traditional ports of call.

Restricted Access to Popular Ports

Many beloved destinations are imposing stricter limits on cruise tourism due to concerns over over-tourism, pollution, and strain on local infrastructure. Iconic locations such as Santorini, Greece, and Key West, Florida, have implemented visitor caps, size restrictions, or outright bans. Other destinations, like Juneau, Alaska, Venice, Italy, and French Polynesia, have followed suit.

An ironic twist is that cruise lines are continuing to introduce mega-ships like Royal Caribbean's Icon of the Seas, capable of carrying over 10,000 passengers and crew. These larger ships often overwhelm smaller ports or are simply too big to dock, making private islands an increasingly vital part of cruise itineraries.

As traditional ports tighten restrictions and operating costs rise, private destinations are becoming central to the cruise industry’s growth strategy. These islands not only enhance guest experiences but also provide cruise lines with more control over their operations and profits, solidifying their importance in the evolving world of cruise travel.

By Nazrin Sadigova