Viking’s journey began in 1979, carving out a niche in the river cruise market, and it quickly became synonymous with this leisure travel segment. At present, Viking commands a staggering 51% market share amongst river cruise companies, a significant lead ahead of AmaWaterways, which holds only 18%. This substantial control has led to the perception of Viking as predominantly a river cruise line among both industry insiders and the general public. However, the narrative surrounding Viking began to shift in 2015 when it ventured into the ocean cruise sector with the launch of the Viking Star, a vessel designed to accommodate 940 passengers. This pivotal moment marked Viking’s ambition to diversify beyond rivers and potentially reshape the landscape of its business.
As we approach the next phase of Viking’s evolution, 2025 will mark the 10th anniversary of its foray into ocean cruising. Interestingly, there are indications that ocean cruising may soon surpass river cruising in terms of financial significance for Viking. While it is still early to draw definitive conclusions, the growth trajectory of both sectors is unmistakable. The seasonal nature of river cruising, with limited operations in colder months, complicates comparative financial analysis. According to Viking’s results from the first half of 2024, making financial inferences based on river cruise revenues alone can be misleading.
The previous year’s financials reveal a striking juxtaposition between Viking’s river and ocean segments. The river cruise division, boasting 70 ships, reported an adjusted gross margin of $1.41 billion. Conversely, its nine ocean vessels closely trailed, bringing in an impressive $1.35 billion. This shortfall represents only a 4% gap in profitability, highlighting the ocean segment’s potential as a competitor in revenue generation.
Growth Strategies for River and Ocean Segments
The ambition for growth is alive in both the river and ocean cruise sectors. Viking has ambitious plans, ordering 17 new river vessels set to launch by 2027, 10 of which will sail European rivers, and the remainder navigating exotic waterways in Egypt and Southeast Asia. Additionally, the ocean cruise fleet will see six new ships commissioned at a rate intended for delivery by 2028, with options for four further vessels. This commitment demonstrates Viking’s recognition of the rising consumer interest in both types of cruising, highlighting their integrated strategy for market positioning.
In its recent filings, Viking has indicated that ocean cruising is emerging as the fastest-growing segment of its business. Unlike its river counterparts, ocean cruising boasts greater flexibility due to fewer seasonal restrictions. Ocean ships can capitalize on seasonal migrations, moving with travelers from colder climates to warmer destinations around the globe, enhancing their operational efficiency and profitability.
Another factor influencing Viking’s ocean strategy is the size of its vessels. While Viking’s ocean ships, carrying up to 998 passengers, are relatively small within the industry context, they still present significant economies of scale, allowing for higher revenue yields. The 2023 net revenue yield for river cruises was reported at $477 per passenger daily, while ocean yields reached $497. This illustrates a pronounced trend where ocean voyages appeal to a more financially stable demographic willing to invest in slightly higher fare experiences.
However, the costs associated with ocean cruising are markedly higher, with Viking’s ocean vessels costing around $500 million each. This leads to large initial investments, necessitating a keen focus on capital acquisition strategies, including their recent public stock offering to aid in fueling these oceanic aspirations.
The assertion that Viking is merely a river cruise company is becoming increasingly outdated. While it remains a formidable player in the river segment, the evolution into a dual river-ocean provider positions it favorably in a competitive market. The company’s strategic efforts to capitalize on diverse cruising experiences, its commitment to expanding fleet capabilities, and the astute understanding of market economics are indicative of a brand poised for further growth. As Viking navigates these waters, an exciting hybrid future awaits, blending the best aspects of both river and ocean cruising for travelers around the world.
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