Disney adds big new cruise liner to travel fleet

Tue Jan 4, 2011 2:31pm EST

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* Disney Dream is company's third cruise ship

* Bigger ship offers chance of higher profit margins

* Fourth Disney ship expected to set sail in 2012

By Barbara Liston

ORLANDO, Fla., Jan. 4 (Reuters) - Walt Disney Co. rolled out a new 4,000-passenger cruise liner on Tuesday, joining other cruise operators in adding bigger and potentially more profitable ships to their fleets.

Disney (DIS.N), a niche player in the international retail cruise business, operates several ships catering to the family entertainment segment.

The new Disney Dream, which cost more than $900 million and features a high-speed water slide that takes riders out over the side of the ship and back, docked in Port Canaveral in central Florida in preparation for its Jan. 26 maiden Caribbean cruise.

The Dream is the third ship in the Disney Cruise Line fleet following the launch of the Disney Magic and the Disney Wonder in the late 1990s. A fourth ship, the Disney Fantasy, is under construction and scheduled for its maiden voyage in March 2012.

"The bigger ships take you in the direction of a better return on your investment," said Janet Brashear, an analyst at Bernstein Research. "Even though Disney is a small player, they outpunch their weight by the fact they have a strong known brand."

"If you look at the pricing on Disney ships versus others, they're pricing above where other ships might price," she added.

The company's new liners are about 50 percent bigger than the original Disney ships and are scheduled to travel on popular Caribbean routes with stops at Disney's private island in the Bahamas, Castaway Cay.

Like their predecessors, the new cruise ships are designed to evoke the golden age of cruising, with early 20th-century Art Nouveau and Art Deco styling. Passengers enjoy larger than average rooms and family-friendly features along with adults-only activities.

Over the last year-and-a-half, leading cruise lines, including Carnival Corp & Plc (CCL.N)(CCL.L) and Royal Caribbean Cruises Ltd (RCL.N), have rolled out bigger ships.

Royal Caribbean's Oasis of the Seas, which set sail in late 2009, is the world's largest, capable of carrying more than 6,000 passengers and over 2,000 crew members. The same company added a twin, the Allure of the Seas, last year.

Michael Driscoll, editor of the Cruise Week newsletter, said the new Disney options will help lure back returning passengers.

"It gives their repeats (customers) something different to do. Their kids are older. It's a logical way for them to progress," he said.

While some other cruise lines have added ships rapidly and saturated their markets, resulting in ticket price cuts, Driscoll described the Disney expansion as conservative.

However, Brashear said Disney, whose movie characters are big children's attractions, can expect to face increased competition in their niche from other cruise carriers.

"Other carriers are introducing characters to compete with the Disney model," she said. "But Disney performs extremely well on brand." (Additional reporting by Kevin Gray; Editing by Kevin Gray and Steve Orlofsky)

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