Cruise lines' private islands are having a renaissance. These are the 3 reasons they need it now more than ever before.
- Cruise lines spend big on private islands and destinations exclusive to their guests.
- These private Caribbean properties are money trees for companies like Carnival and Royal Caribbean.
About 140 miles east of Miami, Royal Caribbean's private Bahamas island, Perfect Day at CocoCay, receives thousands of eager families virtually every day of the year.
The cruise line and many of its competitors don't just own ships — they also have land-based portfolios. Throughout the Caribbean and in countries like Honduras and Belize, practically every major cruise company has snatched up and developed beachfront properties to make exclusive to their guests.
To travelers, these secluded ports of call are convenient, safe, and cherished: "The vast majority of people love the islands," Patrick Scholes, the managing director of lodging and leisure-equity research at Truist Securities, told Business Insider.
To cruise lines, they're cash cows. And now, maybe more than ever before, a necessity as operators seek out profits while battling rising operating costs and ever-restrictive ports.
The industry is cruising into a private island renaissance
Cruise lines like Princess, Holland America, and MSC collectively own 16 ports and private destinations in the Caribbean (including properties that are still under development).
Many of them, like CocoCay, are hits.
Michael Bayley, president and CEO of Royal Caribbean International, told analysts in 2023 that the private island had seen robust demand, including from repeat travelers. So much so that the financial returns on the $350 million investment, launched in 2019, have been "exceptionally high and significantly above its target," Naftali Holtz, CFO of Royal Caribbean Group, said a few months prior.
Given travelers' appetite, Royal Caribbean has continued to expand its splashy Bahamas getaway.
Its most recent addition, the adult-only Hideaway Beach, opened in January, adding to CocoCay's 14-slide waterpark, upscale beach club, massive pool, and umbrella-lined beaches.
But it's not done: The cruise giant plans to open its next development, a 17-acre private beach club on Nassau, Bahamas' Paradise Island, in 2025.
Carnival Corp is also updating its popular private island, Half Moon Cay, with an additional berth to accommodate its largest ships, increasing the destination's guest capacity.
Like its competitor, Carnival has more plans to expand its real estate footprint — this time with Celebration Key, a $500 million exclusive resort on Grand Bahama Island, set to open in 2025.
The vacation-at-sea industry's land-based conquest could continue to grow: Given their benefits, Scholes said he wouldn't be surprised if Royal Caribbean were to announce plans to build another private island in the next five years.
These are the three reasons cruise-run private destinations have become so important.
1. Fuel is expensive
Fuel is one of the cruise industry's biggest expenses. Fortunately, most Caribbean-based private destinations are just a night's sailing from Florida's major cruise ports.
Amid rising fuel costs, it's easy to see why cruise lines would want to plan more itineraries around these nearby stops.
In September 2023, Josh Weinstein — president, CEO, and chief climate officer of Carnival Corp — called the forthcoming Celebration Key a "win-win-win for the environment, our guests, and the people of the Bahamas," citing the property's proximity to its Florida homeports and the subsequent reduced fuel expenditure.
It could certainly be a "win" for travelers: In the same call, he told analysts that a guest-fronted fuel surcharge is "certainly not off the table."
2. Private destinations keep profits in-house
Before its debut, pre-cruise bookings for CocoCay's Hideaway Beach surpassed the company's expectations, Jason Liberty, president and CEO of Royal Caribbean Group, told analysts in October 2023.
Admission costs up to $89 per person during peak season. Nearby, entry to the more exclusive beach club could be shy of triple that cost.
Even the otherwise complimentary parts of the island have splurge-enticing options like rentable cabanas and snorkeling gear.
Travelers content with a basic beach chair and the lunch buffet don't have to ball out on these up-charged luxuries. But they sure are hard to resist, especially as cruisers have become eager to splurge on their vacations.
For families, skipping CocoCay's waterpark could be as sacrilegious as skipping Disney World during an Orlando vacation, Scholes said. A day pass to Thrill Waterpark can exceed $100 per person — that's more than $400 down the drain for a family of four in one afternoon.
These destinations have plenty of opportunities for guests to spend big. And because there's no need to rely on other excursion operators, they allow cruise lines to keep more profits in-house.
3. Some popular ports are saying "no" to giant cruise ships
The world's largest cruise ship, Royal Caribbean's Icon of the Seas, can carry 7,600 guests and 2,350 crew.
This sudden influx of travelers could overwhelm smaller destinations and their locals, like the just over 25,000 residents of Santorini, Greece, and 25,600 of Key West, Florida.
With concerns like pollution and over-tourism, it's no wonder the popular Greek island has a daily cap on cruise visitors, while its Florida counterpart has faced a fraught battle to restrict cruise tourism.
They're not alone. Cities across the US and Europe have increasingly limited travelers coming by sea — either through size restrictions, daily visitor limits, or complete bans. This includes desirable ports like Juneau, Alaska, French Polynesia, and Venice, Italy.
Ironically, at the same time, mass-market cruise lines have continued to grow the size of their vessels — so much so that several of these new mega-ships are now simply too big to fit into some ports.
So, if you can't beat the ports, why not join them? Especially if you can outfit your private properties with dozens of profit-growing amenities.