16 Steps How To Start A Cruise Line

(doylc.com) How to Start a Cruise Line - While owning your own cruise line may seem like a distant dream, it can be achieved with enough seed capital, planning, and hard work. While your own cruise line may not grow to the level of large companies like Carnival or Royal Caribbean, you can still start a smaller line that offers personalized service or unique itineraries.

• How to plan cruise line

1. Gain industry experience. You don't need to have worked in the boating industry to start a cruise line, but it does require a thorough knowledge of the industry and the inner workings of cruise ships to be successful. You may be able to gain significant experience as a cruise planner (like a cruise travel agent) or as a senior executive aboard another cruise ship.

For example, working as a captain, entertainment coordinator, guest services manager, or another important position aboard another vessel would be good preparation for starting your own line.

2. Decide whether you want to develop your cruise line from scratch on your own or with a consortium (a group of partners). Each approach has its pros and cons, and it's a good idea to thoroughly research each option to ensure you're making the right decision, taking into account your expertise, financial flexibility, and past experience.

Developing a cruise line on your own requires building your service offerings, purchasing or chartering vessels, developing marketing strategies, and designing the operational structure itself, which is expensive and requires trial and error.

Working with a syndicate can give you the advantage of having partners who share in your business and also share the risk and responsibility.

3. Study the market and your competition. Learn about the industry and your competitors so you can outline an unfulfilled niche that your cruise line can fill. This is the only way you can be profitable, because the cruise industry is highly competitive. What will be different or unique about your cruise line that will attract paying customers? Think about offering very luxurious trips, unique experiences or entertainment, or going to unusual places to differentiate yourself.

Avoid messing with the big players like Carnival and Royal Caribbean as they are powerful and well-established companies.

However, there are a number of smaller companies that serve fewer than 10,000 passengers per year. These companies would be easier for you to compete against than the bigger ones.

4. Consider your routes and destinations. Think about what cruise routes you want to use and what permits you will need to sail them or what competition you will have on the same routes. Also, think about where you're starting and what that means for your target customers. Market penetration for cruise lines is relatively low outside of the United States, which could present an opportunity for easy growth in an untapped market like Asia or the Middle East.

It would be cheaper to start a boat charter service or a mini cruise line. This would also somewhat loosen your navigational restrictions and improve your ability to access locations further afield.

5. Estimate acquisition costs. When you start a cruise line, your main expenses will be buying or building your ships. The cost depends on which cruise line you are considering. This can range from a small fleet of one or two small cruise ships that can only accommodate a small group to a large liner. For most people, a small cruise ship with room for a small group or family is a reasonable place to start. This is how you can build your business over time and prove to yourself and others that it can work.

The cost of these types of small boats depends on their size and equipment, but even a small 100-berth cruise ship costs about $50 million.

A full-size cruise ship, such as that used by Royal Caribbean and Carnival, will cost you at least $150 million (for the smallest class of ship).

The largest ships currently on the water cost a whopping $1.2 billion.

Their costs also depend on your specific ship requirements. Are you ok with customizing an existing one or need to have a boat or ship built from scratch? Obviously, customizing or buying a ready-made cruise ship costs less than commissioning one from scratch.

You also need working capital to buy fuel, pay port dues, pay employees, provision the ship, and other ongoing expenses.

6. Consider chartering your cruise ships instead of buying them. Chartering an existing cruise ship is a cheaper option (though still expensive). Chartering allows you to "borrow" or lease a ship for your own cruise, to use as you please. For example, some organizations have chartered cruise ships for special interest events or poker tournaments. However, chartering is still expensive. For example, a three-day charter on one of Royal Caribbean's ships can cost over $900,000. Longer trips can cost up to $6 million.

To cover these costs you need to fill the boat with customers and find a way to earn back your charter fee as well as a profit for yourself over the course of the trip.

7. Develop a business plan . Before you even go to the bank or look for other sources of financing, it is important to create and thoroughly prepare a business plan. It is your source to convince others that this project is successful. As you develop your business plan, review all of the previous steps in this part, including your own experiences, your competition, the state of the market, your financing needs, and your planned routes. You must also spell:

The name of your cruise line. This should set you apart from your competition as well as your offerings. Make sure your name reflects the type of cruise line you're launching.

The activities you want to offer on your cruise. For example whale watching cruises, activities on board, visits to cities or islands, etc.

Your pricing structure. Keep in mind that cruise lines primarily benefit from onboard purchases, such as food and alcohol, and not from ticket sales. For starters, the average price of a cruise ticket in 2015 was $1,350, while customers spent an average of $429 on onboard purchases. However, much of the ticket price is eaten up by overheads such as crew and fuel costs.

Profit and growth forecasts.

• How to start cruise line

8. Decide on the country of origin (flag state) where you will register your ships. Find out which licenses you need. Registration restrictions and paperwork tend to be less complicated in developing countries, so consider registering there rather than in the United States.

9. Raise the necessary funds . Decide what type of financing is best for your business. Funding sources include the bank, other major lenders (including co-operatives and credit unions), venture capitalists, angel investors, partnerships, and crowdfunding.

The easiest way to fund a business is to do it yourself with your savings. However, making this kind of money this way is not feasible for most people.

Taking out a small business loan can be an effective solution to fund your business, provided you are qualified. You need experience, a solid business plan and good personal credit. The Small Business Administration, SBA, offers small business loan guarantees that can help you get the loan you need.

The limit for an SBA-guaranteed loan is $5 million through an international trade and export working capital loan. Most other SBA programs offer less and are subject to strict underwriting. In addition, you must find a lender who is sufficiently familiar with the industry and willing to lend, since the SBA program is a guarantee and not a source of capital in and of itself.

Angel investors are harder to come by but can be a great source of capital and advice as the angel is typically a seasoned businessman. Angels offer seed capital in exchange for equity (fractional ownership) in your business.

10. Get your ships. If you have financing, you will need to purchase or charter your ships. Search for offers online at sites such as YachtWorld or Ships4Ever.com, then contact the shipbroker responsible for a ship you wish to negotiate a price for and complete the sale. If you are buying a smaller boat or several there are many other websites that have listings for smaller yachts and cruisers.

11. Equip and repair ships as needed. If you find a good deal on a used ship, it likely means you need to make repairs to prepare the ship for passengers. Hire an engineer to ensure that the boat is structurally sound, seaworthy and that the engines are working properly. In addition, you may wish to make changes to your ship to add more amenities, cabin features, shops or common areas. Purchase cabin equipment and furniture as needed.

12. Hire employees. Depending on the size of your cruise ship and overall operations, you'll need a variety of crew members and employees to keep your cruise line running smoothly. For example, you will surely need crew members for the ship to keep the engines running and fix anything that breaks. You probably also need administrative assistants to process bookings and billing. Then you need to hire food staff and maids to take care of cooking and cleaning. Finally, you need animators such as musicians or tour guides for excursions.

If you run a very small business, you may be able to fill many of these roles yourself.

• How to preparation for setting sail

13. Buy insurance coverage. One of the most important insurances you need is general liability insurance. This covers your legal costs, court costs and settlements if you are sued by a customer who was injured on one of your cruises. This can help you avoid financial ruin from a bad experience. You may also need insurance to cover potential property damage in the event of fire or shipwreck. Contact major insurers to inquire about this type of coverage.

Customers can sue for a variety of reasons, so it's best to get the widest coverage you can afford. Passengers can also complain when the sea is rough.

14. Obtain the required licenses and permits. They need licenses to operate as a company and as a cruise ship. The specific licenses depend on where you are registered and where you stop on your routes. Anywhere you wish to stop, you must obtain a permit from a branch or local government. Due to the complexity of these permits and dealing with local authorities, it may be advisable to hire a consultant who can help you with this.

You must also obtain liquor licenses for the appropriate regions when not navigating in international waters.

In any case, contact the appropriate authority (ports, coast guard, local governments, etc.) to inquire about specific permitting and licensing requirements.

Due to outbreaks of various intestinal diseases on cruise ships, you must comply with the CDC's twice-yearly mandatory health inspections. This is also a form of liability.

15. Promote your first cruise. Now that you're ready to sail, you'll need to acquire clients to fill your first voyage. Set a date and start creating a marketing plan to reach the right customers. First, think carefully about who you want to address. Are you looking for older pensioners or young people? Would you like families, couples or individuals on board? Your answers to these questions will depend on the type of cruise you offer and will influence your promotional strategies and media choices.

For example, many cruise lines are now trying to attract millennials by offering cruises that focus more on adventure and destinations than gambling and shopping.

16. Check your ship, crew and operations. Check all of your ship's systems, crew members and services prior to departure. Make sure everything runs smoothly and efficiently. Your first voyage needs to go smoothly if you hope to operate your cruise ship for a very long time. So make sure you are absolutely ready before you go.