How Much Does It Cost to Run a Cruise Ship?

Some travelers go on a cruise for seven nights, some for three months, while others even go for a 365-day cruise. Just imagine how much money people are willing to spend for such a vacation. More so, how much money do cruise ships earn from all their passengers. This may be a lot of revenue for the cruise, but it certainly isn’t cheap to run the cruise. Has it ever occurred to you how many billions of dollars ship owners spend to ensure that their passengers enjoy and experience a grand time of their life?

How much does it cost to run a cruise ship? It can cost approximately US$5 billion to run a cruise ship annually. The cost varies as it largely depends on the size of the ship as well as its amenities. Royal Caribbean Cruises Ltd. spent an estimated amount of US$9 billion one year to run their business.

To have a better understanding, let’s take a look at all the incurred expenses in running a cruise ship and a cruise ship business.

How Much Does It Cost to Run a Cruise Ship?

If you have approximately US$1.5 billion laying around, then you could purchase a ship as luxurious as the three largest Royal Caribbean ships. The cost of the Harmony of the Seas, the Allure of the Seas, and the Oasis of the Seas ranges between US$1 billion and US$1.5 billion each. It already features 3,000 cabins or so, several bars, restaurants, swimming pools, spas, gyms, and other entertainment facilities.

However, there are also cruise ships that are smaller and less lavish but are also enjoyed by many travelers. For US$300 million, you can own a ship that has a maximum load capacity of 500 passengers. If you can produce US$400 million, you can most likely purchase a ship that can accommodate a thousand passengers. But if you have at least US$450 million, then there’s likelihood that you can own a ship with a maximum load capacity of 2,000 passengers.

Not all 3,000-cabin ships are as costly as those built by Royal Caribbean. There are those that can be bought for only US$555 million. You can also purchase a ship that has a passenger capacity of 5,000 for less than US$1 billion. Their amenities are also posh and extravagant. It’s just that there are lesser options to choose from. For instance, if a plush Royal Caribbean ship features five swimming pools of different themes, a cheaper ship probably features two pools only with simpler designs.

Operating Costs

There are several types of operating expenses to take into account when answering the question: how much does it cost to run a cruise ship? These expenses include the following:

  • Fuel cost
  • Food cost
  • Payroll and other related cost
  • Onboard and other related cost
  • Commissions, transportation and other related cost
  • Other operating cost

Royal Caribbean has always been known to incur the highest amount of operating expenses annually. Based on their 2018 financial report, their fuel cost amounted to US$71 million, their food cost amounted to US$52 million, and their payroll and other related cost totaled to US$52 million. Also, their onboard and other related cost totaled US$54 million, their commissions and transportation cost totaled US$1.43 billion, and other operating cost totaled US$1.13 billion.

With such figures, which basically totals US$2.79 billion, it gives you a fairly good idea of how much is needed to run a cruise ship business. In the previous years, though, Royal Caribbean experienced having spent more than that. But with roughly US$3 billion, it is safe to say that it is indeed feasible for you to operate such business, if you have several billions lying around.

Aside from the cost of the ship, all of the above-mentioned expenses are important. However, let’s briefly discuss three of the major ones, namely, fuel, food, and payroll.

Fuel

If you have the good fortune of trying to decide whether to venture into the cruise line business or airline business, then it might help to know that fuel cost incurred by cruise ships is lower than what is incurred by airlines. On the average, the fuel cost of a cruise ship is more or less 15% of the operating cost. Whereas, the fuel cost of an airplane is relatively 30% of the operating cost.

Food

Given the number of guests that a cruise ship is capable of carrying, it’s obvious why food is one of the major expenses of cruise lines.

Before a cruise starts, it has to be ensured that the ship is carrying thousands of beverages of various kinds, over a hundred thousand pounds of food, a hundred kinds of vegetables, and a wide selection of fruits. Aside from that, the crew has to ensure that that the condiments and all other ingredients are complete and more than enough – not to mention the cooking pans and other cooking utensils and supplies.

To give you an idea, the Harmony of the Seas cruise ship has more than twenty food outlets. Its culinary team has more than a thousand members, 200 of which are cooks. With such a big team, you can just imagine how much food they are capable of preparing on a daily basis.

Payroll

Salaries vary widely. It depends not only on the job description but also on the nationality of the staff. It also depends on the cruise line – perhaps, a crew member working for a lavish cruise ship earns higher than one working for a smaller and simpler cruise ship.

Aside from the captains and directors, a cruise ship employs thousands of staff members for various positions. These include bartenders, casino workers, hosts, disc jockeys, gym instructors, and many others. Their earnings are on a per hour basis and are relatively higher than those not working on cruise lines.

These employees take the risk of not being able to spend time with their families and they work for long hours, that’s why employers ensure that they are well compensated.

Five Tips for Starting a Cruise Ship Business

Let’s say you do have millions or billions lying around. Or maybe you do? I won’t assume you don’t. To start your own cruise ship business, here is what you need to do:

1. Create a Business Plan

You have to evaluate how feasible it is for you – and your business partners – to put up a cruise line. Here are several factors that you need to take into consideration:

  • Determine the amount of initial capital investment that you need;
  • Identify your target market;
  • Determine the timeframe to break even;
  • Decide on your business name; among many others.

2. Complete Your Business and Tax Registration

Before you can start running your business, you have to register it to obtain the required permits and licenses.

There are several types of businesses so be careful when deciding which is the best one for you. For a cruise line, it is ideal to choose a business type that exempts personal liability in the event that business problems arise.

Familiarize yourself with all types of state and federal taxes. You need to register for all of them, otherwise, you won’t be able to open your business.

3. Open a Bank Account for Your Business

This, of course, is where you record both your sales and expenses. It is advisable to keep the financial records detailed, accurate, and organized as this will greatly impact your annual tax filing.

A business bank account establishes your credibility too as a business entity. In most cases, suppliers check the track record of their clients, which is going to be one of the bases of the credit limit amount that they will provide you.

4. Hire an Expert Business Accountant

A cruise line is such a big business and recording all the incoming and outgoing transactions is no easy task. Therefore, it is best that you hire an expert business accountant – and a trusted one at that – who will maintain the accuracy of your financial records. Again, this will allow you to simplify your annual tax filing.

5. Obtain Business Insurance

Any business owner is strictly advised, and at times strictly required, to obtain business insurance. It will not only protect your employees and your business, but it will also protect you and your personal assets.

Conclusion – The Cost to Run and Operate a Cruise Ship

So, to revisit our main question, how much does it cost to run a cruise ship? The answer is, for the most popular cruise lines, around US$5 billion.

The common expenses when running a cruise line are:

  1. Cost of the cruise ship
  2. Fuel cost
  3. Food cost
  4. Payroll and other related cost
  5. Onboard and other related cost
  6. Commissions, transportation and other related cost
  7. Other operating cost

If you have US$5 billion (or get the money from Shark Tank perhaps), it is viable to purchase a cruise ship and still have enough money for other business expenses. With that amount of money, you can already purchase a ship that features approximately 3,000 cabins and lavish amenities.

However, if you want your cruise ship to be as grand as the Royal Caribbean ones, then you might have to produce an additional US$5 billion to ensure its feasibility.