Ship finance expert Shaerf on the dichotomy between big and niche cruise players

Peter Shaerf, managing director at the New York based shipping finance specialist AMA Capital Partners Peter Shaerf, managing director at the New York based shipping finance specialist AMA Capital Partners

Cruise shipping, like other maritime sectors, is capital-intensive, notes Peter Shaerf, managing director at the New York based shipping finance specialist AMA Capital Partners.

In a wide ranging interview with SCN, the shipping veteran shared his thoughts on finance and the cruise sector: ‘Very broadly, he explained, ‘There is a big dichotomy between the handful of top cruise companies, who can raise capital using the strength of their balance sheets and ready access to the capital markets including unsecured bonds, versus smaller companies.’

In contrasting the situation for the smaller companies, he added, ‘the niche players who are new entrants - or want to be, have an extremely hard time obtaining capital from the traditional sources which are no longer financing cruise transactions.’

Still, economic developments have provided some help in funding of new ventures for industry entrants he reminds.

He explained that Export Credit Agency (ECA) finance, an important component in financings of very large ships for the bigger cruise companies, has also benefited the smaller owners.

He also pointed to the interplay of cruise, especially for niche vessels, with the oil services markets, noting that: ‘There has been yard capacity freed up, with the weak markets for building OSVs and supply boats.’

Shaerf started in shipping over 30 years ago and worked as a shipbroker for container and dry cargo vessels, founding a company, The Commonwealth Group.

The intinstic link with marketing

Though his specialty is the money side of the business, Shaerf highlighted the intrinsic linkages with marketing and strategies. He explained that, as cruising continues to grow (at an annual rates of circa 7% - 8%), the business must create new and diverse experiences, to encourage both repeaters and attract new to cruise.

‘The Millennials are an important target segment,’ he said. One way to achieve this objective is to offer diverse itineraries, he noted.

There are other important tie-in’s with the increasingly experience-driven hospitality sector, which come with plusses and minuses.

Positives with well-known brands entering cruise

On the positive side, ‘Linkages with well-known brands, with examples being Virgin and Ritz Carlton’ do open up money raising channels. However, Shaerf, whose business includes financing in the expedition sector, talked about the importance of pre-booking of cabins, a year or two in advance, saying, ‘Financiers want to see forward bookings’.

New brands may not only provide clever marketing inspiration for the larger guys; they may also be the grist for future acquisitions, Shaerf said.

He thinks we will continue to see consolidation.

Where operators have a diverse portfolio, ‘it also is a way to provide a home for older ships,’ he remarked.

Developments in other sectors may bode well for cruise ship financing, with Shaerf saying: ‘Like new destinations’.

He mentioned the Norwegian bond market, a mainstay for industrial shipping projects, which recently saw money raises for containership deals. ‘It’s only a matter of time,’ he said, ‘before someone from the cruise side is able to tap this market.’

 

Posted 15 May 2018

© Copyright 2018 Seatrade UBM (UK) Ltd. Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade UBM (UK) Ltd.

Barry Parker

New York correspondent, Seatrade Maritime News

 

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