Royal Caribbean Expands Luxury Line

Royal Caribbean Cruises Ltd. will shell out at least $698 million for a third ship to expand capacity on its luxury Celebrity Cruises line.

German shipbuilder Meyer Werft will construct the 118,000 gross-ton vessel, Miami-based Royal Caribbean said last week. Each of the three planned Solstice-class vessels will hold 2,850 passengers, compared with the 2,000-person capacity of Celebrity’s four Millennium ships.

Royal Caribbean, the world’s second-biggest cruise operator, is adding three new vessels to the Celebrity fleet as operators build ships and add features such as gourmet food to boost demand even as higher fuel prices cut profits.

The company can earn more from Celebrity cruises than voyages on its Royal Caribbean line, said Tim Conder, an analyst with A.G. Edwards & Sons Inc.

The addition of the third ship “shows management’s commitment to expanding the Celebrity franchise by giving them the flexibility to add itineraries and home ports,” said David Leibowitz, managing director at New York-based Burnham Securities, which owns Royal Caribbean shares.

Celebrity ships often travel to more exotic locales than the flagship Royal Caribbean vessels, Mr. Conder said. By expanding Celebrity, Royal Caribbean is “trying to offer a trade-up to people who have taken a cruise,” he said.

Each of the three Solstice ships will be 1,033 feet long and have larger staterooms and more balconies than most cruise ships, Royal Caribbean said.

Royal Caribbean agreed in February to pay a record $1.1 billion for a vessel code-named Project Genesis. At 220,000 gross tons, it will be the world’s biggest cruise liner when it is delivered in 2009.