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The Sunshine Economy

The newest cruise ship operator at PortMiami says 'we're being singled out as an industry'

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Tom Hudson
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Miami Dade County spent about $160 million building Terminal V on PortMiami. Virgin Voyages has a 30-year agreement to dock its cruise ships there. The county expects that will generate $800 million in docking fees.

Virgin Voyages hopes to stand out in the cruise ship business with its rock-and-roll attitude and adults-only cruises even as the CDC still advises travelers to avoid cruising because of COVID.

A British knight and the expectation of $800 million over the next 30 years helped reshuffle the alphabet at PortMiami.

Terminal V now comes after G.

Cruise ship terminals on the port use letter designations. Terminal A is the largest cruise ship terminal in the country and it is home to Royal Caribbean. Norwegian Cruise Line Holding's Pearl of Miami is the more elegant nickname for Terminal B. Carnival cruises stretch across the terminals D, E, and soon F. Terminal G's roofline is met to evoke a series of sails.

Next comes V, at the westernmost point of the port.

Terminal V – for Virgin Voyages – was christened Sunday, 13 months after construction began, more than a half decade since Virgin began its ambitions to start a cruise ship company in South Florida, and amid the industry's efforts to reassure passengers and the Centers for Disease Control about the safety of cruising during the COVID-19 pandemic.

'Singled Out'

The journey for Virgin Voyages to get to this point has been rough. And it is far from clear sailing. Just last week the Centers for Disease Control released new guidance for cruise operators.

The suggestions include a tiered vaccination status with the highest being what the agency calls “vaccination standard of excellence.” In order to achieve that designation, a cruise ship would have to have at least 95% of passengers and crew fully vaccinated — meaning the regular doses, plus any booster.

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Tom Hudson
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Virgin Voyages CEO Tom McAplin is a Miami native. The company is based in Plantation and sails out of PortMiami.

"We don't think that that makes sense," said Virgin Voyages CEO Tom McAlpin. "That's a very, very high standard for the industry when frankly, it's not required anywhere else, it's not required to go on a flight. It's not required to go into a casino. It's not required to go to a restaurant. But yet we're held to a much higher standard."

If someone on a “vaccination standard of excellence” ship comes in close contact with the virus, quarantines would last five days, not the usual 10 days. While they would be able to be out of isolation earlier, they would be required to wear a mask outside of their cabin for another five days.

The guidelines are voluntary and cruise ship operators have until Feb. 18 to opt in. If a ship does not adopt the guidance, the agency won’t review or confirm the ship’s health protocols.

Virgin Voyages says it is evaluating the recommendations and expects the cruise industry to be united.

The CDC still advises travelers to avoid cruising.

"We don't understand it. We think we're being singled out as an industry," McAlpin said.

Virgin requires its crew and passengers to be vaccinated, and like other ship operators, tests passengers before boarding a cruise. As of Feb. 10, the CDC's cruise ship dashboard listed Virgin's Scarlet Lady as a highly vaccinated ship, meaning at least 95% of passengers and crew are vaccinated. The ship carried an orange status signifying there were enough COVID-19 infections on board to start a CDC investigation.

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courtesy - YouTube - BroadwaveLiveCams
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screenshot - YouTube - BroadwaveLiveCams
Virgin Voyages' Scarlet Lady is dockside on Feb. 13, 2022 at the company's PortMiami Terminal V.

Over The Barriers of Entry

Cruise ships were among the first high-profile places where the disease was spreading. Passengers were kept on some ships and other vessels were kept at sea as public health officials and others scrambled for how to deal with the germ in its early weeks.

Virgin Voyages was days away from launching its first cruise from PortMiami when the pandemic struck. Trips were postponed and then canceled as the industry was shut down for more than a year.

The company is just getting started in the cruising business with one ship sailing the Caribbean. A second ship will sail out of Barcelona this summer with a third vessel expected to join it.

The delay has meant more investment as the company waited to welcome passengers. Private equity firm Bain Capital is the lead investor.

"You don't see cruise lines pop up every day," McAlpin said. "These ships cost $800 million each. You need to have the financing in place to finance them. You have to have the infrastructure to support them. You have to have a brand that is renowned and has experience in the trade and be able to build a team to support it. So big barriers to entry — all of those things are behind us."

The latest investor class to support Virgin Voyages includes professional athletes. Through private alternative investment platform Patricof, tennis pro Venus Williams and NBA player Blake Griffin are counted among the cruise line's investors in the third quarter of 2021.

"You have the ability to have some of these athletes invest in businesses and. Be able to promote them, so it's not only are they investing in getting returns, they get to influence those returns," said McAplin. He noted the new money came in at the same equity price as original investors.

It will be some time before the company is cash flow positive thanks to its debt load and the cruise industry regaining travelers during the pandemic. However, McAplin said about 20% of Virgin Voyage's early passengers are new to cruising — a key group of customers as the company works to stick out among its competitors.

Adults Need a Break

Only passengers at least 18 years old can cruise with Virgin. The Virgin brand — a rock-and-roll, high-gloss and risqué attitude — is very different than many of its much larger competitors emphasizing family and price.

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Tom Hudson
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Virgin Voyages CEO Tom McAplin is silhouetted against the passenger waiting lounge of the company's new Terminal V at PortMiami.

From the get-go, Virgin set out to create an adults-only cruising experience. That means all of its on-board restaurants have bars. It means different types of entertainment. It means a different ambiance. It contributed to Virgin commissioning mid-sized ships of about 2,800 passengers when others sail ships holding more than twice that.

"This is not just a cruise for 20-year-olds or 30-year-olds. This is not just a Millennial cruise. We see this as our sweet spot between 40 and 55 years old," said McAplin. "Moms and dads need a break."

This is a very different type of start-up cruise concept than the first one McAplin was involved with. He was among the leadership team who launched Disney Cruises in the mid-90s.

Despite the different market segments Virgin and Disney cruises are going after, McAplin notes the underlying brand strength helps support premium prices.

"We come at a very competitive price point with great value. We're not going to reduce our prices in order to fill the ships because we're building a brand," he said. "We want to preserve that brand value."

In a journalism career covering news from high global finance to neighborhood infrastructure, Tom Hudson is the Vice President of News and Special Correspondent for WLRN. He hosts and produces the Sunshine Economy and anchors the Florida Roundup in addition to leading the organization's news engagement strategy.