Founded in 1979, Viking Cruises initially carved its niche as a river cruise operator, establishing a robust reputation within the industry. It holds an impressive 51% of the river cruise market share, significantly overshadowing its nearest competitor, AmaWaterways, which accounts for only 18%. This dominant position has allowed Viking to define the river cruising landscape for decades, offering travelers unique experiences along Europe’s picturesque waterways and various exotic routes worldwide.
However, while river cruising remains central to Viking’s identity, the landscape is gradually shifting, heralding a new era for this prominent cruise line.
The year 2015 marked a pivotal moment for Viking when it ventured into the ocean cruise sector, unveiling the Viking Star. This new vessel, accommodating up to 940 passengers, represented not just a ship but a bold statement of Viking’s ambition to diversify its offerings. As Viking approaches the 10-year milestone of its ocean cruise operations, the possibility looms that ocean cruising may soon surpass river excursions as the main financial driver of Viking’s business.
Initial observations indicate that, as early as next year, the ocean division could outperform river cruising. However, measuring this transition may remain clouded due to seasonal fluctuations inherent in river cruising, which typically sees lower activity in the first quarter of the year.
Analyzing Viking’s financial trajectory reveals interesting dynamics. In 2023, Viking’s river boats—operating with a fleet of 70 ships—generated an adjusted gross margin of $1.41 billion. Meanwhile, their fleet of nine ocean ships was close behind, amassing $1.35 billion. This demonstrates that the ocean cruise segment is almost on par with river cruising in profitability, being just 4% shy of its river counterpart.
Interestingly, both segments are on a growth trajectory. Viking has laid plans for 17 new river vessels by 2027, emphasizing their commitment to maintaining a robust river offering. Yet, the ocean segment appears to be skyrocketing, showcasing the growth potential that Viking aims to capitalize on.
Several factors contribute to the rapid growth of Viking’s ocean cruise business. Primarily, the seasonality of river cruising poses limitations; river cruises often slow down due to adverse weather conditions, restricting operations during certain periods of the year. In contrast, ocean cruises enjoy greater flexibility. Ships can navigate to warmer climates or adjust itineraries based on seasonal demand, allowing for continual operations throughout the year.
Additionally, the scale of ocean-going vessels affords economies of scale that riverboats cannot harness. With the capacity to accommodate nearly 1,000 passengers, Viking’s ocean ships hold a considerable advantage over their river counterparts, which typically host only 190. This larger capacity allows for enhanced revenue opportunities, evidenced by the notable difference in net revenue yields—$497 per passenger per day for ocean voyages compared to $477 for river cruises in 2023.
Of course, the stakes are higher in the ocean segment. Viking’s ocean ships are approximately $500 million each, a significant investment compared to the much lower construction costs of river vessels. This immense financial commitment highlights Viking’s strategic pivot as they position themselves favorably within a competitive market.
In light of these developments, it became clear that offering public stock was a logical next step for Viking to secure capital for future growth. Nonetheless, the company’s river cruise foundations remain intact, evidenced by a commitment to explore nontraditional markets like Egypt’s Nile and the Mississippi River in the United States.
The notion that Viking is merely a river cruise company is increasingly outdated. As the company continues blending its river and ocean offerings, it establishes itself as a true hybrid business model that promises thrilling adventures on both plains. The evolution in Viking Cruises not only reflects changing consumer preferences but signals a broader trend in the travel industry, where adaptability and diversification are vital for success.