Why a Cruise Ship is Like a Model-T

As big as five Titanics, Royal Caribbean’s Icon of the Seas is humongous. It can accommodate 7,600 passengers and the 2,350 crew members that serve them.

But perhaps most crucially, (some say) it is a model of economic efficiency.

Cruise Ship Economics

Like much smaller vessels, a 250,800 ton cruise ship needs one captain, one bridge team, and one engineering team. Similar to a mass producing huge factory, one unit of labor or capital has an outsized impact.

You can see how it compares to other smaller ships:

As we might expect, the vessel’s capital includes not only the ship but also the fuel. However, whether they have 100 passengers or 1,000, still these costs remain fixed. We can even say that combining all of this labor and capital within one vessel is environmentally friendly. Yes, as a new ship, it uses relatively clean liquified natural gas and has a hull that reduces friction. Also though, the vessel’s seven pools, six waterslides, rock climbing facilities, and bumper cars, function like an urban apartment building where the same resources simultaneously benefit many people.

Do take a brief look:

Our Bottom Line: Economies of Scale

Adam Smith would tell us that Icon of the Seas is a perfect example of the economies of scale that he described in his Wealth of Nations (1776).

Defined as the lower cost per item that mass production creates, his economy of scale came from a pin. When made by a group of workers with each one performing a single task, the pin economy of scale boosted output and lowered per item manufacturing costs. With Henry Ford and the Model T, they wanted to lower the per car cost of daily production through economies of scale that included the moving assembly line. Rather like one plant made thousands of Model-T Fords, we have one ship whose output is the happy passengers that use seven pools, six waterslides, and a slew of bumper cars.

My sources and more: In  “The Math Behind the Megaships,” WSJ introduced me to their scale.