Famous cruise ship operators are buying up private islands and eschewing traditional stops at regular ports. 

The trend is believed to have begun with Royal Caribbean, which in 2019 opened CocoCay, an amusement park-esque private spot in the Bahamas.

They and other cruise operators are able to increase profits by preventing passengers from spending money in places outside of their control.

“By having their own port and not having to pay passenger fees and government taxes, they are able to capture more of that total revenue,” said Bob Levinstein, CEO of cruise marketplace Cruise Compete.

There are currently 12 private destinations in the Caribbean, including two set to open in 2024 and 2025, with more on the way.

Royal Caribbean spent £193 million renovating and opening CocoCay. Since its opening, the company’s expenses have increased 34% while ticket revenues are up 43%.

“Perfect Day at CocoCay has been a game changer for both our guests and our business,” Royal Caribbean CEO Jason Liberty said.

“The consumer has changed,” he told Reuters. “They want to immerse themselves in the experience and as much as we can tell local providers to do that, they also need to up their game because that’s what the customers expect.”

The company’s shares are up 69% this year, while Carnival and Norwegian are up 27% and 30%, respectively.

“Royal is getting some of the best returns in all of cruise right now, and the big edge they have is CocoCay, and everybody else is trying to catch up,” said Kenneth Kuhrt, executive vice president at Ariel Investments.

Carnival is set to invest £465 million to develop Celebration Key, its private destination in Grand Bahama.

“The returns must be pretty good if Carnival is willing to put a half-billion dollars into development of their private island rather than either trying to clean up the balance sheet or build another ship,” Kuhrt said.

Carnival CFO David Bernstein told Reuters that the return on investment for the private island is similar to that of a new ship, with a three to four-year payback period.

Royal Caribbean has three more private destinations set to open in the next three years. Spending over £630 million in Mahahual in Mexico, the Bahamas, and Cozumel in Mexico.