V.Ships, the world’s largest shipmanager, has secured a contract in China to handle a Cosco joint-venture cruiseship — but it is rejecting claims that it waived monthly fees to score the win.
Three other major international players lost out when V.Ships Leisure won the bidding to handle the technical and hotel management of the 69,800-gt Oriana (built 1995) when it is handed over to its new Chinese owner — Twinkle Travel Cruise International Co — in August next year.
Twinkle, the entity that purchased the ship from Carnival Corp subsidiary P&O Cruises, is 51% owned by China International Travel Service Hong Kong (CTS) and 49% by Cosco.
Rong Xiao, a Shenzhen-based investment official at CTS, confirmed that he has been working on such a cruiseship management contract but declined to comment further, pending official announcements.
A Cosco tenders website confirms the award to V.Ships.
However, sources close to the negotiations are already talking.
“If this is the way the industry is going, that the major players are giving away services for free just to get a foot in the door, then it is heading down the wrong road,” one source said.
But V.Ships responded by insisting that critics were painting a very “black and white” picture of what happened. However, it was not prepared to disclose details of its winning tender.
Runners and riders
It is understood that the contract is for two years, plus an optional 12 months. Also bidding was runner-up Columbia Cruise Services, as well as Wilhelmsen Ship Management and Bernhard Schulte Cruise Services.
Various sources close to the management contract bidding gave a similar account of events, including that the four contenders were told together about the outcome of the tender when they gathered in Xiamen recently.
They had been invited on the same day, one after the other, to discuss their bids.
“It was openly said who had offered what and it came out that V.Ships had offered management free of charge,” claimed one senior executive who, like others, declined to go on record.
“I don’t understand it. None of us are welfare organisations. We have employees to pay and offices. It is not good for your other clients who may say ‘why don’t we get the same treatment?’”
“If you offer something free of charge, most probably you are scared that if you enter a management fee you will not get the deal. I don’t know why V.Ships was so desperate.
“It is like going to a car dealer who gives you a car at no cost because he is afraid he won’t otherwise sell it.”
But Sharn Samra, V.Ships' spokeswoman and head of marketing, said it is “absolutely not the case” that the company had given the owners a freebie.
V.Ships is a company based on profit-making so it doesn’t make sense for us to be doing anything like that
“V.Ships is a company based on profit-making, so it doesn’t make sense for us to be doing anything like that,” she said.
Samra added that it was down to “interpretation” and suggested that others attending the Xiamen meeting had not listened to all of the announcement on the tender result.
Recovering costs
But other sources claimed V.Ships waived monthly management fees to gain a foothold in the Asian cruise sector, adding: “You can be dead sure V.Ships will recover the management expenses somehow.”
It is suggested this could be through commissions or purchases.
Exactly how many shipmanagement contracts the new CTS/Cosco cruiseships' joint venture may eventually generate remains unclear.
Reports from a couple of years ago talked about a Cosco cruise venture, also involving CTS, looking to acquire both secondhand and newbuildings for operations in the South China Sea.
But one observer believes the longer-term aim is to handle management itself once its has learned from third-party managers.
The CTS/Cosco Oriana deal represented possibly the first such contract to be awarded in the Chinese market, although there is unconfirmed talk that the same owner has already struck a deal for V.Ships to manage another cruiseship.
Exactly how much the CTS/Cosco contract was worth remains unclear. None of the sources revealed how much others had bid, although the spread was said to be considerable.
Introductory incentives
One manager who had a representative in the Xiamen bidding said: “I don’t know in detail what V.Ships’ offer was and whether [it was] 100% free or partly free. It would be very surprising if they have given the whole contract or the management part of it for free. Maybe they gave some freebies just to get it.”
He has seen instances in the past of a manager offering the first six months of a contract for free but hoped such tactics would not be repeated because it was important for shipmanagement to sell its services based on quality and transparency, and not just cost.
He said fees in the industry had remained “pretty static” for the past 10 years, and that they should at least track inflation in the countries where vessels are managed.
The same source speculated that V.Ships might be under pressure to show it is growing organically if talk in the market of the company eventually going for an initial public offering is said to be correct.
Meanwhile, V.Ships confirms that two cruiseships from Phoenix Reisen of Germany have been transferred to manager Bernhard Schulte because V.Ships is now American owned and consequently does not meet US sanctions regulations for trading to Cuba.
