How the 1% cruises

Today’s post is a departure from the usual analysis of financial topics. Instead, I’m going to talk about something that has recently intrigued me.

The setup

Santa Barbara is a tourist destination. During the summer our downtown is absolutely inundated with tourists. Locals tend to grouse a bit about all the extra people clogging “our” streets and taking “our” parking spots, but I suspect that most of them are like me – they are happy to share our little slice of paradise with visitors. I try to be a good ambassador to the tourists. if I see a group of people looking at a phone (or heaven forbid, a map!) and looking confused I ask if they need directions. I’m happy to offer suggestions on the best places to eat, fun things to do, etc.

There are many reasons people come to Santa Barbara. It has beautiful Spanish Revival architecture that’s been protected, maintained, and encouraged by the city. State Street (the main drag) is an absolutely glorious place to stroll up and down. The weather is great year round. You can spend the morning hiking in the mountains and literally 15 minutes later dip your toes into the icy blue Pacific.

All of this makes Santa Barbara a very desirable place to live, which in turn makes Santa Barbara a very EXPENSIVE place to live. Not everybody in Santa Barbara is rich, but the city certainly has more than its fair share of wealthy residents.

There’s so much money in Santa Barbara that Santa Barbarians become somewhat numb to it all.

But even I was awestruck my something I saw a few days ago.

The World

Last week one of my friends mentioned that she’d seen a cruise ship anchored off shore. Although we get 20+ cruise ships per years here in Santa Barbara I was a bit surprised, as it seemed a bit early for cruise ships to visit us.

Here’s what was docked off shore (picture courtesy of The Santa Barbara Independent):

This isn’t just any cruise ship. This is The World.

The ship is pretty unremarkable from the outside. It’s not especially large or especially new. But it is exceptional in one way – it’s the largest privately owned residential yacht in the world. It’s a collection of 165 privately owned residences. Each owner must be at least a pentamillionaire (net worth of >$5M), although I would suspect most people are much wealthier.

And even if you have the money you can’t just buy one of the residences and move it. Every prospective owner/resident must go through an extensive vetting process. They specifically do NOT want famous or controversial people. The existing residents don’t want to deal with paparazzi or the press. Neither the Kardashians nor Oprah would be allowed to buy a residence.

The ship itself has all the amenities of a typical cruise ship – exercise facilities, entertainment options, cocktail bars, multiple restaurants, etc. plus a grocery store and deli.

The condos vary from 290 sq ft studios:

to 3 bedroom, 3,000+ sq ft palaces:

In effect, the ship is like a floating co-op – you own your residence but pay a monthly HOA/maintenance charge. This “maintenance fee” is based on the square footage of each residence and can range from $6k to upwards of $20k…PER MONTH. This fee covers crew fees, fuel for the ship, maintenance of common areas, etc.

This is clearly an expensive way to travel. Is it worth it?

Life aboard The World

It might be ridiculously expensive, but I have to admit, life on board The World sounds pretty awesome. While you aren’t likely to get any of the cruise ship staples like poolside “Hairiest Chest” competitions or nighttime karaoke competitions, the ship has a very well thought-out enrichment program. 3-4 times a year the management company will bring aboard professors, tour guides, and other experts to hold lectures and seminars about an upcoming destination.

The enrichment program would be the most interesting part of the experience for me. I love learning new things. I find that the more I know about a destination the more I enjoy visiting it. Being surrounded by a bunch of like-minded people would be a big benefit of living and traveling aboard The World. Imagine spending a week at sea attending seminars on Greek history and philosophy, then visiting the Parthenon. It would be a much more enriching experience then the normal tourist’s experience of walking around for an hour or two trying to remember if the Parthenon’s columns are Corinthian or Doric.

You get all the benefits of being able to see the world while being able to enjoy the stability of having your own residence. You get to decorate your condo however you want – your furniture, your art on the walls, you can keep your clothes in the closet, etc. If you leave for a few months everything will be in exactly the same place when you return.

You are in each port city for 3-5 days, on average. This is much longer than a traditional cruise ship would spend in any given port (usually ~12 hours). That’s enough time to actually start to get to know the city. You can hit a few museums, enjoy some local cuisine, find out where the locals drink, and figure out what makes each location unique.

Another thing that would make living aboard The World enjoyable is that you’d be surrounded by like-minded people. Everybody aboard would, by definition, have a love of travel. Everybody is successful (or had successful parents that they inherited their money from). With 165 other residences there would probably be ~300 people total residents. At any given time you’d probably have 150-200 people on board. Of those, there would probably be 20-30 people you’d really enjoy spending time with and become friends with. Imagine being on a perpetual cruise with 20-30 friends – you’d always have somebody to hang out with. If your spouse is tired and wants to go to sleep you’ll always have other people to hang out with.

And, as my wife pointed out, it’s almost certain that every resident has at least one other home. You would likely spend some of your time handing with your family and friends at “home”, then travel out to meet The World at some port and cruise around for a month or two, then head back home for while.

For rich people who can’t afford a private yacht

I think The World occupies an interesting niche. Clearly you have to rich to be able to live onboard (at least $5M of net worth, but likely much higher). However, if you’re REALLY rich and want to cruise then you likely have a private yacht. If you’re mass affluent then you just take upscale cruises (like Crystal Cruises or Regent Seven Seas).

Owning your own yacht is a pretty expensive proposition, as you have to buy the yacht, then pay for all upkeep, the crew, fuel, insurance, etc. These costs are largely fixed regardless of if you life about the yacht full-time or only spend a few weeks per year on it.

The World is an interesting solution for the very rich who enjoy cruising, can’t afford a private yacht, but want a more upscale experience than a regular cruise. You get a wide variety of travel destinations and the ability to come and go as you please. The fixed costs (fuel, crew, etc.) for The World are significantly higher than they’d be for a private yacht, are much less expensive per person. In a way, I guess you could argue that The World is a positively thrifty experience compared to owning your own private yacht.

The World seems like the sort of thing that would be fun for a few years. You could retire, buy a residence on The World, live and travel for 3-5 years, then sell and move back to your normal home for the rest of your retirement.

 

What do you think? Would you want to live aboard a cruise ship full-time? Do you think the experience aboard The World is worth the cost?

 

BTW, if any of my readers are coming to Santa Barbara please let me know – I’d be happy show you around town!

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