Two weeks ago, the Villa Vie Odyssey abruptly dumped its passengers in Sihanoukville, Cambodia, 2 years into a "continuous voyage around the world" marketed to customers who wished to spend their retirement years living at sea.
Permanent residences aboard the ship had been sold for $120,000 to $440,000, with some cabins also available for rent from $3,500 a month.
Now the U.S.–based operator of the ship is saying it needs to "evaluate restructuring and recapitalization alternatives."
Translation: It ran out of cash.
On Nov. 8, reports emerged that the Odyssey has been seized by creditors while at anchor in Singapore.
Now a respected maritime expert has weighed in on three factors that he thinks make the concept of multiyear prepaid cruises financially unrealistic to begin with.
If you're ever mulling the purchase of permanent residency on any long-term around-the-world cruise, bear in mind the warnings of Sal Mercogliano, who knows a thing or two about how ships operate.
Why multiyear prepaid cruises are unlikely to be viable
Salvatore Mercogliano teaches the intricacies of marine transportation and maritime history at both the U.S. Merchant Marine Academy and at Campbell University in North Carolina, where he is chair of the Department of History, Criminal Justice, and Politics.
That pedigree should be enough for you to heed him, but he also presents YouTube's popular What's Going on with Shipping? channel (727,000 subscribers). There, Mercogliano explores, in plain talk, the latest economy-shifting developments in maritime shipping routes, from the security quagmire in the Strait of Hormuz to the skyrocketing insurance rates that are now weighing down the cost of enjoying free world trade.
"Buying a permanent residence on a ship?" Mercogliano said in a video posted on Sunday. "I mean, there's so many red flags with that, I have to tell you."
He gives three reasons why permanent residency on cruise ships is so hard to manage.
First, Mercogliano says, any ship on which you purchase a cabin will only depreciate in value as time goes by.
"This ship [the Odyssey] is 33 years old," he says. So the price of sailing aboard the vessel is "only going to get cheaper" as time goes on, eating away at the value of whatever you paid as initial fare.
Second, all ships with sound mechanical health are routinely placed in dry dock for maintenance. If the cruise company trying to sell you a permanent residence doesn't have plans to account for that mandatory travel disruption, consider that another red flag.
"You're going to dry dock a ship twice every 5 years," he warns. "So what happens when the ship dry docked?"
But the "greatest variable" that can sink prepaid long-term cruises, Mercogliano warns, is the cost of fuel.
Unless the ship's operator can somehow prepay fuel purchases to lock in a favorable rate over the lifespan of your cruise contract—a practice called hedging—then the operator will be at the mercy of changing prices.
Indeed, that's the exact pitfall that Villa Vie Residences says it fell into. The fallout from the U.S. attack on Iran pushed fuel prices far beyond what the company's prepaid fares could cover. The war in Iran killed the dream.
"Extraordinary increases in fuel costs have placed our current operating model under unsustainable financial pressure," the company announced.
If you truly want to have a multimonth lifestyle aboard a ship, Mercogliano says, it's much safer to rent a cabin by the month than to prepay long-term.
"I don't think you buy your spot," he said. "But if you rent or lease on the ship, that's a whole different thing. Because then [the cruise company] can adjust over the course of a year when rent goes up, like everyone does with homes."
It's good advice for anyone who might be tempted to retire aboard a cruise ship. It's nearly impossible to pay once for retirement travel and then forget about it. Costs never stay the same.
