There are 24 cruise ships under construction or on order ( or option or letter of intent) for deliveries in 2005 through 2009, with an estimated building value of nearly $12 billion.

The latest addition is Royal Caribbean Cruises' announcement that it has signed a letter of intent for a third Freedom-class ship with Aker Finnyards

Royal Caribbean estimated that the cost of the third ship in the series will be approximately $230,000 per berth, which translates into $825 million for the 3,600-passenger vessel.

Commented Richard Fain, CEO and chairman: "We have said all along that the continued success of our brands will depend on the steady, sustained growth of our fleet." Fain's comment is largely echoed by the other major brands.

Carnival Corporation is expected to place orders soon for its long anticipated Pinnacle Project - which will be ships in the 200,000-ton range - according to Fincantieri.

MSC Cruises is also expected to order more ships, while Disney Cruise Line is the unknown factor. Internal issues are said to have derailed the company's cruise plans which had been moving along with designs for a new generation of ships. Whether Disney will get back on track seems to depend on whether its cruise line is considered "core enough" to the company's business.

Exchange Rates

Not long ago, the rising value of the euro versus the dollar made newbuildings prohibitively expensive, according to most of the U.S.-based cruise companies. But after a while, orders started to materialize anyway. Was the exchange rate a convenient excuse to postpone placing new orders - allowing the market some time to absorb all the capacity from the recent years? When Royal Caribbean placed the order for the first of its Freedom-class ships, the exchange rate was $1.18. When the second order was placed, the rate was $1.21 and $1.33 for the third ship.

Royal Caribbean said previously that the first ship in the class would cost just over $200,000 per berth, which translates into a total cost of approximately $720 million. With the higher exchange rate, the cost of the second ship was estimated to be $50 million more by Cruise Industry News (CIN), and the cost has now risen another $50 million, according to Royal Caribbean.

By comparison, Royal Caribbean was able to build the Mariner of the Seas, the last of the Voyager-class, at approximately $550 million or $177,500 per berth, according to CIN's estimates.

So while the Freedom of the Seas promises to be perhaps the most spectacular of all the ships in the contemporary market category, she also carries the highest price tag.

Clearly, Royal Caribbean is counting on being able to command higher prices for its newest and largest ship as well as being able to benefit from the operating efficiencies offered by the economies of scale of the ship-class and its fleet, while bigger ships also tend to drive higher onboard spending by passengers. The Freedom class will carry 3,600 passengers on a double occupancy basis and more than 4,000 at maximum capacity, as well as 1,400 crewmembers. The question now is what price Carnival Corporation is willing to accept for its Pinnacle Project to make it competitive with Royal Caribbean's Freedom class.