Today, Fabled Voyages begins the conversation about how Monthly Maintenance Fees are structured, what they cover, and how those funds are allocated. Over the next few days, we will break things down to provide a general overview explaining where the money goes and why these fees are such an important part of our proposed operating model.
Monthly Maintenance Fees are essential to the ongoing operation and maintenance of the ship. They also contribute toward contingency reserves and the long-term financial stability of our operations. Without a sustainable Monthly Maintenance Fee structure, there is no sustainable operation or ongoing service.
Think of it this way, a hotel that cannot maintain room occupancy, a restaurant that cannot bring in customers, or a homeowner’s association (HOA) that cannot cover its ever-increasing maintenance and insurance costs will eventually run into trouble. A residential cruise ship is no different. The ship must generate enough income to operate, maintain its facilities, provide services, and prepare for the future.
Our proposed fee structure is built around a higher standard occupancy rate of approximately 80–85% to support ongoing operations. Fees may need to increase over time as operating costs rise due to inflation, changes in occupancy, or other factors. A higher number of Residents contributing to the Monthly Maintenance Fees can help spread those costs across more people and potentially slow the need for increased Monthly Maintenance Fees. Additionally, as new Residents join and purchase residences in the future, both residence prices and Monthly Maintenance Fees will be periodically adjusted to reflect the market and the costs of operating at that time.
To put inflation into perspective, using a standard illustrative inflation rate of 3% per year, costs would increase by nearly 16% over five years. At ten years, that increase would be approximately 34%, and over fifteen years, nearly 56%. This is a factor you cannot ignore, and we have accounted for while developing our proposed Monthly Maintenance Fee structure.
How Do We Break Down Monthly Maintenance Fees?
For simplicity and hopefully ease of understanding, we are dividing the expenses covered by Monthly Maintenance Fees into three general categories:
- Operational “Core”
- Operational “External”
- Resident Specific
Today, we are going to focus on the Operational “Core” category.
Operational “Core” Expenses
Operational “Core” expenses include the things it takes to run a cruise ship that generally do not change significantly based on the number of Residents aboard. Examples include operational crew, insurance, marketing, general onboard maintenance, and other basic costs associated with keeping the ship operating. These are relatively fixed price required expenses that do not change much from day to day. You need a captain and crew, insurance coverage, and routine maintenance whether you have 1,000 Residents and renters aboard or 2,000.
Additional Medical and Wellness Services
Another part of our proposed Operational “Core” Expenses category involves bringing additional basic medical and wellness services aboard. Our intention is to provide services that are largely subsidized by the Residents’ Monthly Maintenance Fees, for the benefit of the Residents themselves to help support the additional positions and salaries and onboard, their professional experience merits. There will be co-pays and additional material at costs for certain individual services.
With the growth of Fabled Voyages’ visions, we have already had numerous medical professionals and specialists reach out to us. While these professionals would be core-cost employees, they do not fall under essential employees under basic operation of a standard cruise ship and from a budgeting standpoint are considered additional employees we recognize may need additional incentives to attract and retain the right people. With these added services comes additional insurance and liability costs. Those expenses are also shared across the Residents through the Monthly Maintenance Fee structure.
Bringing medical professionals such as doctors and nurses aboard can be done on a contractual basis. However, we believe there is value in having Primary Care Physicians who can provide a more consistent level of everyday care. This requires a different approach to recruitment and the onboard experience, as we want Residents to have as much continuity in their care as possible.
Equally important to us is providing mental health support through therapists and a psychologist, and we don’t believe dental health should be left entirely to whatever port happens to be next on the itinerary. We will develop a small onboard dental clinic with a dentist and dental hygienists who can help address routine dental needs and support Residents’ ongoing health as conditions allow.
Planning for the Future
Another important part of the Operational “Core” category is planning for future expenses.
Setting money aside for a rainy day, an emergency, or a major project such as an engine rebuild is just as important as covering everyday operating expenses. The same applies to scheduled services such as routine dry docking, repairs, and refurbishment. Making sure we have enough money saved to cover both planned and unplanned expenses is something we have continued to reevaluate. Costs are being driven higher throughout the industry and world, and we do not want to find ourselves in a position where we have to sacrifice or simply patch a problem instead of properly addressing it.
Ensuring that we have accounted for regularly scheduled dry docking and have adequate funds for major repairs is a substantial undertaking. Our current planning considers costs in the range of $30–$50 million or more for these major periods of work, twice within a five-year period, on top of the millions a year in planned maintenance, repairs, and minor renovations.
Residents’ Monthly Maintenance Fees are intended to cover most of these costs, with additional contributions expected from rentals and other revenue-generating activities we are planning for the ship. These may include additional internet usage and high-bandwidth services, private offices, merchandise, goods sales, and other onboard offerings.
We hope this begins to give you a better understanding of how Monthly Maintenance Fees are intended to be used, what they cover, and why we have put so much thought into how they are structured.
Remember, a residential cruise ship is a little like taking a skyscraper, turning it on its side, and making it capable of moving through the ocean and operating independently from nearly all outside infrastructure for extended periods of time.
We will continue breaking down the other expense categories and looking at what goes into making a residential community at sea possible in our next article.
Fabled Voyages – Your Next Chapter Begins at Sea!