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Tourist Submarine Business

Introduction to the Business of Tourist Submarines

The most successful tourist submarine operating today has gross revenues of US$1 million per month derived from a single 48-passenger submarine and associated souvenir sales. Annual net pre-tax revenue from this operation is in excess of $7 million. The profits are based on a 10-12 dive per day schedule, 330 operating days per year, a 90+% passenger load factor and a ticket price of $95. While this operation is, indeed, extraordinarily successful, it suffices to illustrate the profit potential of a tourist submarine operating business.

In any location at which a passenger submarine operates, it is notably unique in its ability to capture a significant portion of the tourist arrivals. In some island locations, over 25% of incoming tourists will enjoy the submarine experience before they depart.

Across the globe, interest in the underwater world is growing rapidly. Today, travel tourism is the world's largest single employer representing 6% of the world's population and an annual turnover of two trillion dollars. The marine leisure sector is the fastest growing segment of the travel industry, as is evidenced by the success and growth of public and private aquariums and marine parks, the cruise ship industry, seaside destination resorts, harbor and dinner cruises and sport diving.

Tourist submarines constitute the only direct experience that most people will have with the undersea world. Passengers of any age and physical condition can enjoy a comfortable and safe experience that is so unique it boasts a 95+% satisfaction level. And after having carried millions of passengers, the industry enjoys a perfect safety record without a single serious injury to any passenger.

Tourist submarines also promote environmental stewardship, for only in seeing and appreciating marine life in its natural setting can people be effectively motivated to act to protect the marine environment. And tourist submarines themselves are entirely nonpolluting, with battery powered electric thrusters that emit no hydrocarbons or other effluents. The submarines operate at low speeds, and are extraordinarily maneuverable so that they never come in contact with coral reefs or marine life. In fact, these vehicles are routinely approved to operate in the most ecologically sensitive marine parks and preserves.

The Auguste Piccard

A History of Profitability and Growth

The first tourist submarine, the Auguste Piccard , was built for the 1964 Swiss National Exhibition. The 40-passenger vehicle was capable of diving to 610 meters, and in a 16 month period the submarine carried 32,000 people to the bottom of Lake Leman. After the Exhibition, regulatory difficulties precluded the use of the submarine for passenger carrying purposes in the U.S., and the submarine later was converted to commercial application. The vehicle was quite large, with a length of 28.5 meters and a displacement of 180 tons. Notably, it is still the largest and deepest diving tourist submarine yet built.

In the mid 1970s, Japan's Kawasaki Heavy Industries executed a design for a 40-passenger tourist submarine, but the vehicle was never constructed. It was not until the advent of a company named Research Submersibles in 1983, that true passenger carrying operations were established; however, the vehicles were converted commercial submersibles with a limited seating capacity of one pilot and two observers. They plied the depths of the famed Cayman Wall, often times to as deep as 600 meters. RSL still exists today and routinely operates its Perry class submarines to the 250 meter level.

In 1984 a British Columbia based company managed by people who had worked on modifications to the Auguste Piccard , designed and built a 28-passenger tourist submarine which began operations the following year in Grand Cayman. The same company had placed two more vehicles in service by 1987, and at that time other firms began establishing operations of their own. Today, the largest single tourist submarine company has designed and constructed 12 tourist submarines with three different capacities; 28, 46- and 64-passengers. All 12 vehicles are company owned and operated and the firm builds submarines only for itself and its joint venture partners.

An independent submarine manufacturer from Finland has built a total of 14 submarines while other manufacturers have contributed smaller numbers of vessels to the industry.

Operating locations for tourist submarines include the Caribbean, the Red Sea, the Mediterranean, the South Pacific, the Atlantic, the South China Sea, the Gulf of Mexico and the Pacific Ocean. A total of 56 vehicles have been placed into operation.

Palau

Selecting an Appropriate Operating Location

Tourist submarines operate successfully in a wide variety of locations. Many of the existing businesses are situated in tropical island areas noted for water clarity and abundant marine life. Still others ply the waters around larger cities, and one tourist submarine routinely dives to the depths of Loch Ness in Scotland on a continual search for the mythical Loch Ness monster.

Water is an obvious requirement for tourist submarine operations. Ideally, the water at the dive site has an average visibility in excess of 5 meters and some marine life in the vicinity. In many cases, artificial reefs, derelict ships and planes and other items can be placed on the sea floor to attract marine life and entertain customers. For instance, a 55-meter ship and some artificial reef materials turned a desolate sand-bottomed dive site off Waikiki into a virtual oasis in a few short weeks. In Monaco, one enterprising company built a stern section of a second century Roman galleon, complete with artificial amphoras and placed it in 40 meters of water at the entrance to the harbor, along with a diving bell and an abandoned tug boat.

The key is to entertain and educate the customers for a dive duration of approximately 45 minutes.

Tourists are the next key ingredient. For instance, in order to make the operation of a 16-passenger submarine a success, a minimum of 60,000 annual tourist arrivals are required given the best industry capture ratios. In addition, the passengers should have sufficient income to purchase a ticket which will cost a minimum of $75 per adult.

The conditions surrounding the dive site are also important. Because the submarine will remain on-site, at- sea during the day, the dive site itself should be within a 20 minute boat ride from the shore in order to efficiently transport the passengers and maintain an hourly dive schedule. In addition, the surface wave conditions should be below sea state three on at least 270 days per year. Above that, and passenger transfer becomes difficult. An alternate dive site is often the solution. Currents too, are an issue and in most cases should be below one knot on the submerged route. Moreover, the water depth at the dive site should not exceed 100 meters, the maximum rated depth of the submarine.

Once a year the submarine is removed from the water for a two week annual maintenance period and classification society inspection. Access to a marine railway, crane or hoist is also a requirement.

Literally hundreds of excellent operating locations are available throughout the world.

A thorough site analysis virtually guarantees success. At U.S. Submarines we have extensive experience in analyzing prospective operating locations. Our site feasibility analysis evaluates over 240 separate factors in the following ten categories:

  • Dive Site Quality - (e.g. visibility, depth, features)
  • Dive Site Logistics - (e.g. currents, sea state)
  • Dock Site Facilities
  • Maintenance and Haul-out Facilities
  • Storm Refuge Plan
  • Passenger Facilities
  • Market Profile & Visitor Demographics
  • Maritime Law
  • Environmental Permits
  • Long Term Growth Potential
The Necessary Infrastructure

The submarine itself is the most technologically advanced and important piece of equipment that the operation owns. But in addition to the submarine and its support equipment, the operator will need a comfortable passenger transfer vessel capable of carrying twice the passenger capacity of the submarine. A small rigid bottom inflatable will also be necessary and carries the surface officer who stays in contact with the submarine via an underwater telephone. The surface officer remains on station above the submarine and keeps the area clear of surface traffic.

A passenger service dock with ticket sales area and optionally, a souvenir shop, is part of the shore facility requirement. A building that houses the air compressor, battery chargers and spare parts should be situated adjacent to the submarine's berth. At night, the submarine maintenance crew will charge the batteries for up to eight hours, recharge the high pressure air tanks, the oxygen cylinders and the carbon dioxide scrubbing compound.

Personnel requirements vary with the location and dive schedule. A single crew working a 10-hour shift can accomplish 6 dives per day. The submarine could make 8 day dives and two night dives which would require two crews per day. In general, operational staff requirements for a one-shift (6-dive) per day scenario requires 11 people.

In addition, sufficient administrative and marketing staff are necessary to effectively operate the business. In the case of a resort or ground tour operation these staff positions can often be advantageously integrated with the existing infrastructure.

Financial Considerations and Profitability

The capital expenditures inherent in the establishment of a tourist submarine operation are significant. But, yet, so is the potential return. Many of the larger tourist submarine businesses were established by several joint venture partners, while others are independently owned.

Regardless of the ownership structure, passenger submarine operators almost inevitably enjoy the support of the business community and local government. Financial support and tax holidays are often offered as incentives for implementing such a popular and high- profile business endeavor.

As an example, we'll look at the Argos, a 16-passenger tourist submarine now available. The price of the Argos, complete with its support equipment, is U.S. $1,450,000. In addition, site and business related pre-development costs would add approximately $700,000, for a total of $2,150,000.

The maximum utility of the Argos would require 12 dives per day, each with 16-passengers, on a 330 day per year schedule for an annual total passenger count of 63,000. Passenger load factors are more likely to average 65% on an 10 dive per day schedule on 300 days per year.

The ticket price is situation dependent. Tourist submarine prices range from $60 per adult passenger to $275, though the later price is for a dive to 250 meters aboard a three passenger deep submersible. The average price for a trip aboard a 48-passenger submarine diving to 50 meters is $85. The Argos is smaller in terms of overall size and number of passengers, but it offers a more personal, spacious and comfortable experience. The submarine also has the largest viewports available, and dives to 100 meters. Comparatively, the minimum adult ticket price should be $95, and the maximum approximately $150. The ticket price will inevitably be a function of demand at the chosen operating location.

Given a $95 ticket price on a 10 dive per day schedule with a 65% passenger load factor operating 300 days per year, the gross profit is approximately $2.9 million. Adding souvenir sales of 15% of gross and subtracting the cost of goods sold and commissions on ticket sales adjusts this number to $2.6 million.

Operating costs also depend on the location. An estimate of the annual operating costs for a U.S. location are approximately $900,000.

The net annual pre-tax profit for the example operation would be approximately $1.7 million.

Business Development, Technical and Training Support

U.S. Submarines, Inc. is a U.S. company located in Vero Beach, Florida. The firm was founded specifically to provide business development, technical support and marketing services to the tourist submarine and manned submersible industries. In addition, U.S. Submarines designs, engineers and constructs a line of custom built diesel electric multi-role submarines.

The management team at U.S. Submarines has been involved in over 50 submarine and submersible projects, including direct experience with 20 different tourist submarine operations. The company has been involved in every aspect of the tourist submarine business, including the design, engineering and construction of tourist submersibles, and the business planning, sea trials, crew training, start-up, pre-marketing and ongoing daily operation of the submarines themselves.

The company's President, L. Bruce Jones, is one of the world's foremost authorities on the tourist submarine industry. Mr. Jones is the Chairman of the Marine Technology Society's Manned Submersible Committee and a member of the American Bureau of Shipping's Special Committee on Undersea Vehicles. He is a member of the U.S. Coast Guard tourist submersible safety panel and coauthor of The Worldwide Tourist Submarine Industry .

U.S. Submarines is uniquely qualified to assist any individual or organization with any aspect of the operational implementation of a tourist submarine. This could include a site feasibility analysis, a comprehensive business plan, crew training, regulatory agency liaison, and even complete operational and management staffing for turn-key contract operations.

For more detailed information download The Tourist Submarine Business. (930K .PDF file)