Saga today confirmed plans for a new cruise ship plus and option for a second in a move described as “transformational” for the business.

The over 50s group has agreed a deal with the Meyer Werft shipyard in Germany to build a new all-balcony cabin ship for delivery in 2019 with an option for another to be delivered in 2021. The value of the order was not disclosed.

The new 55,900-ton vessel is expected to have 540 suites and cabins (pictured, artist’s impression) each with a balcony. Around 15% of cabins will be designed for single occupancy.

There will be single sitting dining throughout a range of restaurants as well as a variety of bars, speciality restaurants and al-fresco dining options. There will also be outdoor and indoor swimming pools, a spa, saunas, treatment rooms and beauty salon.

Research commissioned by Saga into the UK’s over 50s spending on travel and tourism, found that spending on cruising is expected to increase by 43% to £2.2 billion by 2020.

This compares £1.65 billion in 2014 out of a total over 50s spend of £41 billion on travel and tourism.  Almost a third (32%) of over-50s in work said they were planning to increase their spending on cruises after retirement.

Saga Cruises chief executive, Robin Shaw, said: “Our plan for the first of our new modern and elegant cruise liners is sure to delight our existing passengers and we hope it will entice new passengers to cruise with us.

“We will retain an intimate small-ship feel, for fewer than 1,000 passengers, a high crew to customer ratio, great public spaces and entertainment facilities and dining can be accommodated in a single sitting.”

News of the ship order came as the company revealed that Saga Cruises generated revenue of £42.8 million in the six months to July, a 1.2% drop year-on-year with the gross profit of £7.8 million, down £800,000.

“This reflects the slightly lower revenues and increased expenditure on repairs and maintenance of the ships. The group expects profits from the cruising business to grow for the year as a whole,” Saga said.

Saga’s overall travel business recorded earnings [EBITDA] for the half year, 11.2% up to £16.6 million over the same period in 2014.

The acquisition of Destinology in August last year contributed to the travel division’s strong growth in revenue and profits. 

The holidays arm, which also includes Saga Holidays and Titan Travel, saw revenue rise by 25.3% to £166.9 million with a gross profit up by 22.3% to £35.6 million.

The growth was driven by a shift in product mix to higher value long‐haul holidays and sales of the new third party cruise product, Saga said.

Group chief executive, Lance Batchelor, said: “Within our travel business, we have taken the decision to enhance our excellent cruising business by updating our shipping capacity.

“After a rigorous selection process, we have chosen the Meyer Werft shipyard in Germany and signed a memorandum of agreement with them for delivery of a new, purpose built ship in 2019 and an option for a second ship to be delivered in 2021.

“This is a significant decision for the Group but there is a very clear and compelling case for it.

“Strategically, cruising is a growth market and lies at the heart of the Saga brand, playing a key role in driving our reputation for service. It is therefore a business to which we are committed for the long term.

“Financially, it is an investment in an area where we have a proven track record, where demand is outstripping supply for our offering and where new ships will be transformative for the operating efficiency and profitability of our cruising business.”

Batchelor said: “The tour operating business is delivering on a number of strategic initiatives to drive growth through the business, including: new distribution channels; driving our digital presence and enhancing our customer’s digital journey; continuing to connect the various brands within the business into the Saga database; and developing new products.

“Within our cruise operation, we continue to make improvements and investments to ensure that customer satisfaction levels are maintained at the highest levels.

“Currently, 98% of our cruise customers rate their experience as excellent or good and, during August of this year, both the Saga Sapphire and Saga Pearl II achieved their best ever overall customer feedback scores.”

He added: “The cruise operation remains at the heart of the Saga brand, continually demonstrating the service excellence and value that Saga is renowned for.

“The decision we have made to invest in our shipping capacity will be transformational for the cruise business and for our cruise customers.

“The precise details of the new ships will be finalised over the coming months and the result will be a significant upgrade while retaining the traditional features our customers cherish.

“This means that all cabins will have balconies but we will still provide an intimate small‐ship feel – under 1,000 passengers – a high crew‐to‐customer ratio and great public spaces and entertainment facilities.

“We have made good progress again in the first half of the year in travel and in the year to date our reservation levels for departures in holidays and cruising for the remainder of this financial year and for the financial year ending 31 January 2017 are very encouraging.”