Business Monday

CRUISE INDUSTRY

After rough year, Carnival hopes for calmer waters

 

The world’s largest cruise ship company has grown its business and generated profits over five years of ups and downs; executives are hoping for fewer downs in the future.

More information

Carnival at a glance

Employees worldwide: 90,000

Employees in South Florida: 2,800

Brands: 10

Ships: 100

Revenue: $15.4 billion in fiscal 2012

Profits: $1.3 billion in fiscal 2012

Market cap: $28.7 billion


hsampson@MiamiHerald.com

The result: distinct brands that carve out their own niche in the marketplace, even when they offer similar price points and itineraries.

“The companies do a really good job with having their own identity,” said cruise specialist Serkan “Seko” Sener, who owns a Cruise One franchise in Miami Beach. “The cross-branding doesn’t take place.”

Sener said even clients who are repeat cruisers don’t realize that premium brands such as Princess and Holland America are owned by Carnival Corp.

Stein Kruse, president and chief executive officer of Holland America Line Inc. and chairman of Seabourn, said that brand distinctionis completely by design.

“I have all the information that I could ever want about Princess; I can look at the financials, operation, menus, there are no secrets,” he said. “Yet I view Princess also as a competitor — not as a primary competitor that I target, but it is a competitor.”

SUBHED HERE

The massive organization also allows the company to gain efficiency from economies of scale, and to merge some behind-the-scenes operations to cut costs.

In 2011, on the heels of adding three new ships in three years, Seabourn Cruise Line moved its headquarters from Miami to Holland America Line’s headquarters in Seattle. As part of the move, Richard Meadows became Seabourn’s president while holding on to his role as Holland America’s executive vice president of marketing, sales and guest programs.

“I actually literally have two offices,” he said. The move has allowed the six-ship Seabourn unit to tap the larger line’s technology operations, logistics, accounting and other systems. As a result, Seabourn has been able to launch an improved website and customize a customer relations management platform that Holland America built. Through that technology, the brand launched a loyalty program over the summer that gives points for every day sailed.

“The beauty of having such a large company is that they can manage resources for the benefit of all their brands,” said Miami cruise expert Stewart Chiron, CEO of CruiseGuy.com. For example, he said, the company can use the same hull design across brands.

“Royal Caribbean is specifically building brand new classes of ships while Carnival was doing the same design,” said Chiron. Royal Caribbean International’s Oasis of the Seas and Allure of the Seas both hold 5,400 passengers at double occupancy, the largest cruise ships in the world, and the company recently announced that they had ordered a third.

“Carnival is a distinctly different group from their competitors,” he said. “It’s very numbers driven and they’re providing a very specific product....They’re not producing ships just to blow people away.”

The company’s brands also plan itineraries with fuels costs in mind, weighing the number of ports with how much each stop will cost. The company anticipates a 5 percent improvement in fuel use this year.

“We’re very conscious about where we go now and does the consumer see value in going there,” said Gerry Cahill, president and CEO of Carnival Cruise Lines. “That’s the basic fact of life and we live with that today.”

Zackfia said Carnival is well known — even outside the cruise industry — for its cost-cutting prowess, calling it “just kind of second to none.”

“I think they’ve tried to be cognizant of not affecting the passenger experience,” she said. “Ultimately that will affect the price passengers will be willing to pay. It’s a fine line. They’ve kind of walked that line for 10 years.”

At Carnival Cruise Lines, the company’s largest brand with 24 ships, the balancing act is trimming costs where possible while also investing $500 million in a new renovation program dubbed Fun Ship 2.0. The initiative, announced in late 2011, includes branded partnerships with game company Hasbro, comedian George Lopez, Food Network personality Guy Fieri, DJ Irie and EA Sports, as well as a host of new eateries, bars and public spaces.

The innovations are designed in many ways to attract first-time cruisers, a key market for Carnival Cruise Lines. The line has also been attracting more families, which has dropped the average age to 39 from the low 40s just a couple years ago, Cahill said.

Carnival Breeze, which also sports a new tropical, beach-inspired look, is the first new ship to offer most of the updates. But the company is rolling out many of the features on older ships. Phase One of the project will see 14 ships get the updates by 2015; the most dramatic is Carnival Destiny, which is getting a $155 million retrofit to become Carnival Sunshine when it re-launches in April.

“Carnival Breeze defined how we think of our product today,” said Cahill, who became the brand’s president and CEO in 2007. “Now the real challenge is to try to roll as much of that back to the existing fleet, as much as you can as fast as you can, without going broke.”

SUBHED HERE

Carolyn Spencer Brown, editor-in-chief of the website CruiseCritic.com, said the biggest changes at Carnival Corp. are happening at Carnival Cruise Lines.

“There’s a lot of new energy, there’s a lot of new style, new branded features, the biggest refurbishment effort we’ve ever seen with Carnival Sunshine/Destiny,” she said. “It’s really taking a leap from the Carnival of old. And that’s both good and bad.”

The good part is that the brand is refreshing an image that had grown dated. But the bad, Spencer Brown said, can be seen in Cruise Critic reviews of the Carnival Breeze that bemoan a decline in food quality and service.

Cahill said he doesn’t pay a lot of attention to review sites, which he called “very anecdotal,” but relies on surveys sent to guests after their cruise. Dining scores are very high, he said.

Christopher Cooper, a longtime Carnival Cruise Lines customer, wrote one of those Cruise Critic reviews, though he said he enjoyed the ship and all it had to offer on a recent Carnival Breeze cruise. He’s been on more than a dozen Carnival cruises since 2003.

“I think if you’re a first-time cruiser, things are going to be overwhelming and you’re going to think it’s pretty neat,” said Cooper, a 53-year-old firefighter who lives in Port St. Lucie. “If you’ve got the 15 cruises I have, the cutbacks are just coming in waves.”

Still, he singled out the RedFrog Pub (only on Carnival Breeze, Carnival Magic and Carnival Sunshine) as a new favorite and said his next cruise, in February on Carnival Glory, will suffer by comparison.

“There is no such thing as a bad cruise, but it’s not going to be to that level,” he said.

On a recent Saturday, new passengers were discovering the island-themed pub, where bartenders snapped pictures to display on a screen and suggested cocktails in a $19.95 oversized “fish bowl” glass as a beverage option.

Des Moines resident Keith Moeller, 31, got a Long Island iced tea with a Caribbean twist and reflected on what prompted him, his wife and 81 of their friends to vacation with Carnival.

Using a word very important to the cruise line, he said: “It’s funner.”

Read more Business Monday stories from the Miami Herald

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Videos

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category