Starting the cruise industry was the easy part. But staying on top? That’s where the waters get murky, Norwegian Cruise Line will tell you.
Depending on the decade, Norwegian has either been coming up with concepts so innovative that it redefined the cruise industry, or sailing through a minefield of disaster. There rarely has been an in between.
In a way, doing business at the extremes came with the job title of pioneer. Norwegian launched the modern cruise industry exactly 50 years ago Monday, making its name as a risk taker and a game changer. Today, Norwegian is the No. 3 cruise line in the world in terms of capacity, with a presence that continues to grow. Its ships, among the largest in the world, appeal to middle-class travelers who value vacations with flexible options.
For whatever reason, [Norwegian] has come up with some of the best ideas in the business. And then for whatever reason, they’ve made some of the biggest mistakes in the business.
Mike Driscoll, editor of trade publication Cruise Week
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But that wasn’t the case in 1966, when Norwegian was launched. Until then, cruising was mainly a form of transportation, not a vacation option, that often catered to starlets and presidents. It was on a decline, threatened by the growth of the airline industry.
Norwegian’s founders Knut Kloster Sr., a Norwegian-born shipping magnate (hence the cruise line name), and Israel-born businessman Ted Arison set out with big dreams to create a cruise line for the middle-class traveler who wanted to vacation on a ship. (Arison left in 1972 to form Carnival Cruise Line.)
In a 1993 Miami Herald article, former PortMiami director Carmen Lunetta recalled a 1968 meeting with Kloster in a then-unassuming port without a single cruise terminal. Norwegian Caribbean Line, as it was then named, was 2 years old. Miami’s port was mostly a flat slab of limestone.
When Kloster looked at the utilitarian cargo harbor, he saw potential. “He wanted five terminals and he wanted the first one in the fall, and it was already spring,” Lunetta told the Herald.
Kloster got his terminals. He got his fleet of four new 800-passenger ships, all within three years. And PortMiami got its start as the cruise industry’s top port, a position it still holds today.
14 Number of ships Norwegian Cruise Line has today
Despite ownership and management changes, boldness has remained a Norwegian hallmark. Often, that pioneering spirit has pushed the horizons, bringing the industry along in its wake. At other times, Norwegian’s daring has fallen far short, leading to loss and near-financial ruin.
“For whatever reason, [the line] has come up with some of the best ideas in the business,” said Mike Driscoll, editor of trade publication Cruise Week. “And then for whatever reason, they’ve made some of the biggest mistakes in the business.”
At 50, Norwegian finds itself on a virtuous course, ballasted by equal parts of daring and experience. Its fleet boasts 14 ships that carry 2 million passengers a year, with three more ships on order, including one for a new venture in China.
The idea that changed cruising
Innovation has defined the cruise line’s personality, said Andy Stuart, a 28-year NCL veteran who is now its president and CEO.
In 1977, when other cruise companies were visiting existing Caribbean ports, Norwegian purchased a private Bahamian island, transforming it into Great Stirrup Cay, a beach haven accessible only to Norwegian passengers. Other cruise companies followed course — but not until the 1990s.
“Now you got Disney [Cruise Line], you got Princess [Cruises], all of them have it,” said Uf Tukel, co-founder of Delray Beach-based WMPH Vacations and iCruise.com. “That level of innovation, they did that first at a time when the cruise industry [had] this stigma of tradition.”
In 2007, Norwegian brought bowling aboard. In borrowing from the hotel-within-a-hotel concept popularized in Las Vegas, Norwegian introduced what is now called The Haven in 2010, a private ship-within-a-ship featuring luxury suites and a private pool that now appears on every new Norwegian ship. On the same ship, the Norwegian Epic, it also introduced a second ship-within-a-ship, this one a series of single cabins built around a private lounge.
On ‘American Idol,’ if anyone was truly awful what would Simon [Cowell] say? He would say you belong on a cruise ship, which was just irritating and annoying. We wanted to break that view that because it was on a cruise ship, it had to be second rate.
Andy Stuart, president of Norwegian Cruise Line
All have been followed, in one fashion or another, by other lines. But Norwegian’s bottom of the ninth, bases loaded, walk-off grand slam was freestyle cruising, the idea that changed the cruise industry.
For decades, cruises offered set dining and entertainment schedules, with early and late seating times at assigned tables. In 2000, Norwegian bucked convention by allowing guests to dine in the main dining room when they wanted with whomever they wanted and adding additional restaurants on the ships.
In May 2000, the team behind freestyle cruising, led by now-president Stuart, wrote to the guests on the then-new, 2,004-passenger Norwegian Sky to let them know about this revolutionary option.
“There was a riot on the ship,” Stuart said. “Everyone said, ‘We bought for the first and second dining seating, that’s what we chose.’ So we were like, ‘Oh, God.’”
The next week, the message was tweaked to offer the more structured dining times as well as the flexible option.
“And all of a sudden people were like, ‘OK, that sounds good,’” Stuart said. “They didn’t know [flexibility] was what they wanted in some cases. When positioned to them the right way, they may have started at the 6:30 [p.m.] seating for Monday, Tuesday, but by Wednesday they’d met someone at the pool or the bar and said, ‘Let’s have dinner’... so that’s really how it was born.”
The effect was cataclysmic.
Competitors Carnival Cruise Line and Royal Caribbean International unveiled their own versions under names Your Choice and My Time and My Family Time, respectively. Princess Cruises introduced Anytime; Celebrity Cruises’ version was called Select; and Holland America Line went with As You Wish. Different names, similar approach.
Freestyle cruising changed the way cruise ships were built after 2000. Its popularity inspired other cruise lines to offer flexible dining and entertainment options in the evenings.
“It completely revolutionized evenings on cruises,” said Carolyn Spencer Brown, editor-in-chief of CruiseCritic.com. “Because they shook up the dining, then they had to shake up the entertainment because all entertainment was tagged to early and late dining.”
Thereafter, the cruise industry’s focus moved to consumer choice. Subsequent Norwegian ships, beginning with the Norwegian Sun and Star in 2001, were built with three main dining rooms, instead of just one large one. Each new vessel would have upwards of about a dozen additional restaurants. Twice-nightly shows disappeared. In their place: genres of entertainment, from Broadway productions to Cirque du Soleil dinner-and-a-show productions to comedy shows.
“On ‘American Idol,’ if anyone was truly awful what would Simon [Cowell] say? He would say you belong on a cruise ship, which was just irritating and annoying,” Stuart said. “We wanted to break that view that because it was on a cruise ship, it had to be second rate. And now I do believe people pick a genre of entertainment they are going to see in the same way they pick steak, or French or Italian.”
But some new concepts required significant course correction.
A 2003 initiative to bring inter-island cruising to Hawaii touted as a major innovation was met with poor reviews. Under the Jones Act of 1920, passenger ships that sail solely within U.S. waters must carry U.S. crew, among other conditions. (This is why most cruises with U.S. ports also sail to the Bahamas or other foreign ports.) But U.S. workers were not accustomed to the round-the-clock schedules expected on board, and passengers complained about service. Cruise officials found the costs of paying a U.S. worker higher than expected. And the ships weren’t allowed to operate onboard casinos, cutting out a key revenue source.
[We] definitely underestimated the complexity of building [the Hawaii] business. And so it was a brilliant idea not executed as well as it could have been.
Andy Stuart, president of Norwegian Cruise Line
To make matters worse, the Pride of America, a ship the line was building for Hawaiian sailings, sank at the Lloyd Werft shipyard in Bremerhaven, Germany, just seven months before its expected 2004 launch. Norwegian’s new gamble ended 36 feet under water in Europe.
“It exacerbated the kickoff to the [Hawaii] project,” Stuart said. “[We] definitely underestimated the complexity of building that business. And so it was a brilliant idea not executed as well as it could have been.”
The 2,186-passenger Pride of America eventually was rebuilt and sent to Hawaii, along with two other ships.
“I was on the first Pride of America sailing and I couldn’t believe it,” Driscoll said. “You got onto the ship and the beds weren’t made when you went to bed at night. I enjoyed the bartenders because they were Americans, we could talk sports, but I wouldn’t get my drinks.”
Eventually Norwegian found its sweet spot in Hawaii, scaling back from three ships to just one and properly training its American crew. Stuart said the ship generates the highest pricing across the cruise line’s 14-ship fleet.
“One of our biggest products we sell all the time is Hawaii and for us that’s just been an absolute home run,” said Tukel of MWPH Vacations.
‘It’s definitely a survivor’
While Norwegian has righted its Hawaii operation, other initiatives simply had to be abandoned.
Following a decade of success, Norwegian bought the legendary SS France in the late 1970s from a Saudi oil sheik for $18 million. With nearly 2,000 passengers, the 1960s ocean liner was a rarity. Norwegian poured $100 million into renovations and rechristened it the SS Norway. Week-long sailings ranged between $870 and $2,280 in the early 1980s, about double what a voyage on a new cruise ship costs today when adjusted for inflation.
By then, Norwegian faced competition from Royal Caribbean Cruise Line (now Royal Caribbean International) and Carnival Cruise Line. Both offered crisp new ships. Norwegian, with its aging fleet, began to falter.
“Having been on the Norway, I found it an interesting ship but I wouldn’t even use the word classic. It was just old,” Driscoll said. “And people wanted new ships.”
$100 million Amount Norwegian spent to renovate the SS Norway, a ship that eventually experienced a boiler explosion that killed eight crew members and injured more than a dozen others
The Norway experienced power outages at sea that brought another $15 million in repairs. That investment would prevent Norwegian from building a new ship until 1988.
Other challenges started piling up: Acquisitions of two other cruise brands proved to be unprofitable; eventually Norwegian scuttled them. Company management was unstable, bringing nearly a dozen new presidents in a 15-year span. By the mid-1990s, the cruise line faced $1 billion in debt and teetered on the verge of bankruptcy.
But Norwegian restructured its debt and brought in new management.
“It’s definitely a survivor,” said Spencer Brown of CruiseCritic.com.
It also fended off a takeover effort by Carnival and instead was acquired by Star Cruises (now Genting Hong Kong Limited) in early 2000. The new parent company gave the financial boost it needed to build new ships with new amenities.
What Norwegian Cruise Line doesn’t get enough credit for is what an innovative company they are and how well they’ve been able to reinvent themselves in different positions in their business.
Uf Tukel, co-founder of WMPH Vacations
“What Norwegian Cruise Line doesn’t get enough credit for is what an innovative company they are and how well they’ve been able to reinvent themselves in different positions in their business,” said Tukel of WMPH Vacations.
Norwegian tried ideas large and small to find success, such as going after the honeymoon market — something the rest of the industry hadn’t yet tapped into — with ads in bridal magazines, Tukel said. One such ad roped in Tukel’s wife, Sandy, on a buy-one, get-one couples cruise aboard Norwegian’s Starward in 1990.
“I loved it to so much, I quit my job and started selling cruises,” Tukel said. He has been in the business 26 years.
Finding its voice
Norwegian’s comeback kicked in full throttle in 2010, with the debut of the aptly named, 4,100-passenger Norwegian Epic.
The ship exemplifies everything Norwegian wanted its brand to deliver, but had fallen short of in the decades past. Epic debuted with 23 restaurants (but no main dining room), high-profile acts and the first ice bar at sea.
The ship was closely followed by the Norwegian Breakaway, Getaway and Escape, each with similar amenities and each a reminder that Norwegian had found its way as a cruise line that could deliver on guests’ expectations: options, destinations and value.
“Right now they have a very bright future,” thanks in part to the new ships and to new management, said Teijo Niemelä, editor and publisher of Cruise Business Review.
As someone in the business since the ’80s, they have always been the most interesting by far in the trade, the most interesting company to cover. It’s 50 years of perseverance.
Mike Driscoll, editor of trade publication Cruise Week
In 2013, the company went public. The next year, it paid more than $3 billion to acquire Prestige Cruises International and its cruise lines Oceania Cruises and luxury Regent Seven Seas Cruises. The merger created a larger global navigation chart for Norwegian, which primarily sailed in the Caribbean, Alaska and Europe. Oceania and Regent visit areas as remote as the Seychelles in east Africa and French Polynesia. The cruise lines came under the umbrella of parent company Norwegian Cruise Line Holdings with former Oceania president Frank Del Rio at the helm.
“They are not just tagging along as the cheaper version of whatever else is out there,” Driscoll said. “They really do have the chance to be a leader again.”
To do that, Norwegian will lean on what has worked for it in the past.
Earlier this fall, Norwegian launched Harvest Caye off the southern coast of Belize, a new private island with an environmental focus featuring manatee observation tours and visits to see endangered scarlet macaws and toucans. No jet skis will be allowed in the waterways, but guests can combine their trip with a visit to mainland Belize.
Norwegian has three new ships planned, including custom ships for Alaska and China, is going to Cuba next year and just debuted a new private island, Harvest Caye.
Stuart frames the Harvest Caye experience as increasing guest options — another example, he believes, of the line’s goal to advance the guest experience by predicting what travelers want before they realize they want it.
Harvest Caye isn’t Norwegian’s only new move. The line’s new 4,000-passenger Norwegian Bliss, designed specifically for Alaska, will launch in June 2018. The company was just approved to take the largest American cruise ship Cuba has ever seen into Havana Harbor. And like other cruise lines, it has set its sights on China, beginning with a tailor-made ship for that market, the Norwegian Joy. Some experts call it the best ship for the Chinese traveler because of personalized features, such as a race track, a large casino and a smaller pool deck. The ship launches next year.
“The acceptance of Norwegian right now is the highest that it’s been in 50 years,” Driscoll said. “Now every major group has them on their list. In years past, they wouldn’t even be there...
“As someone in the business since the ’80s, they have always been the most interesting by far in the trade, the most interesting company to cover,” he said. “It’s 50 years of perseverance. It’s a different type of anniversary than any in this business.”
Norwegian Cruise Line
Current fleet and capacity: 14 ships with a capacity, at double occupancy, of nearly 40,000. The cruise line sails 2 million guests a year.
Total ports visited this year: 189
Number of global offices: 13
Upcoming ships: Norwegian Joy, Norwegian Bliss and an unnamed Breakaway Plus class vessel
Market share: 13 percent of the North American share, among 28 cruise lines
Revenues and profits through third quarter: For parent company Norwegian Cruise Lines Holdings (which includes Oceania Cruises and Regent Seven Seas Cruises): Adjusted earnings per share grew 20 percent and was $1.62. It was the 33rd consecutive quarter of adjusted earnings (before interest, tax, depreciation and amortization) growth, with growth of 22 percent to $547 million from $448 million.
Stock price: Parent company Norwegian Cruise Line Holdings’ stock closed at $44.13 Friday