Challenging the Cruise Industry: 2007 and Beyond

| March 13, 2007

A veteran cruise executive and innovator explains how the industry can make itself even better.

Since 1973, I have been an insider working at the highest levels of some top cruise lines. I have also been an outsider and entrepreneur, starting my own cruise line from scratch -- and not just surviving, but thriving by finding ways to innovate and compete in this tough but challenging business.

I love the cruise industry, but I can't help thinking of ways it could be doing better. I want to express make some suggestions for everyone involved in this business that just might help take cruising beyond its current position in tourism to the next level.

But first, let me explain my qualifications to take on such a task.

Working for the cruise lines I began my career with Norwegian Caribbean Line in 1973, the precursor to Norwegian Cruise Line (NCL). At the time, NCL had four ships, making it the largest cruise line operating out of the Miami area. Ted Arison, the man who started NCL with Norwegian partners, was just getting Carnival Cruise Lines off the ground with its first ship, the Mardi Gras. My job titles included director of sales, director of marketing, then vice-president of marketing, sales and passenger service; and finally executive vp in charge of U.S. operations. Those years at NCL (1973-1979) were some of the most exciting and important in the history of the cruise industry.

While at Norwegian Caribbean, using the M/S Southward, I created the first western Caribbean cruise itinerary in 1975. The 1,000 passengers we brought to the Yucatan each week virtually opened up Mexico's Yucatan Peninsula for tourism (this was before Cancun blossomed into a mega-resort) . We had Grand Cayman all to ourselves -- quite a change from the three to five mega-ships that now call there almost every day.

With the Sunward II, I developed the first Bahamian "out-island" cruise concept, the precursor to the private islands most large cruise lines have today. Creating these "beach party" stops brought three- and four-day cruising to the younger generations, so we made the industry's first commitment to casual dining, with buffets for breakfast and lunch every day. Water sports, especially snorkeling and diving, also became part of the cruise experience for the first time.

One of my most significant accomplishments was convincing NCL to buy the SS France. The ship was an imposing 2,000-passenger, 70,000 gross ton ocean liner more than 1000 feet long, at a time when the average Miami cruise ship barely reached half that size and capacity. I urged NCL's owners to convert her into the SS Norway and put her on regular Caribbean cruises. Putting a ship this large into the Miami cruise market was an eye-opening event, and the Norway remained one of the most popular Caribbean cruise ships for a number of years. This proved the industry was ready to support large-capacity ships -- a notion soon followed by competitors like Royal Caribbean and Carnival. It also made the vessel the destination for the first time, a concept that has become the driving force behind today's super mega-liners.

Starting my own cruise line By 1983 the urge to start my own cruise line had a hold on me. By this time, Royal Caribbean and Carnival were innovating in their own ways. My personal challenge was to figure out how to create a new line that could survive without having to compete with the others head to head.

I started Premier Cruise Lines,also known as The Big Red Boats -- a line that sadly is no longer in existence. Many mainstream products found on today's cruises were first introduced at Premeier in the 1980s. This was especially true in the family cruise market. Our first ship was the SS Royale, and from our first month operating cruises we were making money.

The key was differentiation. For example, I opted for Port Canaveral as our home port. My colleagues thought I was crazy, but I saw the potential to reach a much larger drive-to audience than Miami could attract, and I liked being the only cruise line in town. We also had proximity to Orlando, where Walt Disney World had become the world's most popular vacation destination. In our second year, we contracted with them to become the "Official Cruise Line of Walt Disney World." We bought a second ship, the Oceanic, and she was christened by Minnie Mouse. It made the cover of the New York Times.

Premier Cruise Lines became the most successful tour operator in Florida, selling the most Disney tickets, using the most hotel rooms and renting the most cars. For a while, Premier was the leading three- and four-day cruise line. We added the a third ship, the Atlantic, in January 1989; and the Majestic in June 1989. During those years, we were the first cruise line to commit to family cruising year-round, with a staff of 30+ youth counselors onboard and programs for kids divided by age groups. We developed the first children's menus and provided free onboard babysitting. And the big draw: We had Disney characters in costume on board.

Moving on with life After I left Premier in 1991, I made a deal with Italy's Costa Line (This was before it was purchased by Carnival) to take some of their older ships and start a new operation called "American Family Cruises." But the management styles of myself and Costa clashed and we agreed to split the companies, which in the end killed the whole joint venture. My most recent position was president of Delta Queen Steamboat Company from 2003 to 2006, where I worked in the small ship segment for the first time.

While I'm playing a lot of golf these days, I still want to contribute in some way to the cruise and travel industry for years to come. I guess I have been a bit of a renegade, but I am definitely entrepreneurial, with a good feel for what will or will not work. I am not afraid to speak my mind and try the unusual. So when I was asked to write this article about the state of the cruise industry today, how could I resist?

Challenging the cruise industry Though they are supposed to be fun, vacation choices are actually one of the most personal and difficult decisions for consumers. It's a simple decision for a lot of people -- "drive to Aunt Mary's," for example. But these days, most people want more from their limited vacation time. They crave experiences that are unique and memorable.

A vacation becomes a challenge when it requires a great deal of planning, especially a family vacation. So it is no coincidence that cruising has become so popular. Its success is largely due to its ability to provide a risk-free vacation. There is always something for everyone to do on a ship, so you don't have to battle boredom. You don't have to seek out a different restaurant every night. (Although if you want to try something different for dinner, that option is now available to you on most ships.) The itinerary is already laid out for you once you choose a cruise, and rarely subject to change on a whim. Even the "what clothes to bring" decision is made in the guidelines from the cruise line.

This formula for successful vacations has resulted in the construction of many new mega-liners, giving the consumer a broad selection of vessels going to the most popular ports at affordable prices.

Yes, the smaller, more intimate vessels have been disappearing from the same routes during the past 10 years, but those who prefer a smaller ship can still find them on lesser-traveled itineraries, and the fact that there are small ships on order shows that is growing for this type of experience.

The cruise industry still provides one of the best values per dollar spent, and the ships themselves are quite impressive in style, design and structure. But something is missing today that was a key driving influence in the industry's growth from the 1970s into the 90s.

What is missing in today's cruise market?The industry is driven today by size, volume, numbers, and stock values. Given this growing emphasis on size and profitability, the major cruise lines have become consumed with the physical structure of the ship. These lines seem to think that if you surround customers with an eye-dazzling environment, they won't notice what has gone missing � a commitment to "vacation experience product development."

True, the public spaces and cabins on today's ships are modern, well thought out and beautiful. But does that alone create an outstanding travel experience? Not when every cruise ship has the same formula. Why are they all flogging the same basic premise -- beautiful ships at the expense of a personalized onboard experience that differentiates one ship from another?

While the focus has grown exponentially on creating more dazzling ships (known as "hardware" in the business), almost nothing has been done lately to improve the "software." For example, stage shows are now presented in multi-million dollar theaters with lasers and pyrotechnics. But when was the last time a cruise line announced it was seeking better talent for its shows? Celebrity's experiment with Cirque Du Soleil is one exception: Why didn't it work out?

What can the cruise lines do? Premier Cruises did not have the most beautiful ships, but there are people who will tell you how much they miss the "Big Red Boats." Why? Each ship had its own personality, and we created experiences for the passengers, not just an onboard environment. With our beach parties and emphasis on onboard personalities, we provided a total immersion in the cruise experience that is missing from many cruise ships today. Kids were really welcome for the first time.

Many of today's shipboard experiences simply duplicate what a person can do at home. We have ships with rock-climbing walls, bowling alleys, miniature golf, etc. But are those unique in any way except for the fact that they are on a ship? No: You can find most of those things at the local mall, so you are back to the car trip to Aunt Mary's.

Now, there are exceptions. I admire what NCL is doing in Hawaii, combining port-intensive itineraries with a night-time sail-by of a live volcano and the Napali Coastline. Add in NCL's Freestyle Cruising and you have a unique product. It is too bad for NCL that the Hawaii market is proving so difficult to manage on a fiscal basis.

I admire what Carnival did with the mega-ship Carnival Conquest -- basing it in New Orleans and giving it a distinctive Creole and French theme onboard. Even the stage shows were on-theme. It is too bad Katrina caused them to move the ship to a different home port.

I also admire the investments being made in places like the Turks & Caicos, and some projects on the Yucatan coast, where new port experiences are being developed.

Ports of call Speaking of ports, the examples I cited above are the exception. In most cases a cruise vacation consists of two distinct and mostly unrelated elements: the ship and the ports. Ironically, the lines the do the best jobs of tying them together are the ones that change itineraries the most � the luxury lines. But how about more varied port development and building onboard ship experiences based on those specific itineraries?

Dropping several thousand passengers in a typical Caribbean port is not a good thing. Having it done by three to five mega-ships at one time is no fun for the passenger at all. They sell a lot of tours and a few local ground operators get very wealthy, but is it a good experience for the customer? Hardly. The ports on most cruises have become almost incidental, a secondary consideration to the ship itself. What happens after the cruiser has seen the ship, and the same ports, time after time?

There are dozens of 2000+ passenger ships all on eastern/western/southern Caribbean itineraries, mostly seven days long, mostly visiting the same ports they have for 30 years. There have been a few port development projects in Mexico and the lower Bahamas, but I always get the feeling that it's because the lines have to do it, not because they want to.

It took several larger companies 20+ years to realize that cruising to less populated out-islands and remote locations is a good thing. Most did not want to spend the time or the money to develop these destinations.

They are changing, but very slowly. The mainstream cruise operators have many people dedicated to making sure the port experiences they offer work well and are profitable. But do any of them have staff dedicated to developing new destinations and experiences without restriction? These people should use pure innovation to invent new land-based cruise offerings, and then check profitability. If one in 10 new concepts proved feasible and profitable, we would be ahead of the game.

Onboard activity and entertainment There are lots more public rooms and lounges on the big new ships, but the experience is still basically the same as it has been for many years. How about coming up with new entertainment concepts, throwing the Baby Boomers a bone and playing to their appreciation for the new and different. Someone is going to do this and make a lot of money.

NCL is trying with its "Freestyle" dining concept, and I applaud them for that. But it needs more development and a commitment to all the opportunities of a "casual environment" onboard -- not just where you eat and when. When is the last time someone said they chose a particular cruise for its onboard entertainment? If a cruise line rethought this activity rather than just following the pack, it could gain a significant advantage over the competition.

I mentioned that a closer tie between the ship and the itinerary would be a good thing, as it gives people a reason to try different ships based on itinerary alone. Onboard enrichment lectures based on the destinations never fail to please, but the lack of them is pervasive. Most cruisers see a port shopping talk for what it really is: paid commercials for specific stores on the next island. And what about art auctions? What does shopping for a limited-edition print have to do with a vacation in the Caribbean? While they rope in a few takers for these art shows on every cruise, how many cruisers are they turning off with them? And by the way, would somebody please make it illegal to sell gold necklace chains by the inch on cruise ships??

Let's get out of line! Here is another challenge to the industry: Get people out of lines! You shouldn't have to wait on line to buy a tour, go to dinner, get on a tender, get a towel, or for any other purpose if you claim to be a high-quality resort offering. Once again, this boils down to the people on the ship creating the experience.

Continue taking the ships to the people Even before the horrors of 9/11, I saw the marketing advantage of allowing more people to cruise without having to get on an airplane. This was the driving reason I opened the ports of Houston and Port Canaveral to mainstream cruising. Customers were always telling me that one of the deterrents to cruising was that they preferred not to fly. Today's world has made this only more relevant: What else can we do to help the consumer get onboard without getting in the air? This is even more of a concern to family travelers -- not so much for security, but because of cost and convenience.

As one who has been in the cruise business since 1973, I appreciate what the past teaches us. But in the case of the cruise industry, I'm not yearning for the old ships, the old way of doing things, not at all. I think the new ships with their technological superiority is fantastic. They will only get better (and more environmentally sensitive). What I do miss is the commitment to innovation in the non-hardware aspects of cruising. We need to spend more time thinking outside the box, challenging ourselves to be unique and provocative -- not just in the way the ships look and how big they are, but in the memorable, unique, and provocative experiences we offer.

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