Archive for March, 2003

Posted on March 2, 2003 - by Ralph Grizzle

Wave Produces No Tidal Surge

This year’s Wave produced barely a ripple on the collective shores of the North American cruise industry. Unlike the last few years, one-day booking records went unbroken. Keyboards in the cruise line public relations departments heralded no headlines such as this one last year: “Carnival Cruise Lines Breaks One-Week Reservations Record Two Weeks In A Row.”

Cruise executives told their stories by repeating words like “uncertainty” and “disappointing,” and prefacing their remarks with phrases like “the challenges we face.”

“Clearly, this has been a more disappointing Wave period than any of us had hoped for right now in this period of uncertainty,” said Royal Caribbean International Chairman Richard Fain in early March. Other cruise execs echoed Fain’s remark. “Our second quarter is shaping up to be a challenge,” Carnival Cruise Lines’ President Bob Dickinson said.

The report from travel agents, however, was mixed. While one North Carolina retailer lamented “the weakest February we’ve had in 10 years,” we talked to several retailers whose businesses ““ or at least, whose bookings – were thriving.

Just Cruises in Michigan reported cruise bookings were up 35 percent over last year but that actual earnings were about the same as last year due to lower prices.

Connecticut’s Cruise and Vacation Center told us bookings were up 100 percent first quarter but that most of the activity has come from an unexpected source: resorts. Why not cruises? “I can’t explain it,” said owner agency Christopher Tichy. “Maybe it’s all the talk of Norwalk virus or people worried about the security of cruise ships. I just don’t know.”

Industry trade publications also told the story. Cruise Week kept pace of Wave week-by-week: Its headlines: “Agents: Spotty Wave Season” (January 22, 2003) and “Slow February for Travel Agents” (February 26, 2003).

Analysts talked of price erosion, shrinking yields and poor performance.

Why all the glum news?

Cruise executives cite the primary reason being the prospect of war with Iraq leading up to ““ and continuing through – Wave. ”Uncertainty is the great enemy of our business,” said Norwegian Cruise Line President and CEO Colin Veitch.

As Carnival Corp.’s stock plunged to a 52-week low last month, execs accused the uncertainty of crushing theirs and other businesses. Cruise leaders feel some sort of resolution with Iraq will mean a rebound in business. “Get it over with, get it done or get out,” said Larry Pimentel, chairman and CEO of Seadream Yacht Club.

But perhaps Pimentel should have sent a similar message to the traveling public: “Get on with it.” Rather than wait for certainty to return, American travelers and businesses may just have to learn to live in a world that is a little more uncertain than was the case during the past couple of decades, when America was isolated from ““ or chose to ignore – world events.

A resolution with Iraq likely will not solve the persistent threat of terrorist attacks and the pervasive fear among some American travelers who still shun airplanes and trips abroad. A sense of certainty guarantees nothing anyway. As they set out on a ship thought to be unsinkable, those cruise passengers who left Southampton, England, April 10, 1912, had little to fear. Frozen water, not war, not a terrorist attack, not some biological or chemical agent, caused those ill-fated passengers to meet their icy demise.

There is an odd note of irony in this year’s dismal news. In 2003, CLIA member lines will introduce 14 new ships. And despite a disappointing Wave season for cruise lines, 2003 could prove to be yet another record year, thanks to the additional capacity and the drive to fill ships at any cost (Costa reportedly was offering seven-day cruises for $140 in February).

“By maintaining our current occupancy levels we will have the opportunity to welcome 1 million more guests on board in 2003 – a potential of 9.6 million passengers worldwide, including 8.3 million from North America,” said Bob Sharak, CLIA’s executive director and vice president of marketing.

There is hope that the coming tide will bring with it a new surge in business. “These are the toughest times we’ve seen as an industry,” said David Drier, CEO of Intrav Inc. and its subsidiary Clipper Cruise Line, “But I think we all agree that it’s temporary. It certainly will get better at some point in time.”

Sidebar: Ship-Building Blues
The somber mood among cruise executives gives shipyards little to cheer about. “Shipyards recognized some time ago the [building] frenzy was over,” said UBS Warburg Leisure Analyst Robin Farley. She noted that ship orders by North American cruise companies are down 70 percent from the peak years. In 1999, for example, 13 new ships were ordered; in 2001, only two ship orders were placed; and in 2002, four new ship orders made the books.

“We have an awful lot of capacity that we’re having to digest over the next few years,” said Carnival Corp. Vice Chairman and COO Howard Frank. “In my mind, we will see a slowdown with new capacity from the standpoint of shipyards. New ship orders will be at a much slower pace than in the past.”

Despite the current gloom, industry fundamentals remain strong, and the long-term outlook remains optimistic for shipyards. Tony Peisley, author of “Global Changes in the Cruise Industry 2003-2010,” cited strong pent-up demand that will drive worldwide cruise capacity from 241,000 to 400,000 berths between 2000 and 2009,

While he acknowledged that exchange rates between the Euro and the U.S. dollar were a stumbling block that made new orders less attractive than during times when the dollar was stronger, he noted that “slots are open, shipyards are anxious to build “¦ discounts already have been offered and accepted.”

Posted on March 2, 2003 - by Ralph Grizzle

Jumping Ship

Now more than three decades old, the North American cruise industry is attracting many fresh faces, some to fill newly created positions, others to replace the old guard. High profiles executives, such as Holland America Line’s Linda Ehlenberger and Royal Caribbean International’s Mike Applebaum, recently resigned their long-held posts as vice presidents of sales for their respective companies.

Holland America Line was conducting an “internal and external” search to replace Ehlenberger, who resigned after 10 years with the company. Royal Caribbean International does not plan fill the void left when Applebaum stepped down earlier this year.

As with Royal Caribbean, Carnival Corporation’s executives tend to have been with the company for “many, many years,” says a Carnival Corp. spokesperson. “And we typically promote from within.”

That said, recruiting new talent from outside the cruise industry tends to be one of the more active segments within the hospitality sector, according to Karine Gill, who leads the Hospitality & Leisure Specialty Practice group for Coral Gables, Florida-based Spencer Stuart, a leading management consulting firm specializing in senior-level executive search and board director appointments.

As the industry matures, Gill says, it is looking increasingly to the outside to fill executive positions. “It’s a trend we’ve seen for the past five or six years,” she says, adding that the search outside the industry serves to broaden available talent.

“In its initial phases, the cruise industry was a very small, very networked group of people,” she says. “Now as it has become a more mature part of the leisure industry, we are now at a point where we’re looking outside. At Spencer Stuart, we do all levels of functional expertise, from the supply chain to operations to culinary to human resources, and for most of these cases, we tend to go outside the cruise industry.”

CFI recently talked with three executives who came from other professions to begin their careers in cruising.

Edie Bornstein, Vice President of Business Development, Cunard Line
Edie Bornstein got her job because of Queen Mary. Not the former British monarch, mind you, but Cunard Line’s $800 million new-build.

Bornstein stepped aboard in the newly created position of vice president of business development in February 2001. She was charged with developing co-branding relationships for Queen Mary 2.

“Cunard Line’s president at the time recognized that Queen Mary 2 was going to be an anomaly in the cruise industry,” Bornstein says. “He felt there would be tremendous co-branding opportunities. He [Larry Pimentel] called and said, ‘Edie, I’ve thought about this with you in mind, and I’d like for you to talk with Pam [Conover] and Debbie [Natansohn] and see if we can work this out,’ We did. Pam and Debbie hired me, and I’ve been here two years.”

After graduating with a bachelor’s degree from Nova Southeastern University, Bornstein worked as a travel consultant for Liberty Travel in New Jersey. She later took a position with System One, the Eastern Airlines entity that became Amadeus. Bornstein remained with Amadeus for nearly 14 years, serving as vice president, cruise and specialty sales & marketing.

Bornstein had an early baptism into the cruise industry. Her role at Amadeus required that she attend ship inaugurals, where she rubbed elbows with cruise line executives. And because she loved to cruise, Bornstein spent all of her vacations on ships. Today, the single mom cruises with her son, who, at age 13, can claim having been on 26 cruises.

Cunard Line possibly could have looked within to fill the new business development position, but Bornstein says she had the experience that Pimentel, Conover and Natansohn were seeking. “They certainly knew my background and the kind of person I was and what they were looking to achieve with this division,” Bornstein says, “They really felt my personality fit the position.”

Since coming on board with Cunard, she has forged co-branding relationships with Canyon Ranch, operators of the award-winning health resorts. Canyon Ranch has designed and will operate the QM2’s spa. She also engaged four-star chef, Daniel Boulud, whose New York restaurant has been rated one of the 10 best in the world, to create signature menus exclusively for Cunard.

Rick Abramson, President, Delta Queen Steamboat Company
As the former director of the Kennedy Space Center Visitor Complex, Rick Abramson has seen more rockets launched into space than he has ships pushed out to sea. “I’m a real new kid on the block,” Abramson says. “But while the cruise industry itself and the marine aspects are certainly new to me, hospitality and tourism aren’t.”

With more than 35 years of hospitality experience, Abramson says he will incorporate acquired management techniques to transform the Delta Queen Steamboat Company. Abramson’s long-time employer, Delaware North Companies, rescued venerable DQ from bankruptcy last year.

Charged with managing America’s oldest continuously operating cruise line and its three paddle wheelers, Abramson says he will employ some of the strategies he brings to the job from other positions he has held. In fact, just as he did at the Kennedy Space Center, he thinks of himself as the steward of a “special place.” Delta Queen’s historic ships, he says, are indeed special places and should be marketed as such.

With that in mind, he says he will steer Delta Queen away from the rest of the cruise industry. One of the company’s biggest challenges, he says, is to avoid being identified with the larger market. “One of our boats is a 75-year-old wooden boat on the historical registry,” Abramson says. “The experience we provide is so much different than a cruise. That’s the challenge, trying to get identified as something different than the blue water cruise experience.”

Abramson does plan to glean from industry models. He will attend industry conferences, and he confesses to wanting to meet some of the “legends” in the industry. “I also need to get on a couple of the big boats to see the programs and what people are gravitating to,” he says.

His course is clearly charted, however. “I’m not worried about how many umbrella drinks we sell,” Abramson says. “I want to make sure we distance ourselves from the rest of the industry and create a really unique experience that people talk about. I don’t have huge advertising budgets, so my advertising is really on the backs of my passengers, and I have to show them a fantastic time so that they say to their friends, ‘Hey, this is really something you need to do.’ ”

John Meszaros, Vice President, Supply Chain Management, Carnival Corp.
Talk about a greenhorn. John Meszaros had never even been on a ship when he took the helm as Carnival Corporation’s vice president, supply chain management. Never been on a ship, but now he’s responsible for the world’s largest fleet of cruise ships.

His charge is to negotiate, contract and partner with the hundreds of vendors that supply Carnival Corp.’ six cruise brands. Until he joined the company, Carnival Corp. had four autonomous companies with four purchasing groups. There was some interaction, he says, but no formal strategy to pull it all together in a single supply chain.

Consolidating the groups under one umbrella made sense, Meszaros says, particularly with regard to helping Carnival Corp., which purchases more than $1 billion in supplies annually, to achieve greater economies of scale.

Meszaros says by consolidating purchases, his department has been able to cut cost while improving quality. “Since I’ve been here, we’ve basically focused on food and beverage,” he says. “We’ve done a great job in taking cost out and improving quality in food and beverage.”

Meszaros’s biggest challenges thus far have been bridging the cultural differences between Carnival Corp.’s different brands ““ Costa and Cunard, for example – and coordinating between the port of calls and Carnival Corp’s ships.

“It’s a little different from land-based supply in that our customers [the ships] continually move,” Meszaros says. “So the challenge is making sure that we have a worldwide supply of services that meet the needs of the ships no matter where they are.”

A resident of Miami Beach, Meszaros served eight years as supply chain vice president for Dallas-based AmeriServe Food Distribution (formerly PepsiCo Foods Systems), a food service distributor for several national chain restaurants, He also spent four years as a consultant with Systems Modeling Corporation, a leading provider of computer simulation software, and three years in operations at Frito-Lay Inc.

“In my old world,” he says, “I did very similar things and there was very similar integration, but I had very defined customers in very defined locations. If we missed a delivery time, the customer was still there. We could be an hour late. But if I am an hour late now, the ships are gone. I’ve never been in a position where the supply chain timing was so critical.”

A tough job, no doubt, with lots of stress associated. We know just the cure: a cruise.