Full steam ahead

While other cruise lines anticipate cutting calls to keep costs down, Rodwell remains uncompromising. “We do not intend to tailor our itineraries around the new Emission Control Areas (ECAs) due to take effect in 2015,” he says. “We are a destination-rich company and have always gone to the ports that are popular with our passengers. We do not intend to change that as we believe 50% of a decision to take a particular cruise depends on the destinations offered.”

Rodwell explains, “We are prepared to buy the more expensive distillate fuel demanded by tighter emissions regulations. We do not believe the case for scrubber technology has yet been made and will not be fitting our vessels with it.” What this means is that fares are certain to rise to cover the further increased cost of fuel which has already doubled for the company since the recession started in 2008.

But there is one mitigating factor for the line that is not enjoyed by other cruise companies. Other, oil-related parts of its Norwegian parent company’s business empire benefit from higher oil prices and an overall equation is bound to be drawn up which will not be to the group’s disadvantage. Mr Rodwell does not disagree with this prognosis.

It is also the case, he points out, that being a destination operator lends itself to spending more time in port as an economy measure. “But we shall not be slow steaming between ports; we need to get our passengers to their destinations on time.” Another advantage for the line in the emissions debate is that the ECAs are mostly positioned in the north (including the Baltic) where the company’s yields are strongest. Exposure to the North American equivalent zones will be minimal and there are none, as yet, in the Mediterranean.

One of the operational areas the company is going back to by popular demand in early 2015 is the Caribbean, which it left in 2012 because the returns were so poor. “By the time the cost of the flight and the transfers had been taken out there was very little left in it for us,” says Rodwell. But this time things are different, he explains. There will be three cruises which sold out quickly at premium prices. “A return would not be possible without these higher rates, but you can only do this for a limited period; hence the short season, which includes a repositioning trip across the Atlantic.”

But this renewed Caribbean presence, says the MD, does not mean that Braemar, the operating vessel, will be abandoning her Tenerife-based programme that covers all the Atlantic islands, including Cape Verde off the coast of West Africa. On average, passengers on the Caribbean cruises are two years younger than on UK-based itineraries – a surprisingly small difference.

In the autumn, the line reported losses which were almost tripled to US$16.2 million for the first nine months of 2013. Rodwell says this was caused by poor market conditions, the high cost of bunker fuel and the absorption of costs associated with lengthening works on the Balmoral and Braemar. But he points out that the company is making profits at the trading level, particularly as Olsen hedges (buys forward) a good part of its fuel demand. “Though the price cycle does not always work in your favour, what you do get is certainty of price,” he asserts.

He admits, however, “The weakness of the UK economy has not only meant poorer demand but also an increase in late bookings, which are mostly made at sharply discounted prices. We don’t like it, not least because it is unfair to those passengers who booked earlier at standard prices. We try to compensate them for this with some upgrades, the choice of cabins and more attractive dining alternatives.”

He remains convinced that the signs are good for the future. “In the main I do not believe the company is yet back to its position before recession struck in 2008. Our cost base is higher now, but our yields are improving. In 2015, we shall once again get the benefit of strong Caribbean prices and in March of that year we have been getting strong bookings for a rare solar eclipse. Currently we are in the peak two years of the seven-year cycle of the Northern Lights and we have even been getting Japanese passengers in good bookings to witness the phenomenon.”

And nobody could accuse Fred. Olsen Cruises of being complacent in its quest for new passengers. In a new initiative, passengers who have not cruised with the company before will be given the chance to take a two-day trip with the option of being flown home at that point with a fare refund if they decide they do not like it. It is the first time such a campaign has been mounted in the UK market. “This will give passengers the chance to confirm or deny their main reservations like seasickness, cramped ships, expensive drinks, and rigid dress codes,” says Rodwell, adding that independent research by Mintel last year showed that 14% of adults in the UK had cruised and another 24% had considered doing so.

The company has announced that it will be basing its UK cruises in two more ports, Tilbury and Avonmouth, making a total of 10 in all. The rationale behind this is that nobody should have to drive more than 90 minutes to join one of the four ships, a situation brought about by complaints from passengers who had to drive long distances to Southampton and Dover on the UK south coast and its busiest embarkation ports.

Any interview with a senior Fred. Olsen Cruises executive will sooner or later elicit the question of when the company will build its first tailor-made, brand new ship. “We have good ships and would like to expand the fleet further. We always keep a weather eye open for any opportunity to do that,” is all Rodwell is prepared to venture, with a knowing smile. He has been asked that question many times before.

This article appeared in the Spring/Summer 2014 edition of International Cruise & Ferry Review. To read other articles, you can subscribe to the magazine in printed or digital formats.