By
Michele Witthaus |
“I’m sorry to say so but, sadly, it’s true
that bang-ups and hang-ups
can happen to you.”
These words from the Dr Seuss classic, Oh, the places you’ll go, have peculiar resonance in view of the recent trials and tribulations faced by both Carnival Corporation & plc and the wider cruise industry over the past two years. The ever-popular children’s book characters of Seuss have been chosen to deliver their wise and witty homilies for the young at heart on all Carnival Cruise Lines’ ships – at a time when its parent company has made significant efforts across all of its business areas to put some pretty significant ‘bang-ups and hang-ups’ behind it.
In the aftermath of the well-publicised incidents and accidents of the past two years, Carnival Corporation has worked with the global cruise industry to improve safety standards and has embarked on a comprehensive internal programme to upgrade guest comfort on the ships in its fleet. Unsurprisingly, the US$700 million cost of the safety enhancements, along with the US$50 million cost of the Triumph incident and rock-bottom ticket prices for the Carnival brand have affected the group’s results. Net revenue yields dropped 2.1% year on year, although this was an improvement on the company’s September guidance, which predicted a drop of up to 4.0%.
At the same time, net cruise costs excluding fuel per increased 6.5%, driven by higher advertising spend. Costs were higher than indicated in September’s guidance, up 3.5 to 4.5% due primarily to the timing of expenses. Carnival argued it had still managed strong cash returns from operations, enabling it to meet its capital commitments and return value to shareholders, but this may have seemed liked cold comfort at times.
The fragile beginnings of a return to confidence were seen in September thanks to the successful progress of salvage operations in Italy. Fourth quarter earnings for Carnival were better than anticipated, mostly thanks to improved cruise ticket prices and onboard spending for Carnival Cruise Lines. Based on booking trends, the outlook for this year is mixed, with full-year 2014 net revenue yields expected to be down slightly compared to last year. Towards the end of the year, improvements are expected thanks to a recovery in ticket prices. All told, there are no easy solutions or quick fixes and the global company has still had to face up to a third consecutive year of lower profits.
Dr Seuss has a few words to say about this state of affairs:
“When you’re in a Slump, you’re not in for much fun.
Un-slumping yourself is not easily done.”
It may not have been easy but for Carnival, a key part of the un-slumping process has been an organisation-wide restructuring programme of unprecedented scope and intensity. Following Micky Arison’s surprise decision, after running the company since 1979, to split the roles of chairman and chief executive and step down from the driver’s seat while retaining the chair, a series of seismic organisational shifts followed. Howard Frank handed over his position of vice chairman and COO of Carnival Corporation to former Princess Cruises president Alan Buckelew, with Jan Swartz assuming that presidency. Frank himself took over the mantle of chairman at Costa Cruises from Pier Luigi Foschi and remains in an advisory position to Carnival’s executive leadership. Stein Kruse, president and CEO of Holland America Line and Seabourn, took on new responsibilities as leader of the HAL Group. And in one of the least-predicted moves the cruise business has seen in decades, in July 2013, the ongoing realignment and reconfiguration of the group’s management team reached its peak as long-time board member (but cruise outsider) Arnold Donald was appointed president and CEO of the global organisation.
As the dust settles on the executive shuffle, it seems the fun may be on its way back for Carnival. All eyes are on Donald as he seizes the baton and continues the marathon process of reviving the company’s reputation and performance across its 101 ships, representing 78 million passenger cruise days and 10 million passengers at sea. Having served on the Carnival board for 12 years before taking on his current position, he is no stranger to the company, but his career to date has focused on the very different business environment of genetically modified products and artificial sweeteners.
In the cruise business – and at Carnival Corporation in particular, with the powerful legacy of the very hands-on Micky Arison – the senior figures tend to remain well entrenched over many years and it is only recently that the industry has begun to source talent from other sectors. In this context, how is Donald finding his new role and what attributes does he feel he brings to it?
“I had a working knowledge of the company, but I had a policy role, not an operating role,” he says. “I had a lot to learn in the first six months but I have to say I’ve been thrilled.” He has spoken frankly about his initial surprise at being offered the job of president and CEO, and he famously took two days to decide whether to take it. “Now that I’ve done it I felt I really should have said yes as soon as the question was asked. I’m finding the role fun, exciting and fulfilling. I love being with the people in the organisation and I love being with our guests and travel agent partners. It’s just an all-round great experience for me.”
A large part of his role will involve facilitating new levels of performance across Carnival’s brands. “A lot of it will be down to the great team of committed employees we have,” says Donald. “My role is to unleash creativity that has as yet not been unleashed, and the excellence of performance that has not yet been achieved. We are built on a record of success and a strong foundation, and my job is to help take that to an even higher level, to even greater results.”
This article appeared in the Spring/Summer 2014 edition of International Cruise & Ferry Review. To read the full article, you can subscribe to the magazine in printed or digital formats.