One of Norway’s indelible natural resources is its western coastline, full of fjords and rich with scenery and lore. Nearly equal to that resource, as a source of national pride: Norway’s national cruise line, Hurtigruten (literally, in Norwegian, ‘Express Route’, also known as the Norwegian Coastal Express). Hurtigruten’s ferries and ships have, for more than 120 years, faithfully wound their way in and out of, and shuttled up and down, the country’s stunning west coast.
Their path is actually a single roundtrip route, taking 11 days – from Bergen up to Kirkenes, on the northeastern coast and back again – with stops at 34 ports. Thus, in practice, Hurtigruten is both a local port-to-port transport system (transferring roughly 400,000 guests annually) and a national touring system (with roundtrips or cruises carrying around 90,000 tourists annually). Its demographics bespeak the split: port-to-port clients are, on average, somewhat younger customers; roundtrip/cruise guests, older. Thanks to them all, Hurtigruten manages to sell about a million-plus cruise nights per year – the equivalent of about two percent of the global cruise market.
In the middle of last year, Hurtigruten was graced with another valuable resource, when its youthful new director, 37-year-old Daniel Skjeldam, joined the firm, leaving his position as chief commercial officer of Norwegian Air Shuttle. Skjeldam oversees all operations and a fleet of 12 vessels, eleven of which ply the routes between the coastal ports, with the other offering only expedition cruises (that is, in more polar areas such as Antarctica, Greenland and Spitsbergen). The ships have capacities of between 400 and 1,000 guests and ten of them can carry 40 cars each, the heaviest being only about 16,000gt.
What is Skjeldam’s view of, and vision for, the line, now that he’s been at the helm some months? Mostly, he says, to maintain sufficient revenue and profit by marketing Hurtigruten’s voyages and expeditions more actively and creatively. “We have elected to focus on the marketing of shorter voyages occurring peripherally to our traditional ‘high season’ (summer).
“We first focused on winter sailings. We called that programme ‘Hunting the Light’. It’s been so successful, we don’t even use the term ‘low season’ anymore. We have winter, spring, autumn and summer seasons. They each have their own onboard activities, excursions and small itinerary adjustments.”
Hurtigruten’s effort at warming up the winter for business has had a number of impacts. For one, the demos are now skewing towards younger guests. “In a way, our customers haven’t changed much. But in a way they have. Our port-to-port customer is mostly 50-plus, a bit younger than the roundtrip cruise customer, who is 60-plus. But the sheer expansion represented by the winter programme means we have, on average, a younger audience. In coming years, we believe the average age of guests will continue to head down somewhat. We’re also seeing a marked increase in the number of guests from the UK.” Skjeldam hopes to reprise the success of winter’s ‘Hunting the Light’ with a similar concept and campaign for autumn (‘Autumn Gold’) and spring (‘Arctic Awakening’).
Another vector for Hurtigruten is clearly cost reduction, especially divestment of ancillary business units. In the last few years, the line has resolutely liquidated revenue and cost centres outside its core business areas of coastal operations and expedition cruises. Despite the line’s esteem, unique history and international allure, Sjkeldam’s challenge is to continue this programme of lean, mean bailing and operation – while building certain new profit centres, such as enhanced hotel services and new onboard eateries.
“We owned some hotels in Bergen and a chain of Norwegian travel agents some years ago,” he says. “Plus a transport division with 50 ferries and fast ferries. However, in the last few years, we have streamlined and will continue to increasingly focus on our core business.” The drive has extended to eliminating ticket offices. “We no longer have ticket offices in Norway nor in any other country. Instead, one can buy tickets onboard the ships, online, or from our global call center in Tallin, Estonia,” he says.
Last year, the cost reduction programme became industrial strength. Intending to foster long-term profitability in an expanding and competitive cruise market, and resisting further downward pressure on profits from the tentative global recovery, Hurtigruten announced a full-on reorganisation. “It is true that in the past decade or so, the company has offered weak results or posted a loss. But then again, going forward, there are few travel industry players like us,” says Skjeldam. The programme is expected to save more than NOK60 million per year, starting in 2014.
It includes selling most if not all of its terrestrial properties in and around its age-old shore complexes in Narvik and Tromso, then consolidating its office and service functions into new leased space in Tromso by mid-2013. Last year the company acknowledged, in a message to the Oslo Stock Exchange, that such drastic measures were necessary due to the faltering global economy.
Also, because the old Narvik office will close, shore staff will be reduced by 25-30 per cent, or at least 30-40 employees (according to some reports, the job loss will run into three figures). There are yet further plans, too, to streamline operations by divesting nonessential properties outside of Norway.
To Skjeldam’s credit in his first year, the cost cutting programmes seem to be working. Hurtigruten had at least nominal net earnings during 2012, as it did in 2010, compared to losses in 2011, 2009 and 2008 (which occurred despite the government’s subsidies in support of the company’s local transport routes).
What about Hurtigruten’s continuing prospects? “I came aboard because we have a great company, product and brand, and there is such social importance to transport along the coast,” says Skjeldam. “In eastern Norway alone, too few people are aware of Hurtigruten’s significance to Norwegian travel. And yet it is so easy and credible to boast of Hurtigruten and its cruise programmes. So there is a huge global opportunity to exploit this brand.”