Exceeding all expectations

Arnold Donald, president and CEO of Carnival Corporation, shares how the company overcame past voyage incidents and reputation issues to generate full-speed-ahead momentum and produce record financial performance. Rebecca Gibson reports

Exceeding all expectations
Arnold Donald has helped to turn around the fortunes of Carnival Corporation (Image in the past four years: Carnival Corporation)
This article was first published in the Spring/Summer 2017 issue of International Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed.

For a man who initially took time to consider accepting the opportunity to run the world’s largest cruise company because he was content being semi-retired and serving on several executive boards, Arnold Donald is making the best of what many predicted would be a tricky role.

When he took the helm in July 2013, the corporation’s reputation was suffering in the aftermath of several ship incidents. However, almost four years in and Donald has reinvigorated Carnival Corporation and improved the fortunes of its 10 cruise brands – AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Fathom, Holland America Line, Princess Cruises, P&O Cruises Australia, P&O Cruises UK and Seabourn.

Today, the corporation employs more than 120,000 people worldwide and its 102 cruise ships carry more than 11.5 million guests annually – about 50% of the global cruise market. Brand reputations have soared and financial performance is stronger than ever. The corporation achieved its best-ever, full-year financial results in 2016, including record-setting second and third quarters, and preceded by several years of significant earnings growth.

“We’ve had tremendous success and it’s all down to the passion and dedication of our employees, as well as our travel agents and other industry partners who support our brands,” says Donald. “We’ve implemented a new revenue management tool, signed new homeporting and terminal expansion deals, welcomed and ordered new ships, and enhanced the onboard experience. These investments all add value for our customers and shareholders.”

A key factor in Carnival Corporation’s newfound success is the zeal and relentless ambition of its leader and, perhaps more importantly, his ability to instil the same drive in his employees.

“We’re in the vacation business and our job is to create fun – if you can’t have fun while making fun, you need your head examined!” Donald quips. “I’m having a blast and running Carnival Corporation is one of the world’s best jobs. Cruise is one of the most inspiring industries to be involved in because the human spirit level is so high. It’s phenomenal to watch our employees bring people together – both on our ships and in the destinations we visit – to create memorable and life-changing experiences for our guests. I enjoy finding ways of engaging with our employees and unlocking the potential they have to achieve their personal goals, and those of our brands.”

Four new ships have joined the global fleet in the past 12 months. Queen Máxima of the Netherlands named Holland America’s Koningsdam in April, AIDA’s AIDAprima and Carnival Cruise Line’s Carnival Vista debuted in May, and Seabourn Encore was christened by Seabourn this January.

Each ship is set up to cater to the preferences of its target market. “AIDAprima’s layout and onboard features resonate with our German guests, while Carnival Vista epitomises Carnival Cruise Line’s ‘fun ship’ promise with innovations like the industry’s first IMAX theatre and SkyRide,” Donald remarks. “Koningsdam is ideal for music enthusiasts thanks to the Lincoln Center, B.B. King’s Blues Club and Billboard Top 40, as well for wine lovers who can create their own personal blend to drink onboard. Meanwhile, Seabourn Encore offers the ultimate ultra-luxury cruise experience with interiors by Adam D. Tihany and chef Thomas Keller’s signature grill restaurant.”

As part of its plans to entice a new type of passenger onto its cruise ships, namely millennials and young families, Carnival Corporation recently introduced several TV campaigns. The company aired three weekend series (80 episodes in all) on US TV and filmed a movie onboard Costa Fortuna, while P&O Cruises’ Britannia hosted a live episode of the UK primetime show Ant & Dec’s Saturday Night Takeaway on her top deck. Guests and crew onboard Princess Cruises’ Regal Princess also starred in a fly-on-the-wall documentary The Cruise.

“We used the TV shows to share personal cruise stories, debunking the myths and ensuring that cruising is top of mind when regular and potential cruisers are planning their vacations,” says Donald, adding that the corporation sponsored and was featured in The New Celebrity Apprentice in the US this February.

A review of Carnival Corporation’s 2016 highlights would not be complete without a mention of its historic foray into Cuba. Last May, the company’s newest brand Fathom – where passengers get an opportunity to take part in volunteer projects as they travel – became the first US cruise line to sail from the US to the Cuban ports of Havana, Cienfuegos and Santiago de Cuba in more than 40 years.

“The inaugural cruise was a special moment for our company, Cuba and the US, particularly because it also marked the Cuban Government’s decision to overturn its decades-long ban on Cuba-born nationals travelling to or from Cuba by sea,” remarks Donald. “Our agreement was one of the first indications of the changing US-Cuba relations. It also characterises one of the most beautiful things about cruising: it brings people closer together and helps them to understand what they have in common, while valuing their differences.”

Fathom alternates seven-day cruises from PortMiami, Florida to Cuba on the 704-guest Adonia with similar week-long voyages to Amber Cove in Puerto Plata, Dominican Republic. Guests can participate in artistic, educational and humanitarian activities that support cultural and economic development in Cuba. The response from both the guests and Fathom’s destination partners has been so strong that from November 2016, Fathom has made two social impact excursions – one at chocolate production plant Chocal and another at paper recycling micro-business RePapel – available to guests sailing to Amber Cove with six of its brands.

“Fathom receives some of our highest guest ratings and has Carnival Corporation’s highest net promoter score because it offers a tremendously fulfilling onshore experience to our guests,” Donald enthuses. “It’s exciting to offer thousands of guests who sail with our AIDA, Carnival, Costa, Holland America, Princess and P&O Cruises UK brands to Amber Cove the opportunity to participate in Fathom’s social impact experience. Although Adonia will return to the P&O Cruises UK fleet in June, we’ll have other ships sailing in the Dominican Republic and Cuba.”

Carnival Corporation is set to continue innovating in 2017 too. Donald kicked off the year by becoming the first travel industry executive to give the opening keynote at the annual consumer technology trade show CES 2017 in Las Vegas, Nevada. He used the opportunity to showcase how first-of-its-kind proprietary technology – developed internally – will deliver innovative, highly personalised onboard experiences to guests. Top of the bill was the new Ocean Medallion, a device that can be worn or carried by passengers to anticipate their every onboard need.

“The medallion will make the cruise feel like it has been specifically engineered to each individual guest via touch-free access to staterooms, personalised dining experiences, interactive entertainment, transaction-free payments and expedited embarkation and disembarkation,” says Donald. “It can be paired with Ocean Compass, an optional personalised digital concierge, to significantly enhance interactions with crew members and guests. Ocean Medallion and Ocean Compass will truly transform the guest experience when they debut on Princess Cruises’ Regal Princess this November, followed by Royal Princess and Caribbean Princess in 2018, and more ships in future.”

Donald is also resolutely positive when it comes to the impact the UK’s impending exit from the European Union, President Donald Trump’s new White House administration, and political unrest elsewhere in the world could have on the cruise sector.

“Brexit will have a minor financial impact from a currency translation standpoint, but it may actually help P&O Cruises because the brand has always used the British pound so it will look favourable compared to other travel options available to British people,” Donald explains. “Time will tell if there’ll be any tax ramifications or limitations on freedom to move. Similarly, it’s too early to predict the impact of the new US administration, but public consensus seems to be that it will be good for business so our share prices may benefit.” In fact, says Donald, the bigger issue for Carnival Corporation and the industry as a whole is people’s willingness, and ability, to travel.

“As long as they have the freedom, finances and desire to travel, the cruise industry will continue to grow, but if anything restricts travel then we’ll be in trouble,” he explains. “Carnival Corporation is a global company so we hope that none of the world’s political issues prompt governments to close borders, or cause consumers to fear travel.”

Enhancing the safety of guests and crew is a key priority for all 10 brands. Last November, Carnival Corporation became the first maritime company to announce that it will use Interpol’s I-Checkit system to screen passengers’ travel documents against the Interpol Stolen and Lost Travel Documents database containing more than 69 million records from 175 countries.

In July 2016, the company also opened the €75 million (US$79.5 million) Arison Maritime Center in Almere, Netherlands to provide training for its 6,500 deck and engineering officers every year. The facility houses an 110,000-square foot CSMART (Center for Simulator Maritime Training) Academy, which is equipped with four full-mission bridge simulators, engine room simulators based on actual ship layouts, 24 part-task engine simulators, eight debriefing rooms and eight part-task bridge simulators.

“The leading-edge curriculum, state-of-the-art equipment and training exercises that reflect real-life scenarios and sea conditions ensure that our crew know how to operate onboard systems and exactly how to protect themselves and our guests in an emergency,” says Donald.

In addition, investments have been made to extend Carnival Maritime’s Fleet Operation Center (FOC) in Hamburg, Germany to include a new Nautical Department. The FOC now provides real-time digital support, surveillance and route planning services for 37 cruise ships across the P&O Cruises, Fathom, Cunard Line, AIDA Cruises and Costa Cruises brands. Plus, Wärtsilä has signed a 12-year deal to monitor and maintain almost 400 engines onboard 79 vessels to predict maintenance requirements, optimise vessel operations, reduce fuel consumption and potentially extend engine overhaul intervals.

“Our prime objective is to exceed guest expectations and we can’t do that if we don’t keep them safe, so continually improving the safety of passengers and crew is paramount,” comments Donald. “The investments we’ve made in the Arison Maritime Center, Carnival Maritime’s FOC and our partnership with Interpol make certain that we’re continuously mitigating risks to guests and crew, while improving fuel and itinerary efficiency.”

Donald points out that such investments are also helping the corporation to meet environmental requirements, which will become even stricter when the International Maritime Organization’s global 0.5% sulphur cap enters force in January 2020.

Three of the company’s 10 key sustainability goals include developing and operating exhaust gas cleaning systems (scrubbers) to lower sulphur and particulate matter emissions; increasing cold ironing capacity so ships can rely on shorepower in ports; and reducing carbon dioxide emissions. “We’ve already equipped 41% of the fleet with scrubbers and will make further investments so our global fleet is prepared to meet the 2020 cap,” notes Donald.

In a further move towards sustainability, Carnival Corporation has contracted German shipyard Meyer Werft and Finnish shipbuilder Meyer Turku to build a total of seven 180,000gt, 5,200-guest LNG-powered newbuilds between 2019 and 2022.

Costa and AIDA will each take delivery of an LNG ship in 2019 and again in 2021, while Carnival Cruise Line will welcome one in 2020 and another in 2022. The newbuilds will be the biggest to join the line’s fleet and the first LNG-powered cruise ships to be based in North America. The seventh vessel will join P&O Cruises in 2020, becoming the most environmentally efficient ship in brand history and the largest-ever cruise ship to be built for the British market.

“AIDA was the first cruise line to use LNG in port, and now we’ve taken it a step further by introducing the first ships that can generate 100% of their power in port and at sea using LNG,” says Donald. “Although global availability and relative pricing remains to be seen, we’re confident about our LNG investments. Regardless of whether they use LNG, all our vessels will comply with, and in most cases exceed, external environmental requirements. Carnival Cruise Line, for example, recently earned its first ECO Notation from Lloyd’s Register for doing just that with Carnival Vista.”

Including the seven LNG vessels, Carnival Corporation has 19 newbuilds scheduled for delivery over the next six years.

2017 will see AIDAperla joining AIDA, while Majestic Princess will make her debut in Shanghai, China for the Princess Cruises fleet. The 3,600-guest Royal Class vessel will be joined by two more yet-to-be-named sisters in 2019 and 2020. Meanwhile, Fincantieri will deliver Seabourn Ovation to Seabourn in early 2018, and Holland America will welcome its second 2,660-guest Pinnacle Class ship, Nieuw Statendam, in November 2018. A third will launch in 2021, taking the fleet to 16 ships. Two additional Vista Class newbuilds will join Carnival Cruise Line – one named Carnival Horizon in 2018 and another in 2019. Similarly, Costa Asia will introduce two 4,200-passenger ships, one in 2019 and another in 2020. “These new ships are an important part of our measured capacity growth strategy, which includes replacing less efficient ships with newer, larger and more efficient vessels,” notes Donald. “Every new ship offers an opportunity to enhance the onboard experience, generate excitement about our brands, attract potential cruisers and showcase why cruising offers exceptional value.”

Majestic Princess and the two Costa Asia ships have all been designed specifically for the Chinese market, reflecting the corporation’s commitment to this region.

“China will play a major role in the growth of the global cruise sector and we’re proud to have partnered with China State Shipbuilding Corporation and China Investment Capital Corporation to help the country enact its five-year plan to develop a sustainable cruise market that acts as an economic multiplier,” says Donald. “We were the first in China in 2006, the first with six ships in China through our Costa and Princess brands, and we maintain a strong leadership position with about 45% market share. Now that Asia’s economy is stronger and people have more discretionary income, they want to travel to more exotic places and we want to help them do that.”

However, Asia is not the only market Carnival Corporation is investing in. Collectively, its ships visit more than 700 ports worldwide and Donald says that consumer demand outstrips ship capacity in various markets, so there are growth opportunities worldwide.

“Our investments in passenger source markets are driven by economic situations and the ability to homeport ships so we’re mainly focusing on traditional markets like North America, Europe and the Caribbean,” he notes. “In the future, we expect Asia, South America, India and various parts of South Africa to become bigger source markets. From a destination standpoint, the Caribbean, Mediterranean and Baltic remain popular, and there’s a lot of opportunity in Australia. We’ll also continue to offer expedition cruising in Antarctica, the Arctic and Alaska and work with all our port partners to improve facilities and the cruise terminal experience.”

Understanding, shaping and growing the global cruise industry will be another of Donald’s key priorities for 2017 now that he has begun his new role as chair of Cruise Lines International Association (CLIA Global), taking over from Royal Caribbean president and COO Adam Goldstein. He plans to use the expertise he has developed as Carnival Corporation leader and as member of CLIA’s Executive Committee to help build a stronger cruise industry.

“Working alongside CLIA president and CEO Cindy D’Aoust, I want to continue Adam’s fabulous job of representing the global cruise industry and supporting our members,” says Donald. “I’ll ensure we’re fulfilling our overarching responsibility as the unified voice of the global cruise industry and supporting our members as they tackle regulatory, environmental, political, economic and other challenges. This will involve strengthening standards and industry partnerships, and improving training for our travel industry partners.”

“We’re very fortunate to be in the golden age of cruising where people want to explore the world,” concludes Donald. “Carnival Corporation’s employees get a thrill when we exceed guest expectations so we’ll stay focused on listening to what they want and finding the best way to deliver memorable experiences. Plus, we’ll continue to work with our industry partners and stakeholders to deliver double-digit returns on invested capital within the next two years, ensure we’re being the best possible corporate citizen, and that Carnival Corporation is always the first choice of partner in the global cruise industry.”

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Rebecca Gibson
By Rebecca Gibson
Monday, April 3, 2017