Why Royal Caribbean is such a true pioneer

From the first at-sea rock climbing walls, to movable platforms and new fuel cell technology, Royal Caribbean Cruises Ltd.’s six brands continue to bring innovations to the cruise industry. Chairman and CEO Richard Fain talks to Rebecca Gibson ahead of the company’s 50th anniversary

Why Royal Caribbean is such a true pioneer
This article was first published in the Autumn/Winter 2017 issue of International Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed.

Fifty million guests in almost fifty years. It’s an impressive statistic, particularly for a cruise company that started by building just one 724-passenger vessel – Song of Norway – in 1968, officially launching her as the world’s first warm-weather cruise ship in 1970.

Today, Royal Caribbean Cruises Ltd. (RCL) has expanded to include three global cruise brands – Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises – and owns joint venture interests with German brand TUI Cruises, Spanish line Pullmantur, and newest addition China-based SkySea Cruise Line. Collectively, these six brands operate 49 cruise vessels and take five million guests to around 535 destinations in 105 countries on all seven continents every year.

At the helm steering RCL to success is chairman and CEO Richard Fain, who attributes the growth of the company’s six brands to their insatiable thirst for improving ships, onboard amenities, food and beverage offerings, entertainment and itineraries. “Historically, cruise ships were modelled on the classic transatlantic ocean liners of the past, designed as floating hotels that offered rest, relaxation and a great view,” says Fain. “As time progressed, guests wanted to do more onboard and have a greater variety of choices so we needed to change our ships.”

Royal Caribbean International, RCL’s biggest brand, caused waves in the industry by adding a rock climbing wall to its first Voyager-class ship in 1999. Not only did the rock climbing wall make the vessel stand out, but it also introduced the concept of guests being able to participate in novel types of physical activities while at sea.

“Due to its incredible popularity, the wall was implemented across the fleet, becoming a staple of a Royal Caribbean International vacation,” Fain says. “We then expanded to offer even more fun activities on ships, such as the FlowRider surf simulators, ice skating, bumper cars and indoor skydiving. Modern cruise ships would be incomplete without the types of physical activities that stemmed from our rock climbing wall.”

However, it’s not just Royal Caribbean International that has debuted industry firsts on every new class of ships. TUI Cruises brought the concept of ‘well-being ships’ to sea, while Azamara Club Cruises pioneered the current trend for offering longer stays and overnights in port with its Destination Immersion concept on its two boutique ships Azamara Quest and Azamara Journey. Meanwhile, Celebrity Cruises has introduced various cutting-edge amenities, such as the all-glass reflective shower that extends over the edge of Celebrity Reflection, protecting guests’ modesty with electrochromic technology.

“Innovation is a by-product of the world’s cruise lines competing to attract guests, and RCL prides itself on the original ideas our people bring to the table,” says Fain. “We’ve made multiple changes to our ship designs to differentiate us from other companies and set the new standard for what guests expect. Our innovative spirit has been a good driver for ensuring we will remain competitive long into the future. One of the cruise sector’s great strengths is that, unlike so many industries that have become homogenous, each brand has maintained its individuality so every cruiser can find a company that appeals to them.” Digital technology is a key part of RCL’s innovation strategy, according to Fain.

“Technology is a great tool for enhancing the cruise experience, but we have to assume that not all of our guests are tech-savvy, so we only use it if it will truly improve the vacation experience for everyone,” he says. “Two years ago, for example, we used intuitive digital applications to simplify the guest experience and make it more comfortable, and we’ve created an app so passengers can navigate their ship or plan activities long before they start their cruise. Soon, you’ll be able to open the door to your room without pulling out a card or a key, request a beverage in real-time from the comfort of your lounge chair, or get recommendations for your travelling companion based on their preferences.”

Testament to its commitment to digital innovation, RCL has opened a new Innovation Lab so it can fully plan and design cruise ships using 3D virtual reality technology.

“By bringing onboard spaces to life in 3D in our offices, we’ll be able to be more creative and better share people’s expertise so we can design, and then build, ground-breaking newbuilds more efficiently and effectively,” says Fain.

First to be entirely designed in 3D virtual reality by the Innovation Lab was Celebrity Edge, one of four brand new 2,918-guest vessels to join the Celebrity Cruises fleet in a decade. Set to debut in December 2018, Celebrity Edge will feature The Rooftop Garden, exclusive enclave The Retreat, and Eden, a three-deck dining and entertainment venue with 7,000 square feet of glass, a 90-metre-long ramp inspired by the Fibonacci golden spiral, and an 18-foot-high live Library of Plants to provide fresh cocktail ingredients. However, Fain expects that a guest favourite will be the Magic Carpet, a tennis court-sized platform that will move up and down the side of the ship.

“At night, the Magic Carpet will serve as 90-seat speciality restaurant on Deck 16, and during the day it can be used to expand the main pool area on Deck 14, provide an al fresco area for a dining venue on Deck 5, or as a luxury embarkation station for guests joining shore tenders on Deck 2,” he says.

Accommodation has been designed by Kelly Hoppen MBE (read our interview with her in Cruise & Ferry Interiors on page 30) and will include 918 staterooms with Infinite Verandas – floor-to-ceiling windows that retract to create a glass railing – and double the number of suites as the Solstice Class, including two 2,600-square-foot Iconic Suites and six split-level Edge Villas with a private terrace and plunge pool.

“Over the years I’ve been lucky enough to be involved with multiple transformational ship designs, but I believe that Celebrity Edge will be yet another revolutionary vessel that will set a new baseline for years to come,” enthuses Fain. “Everything about the Edge class is new and exciting. The décor is highly unique, the spaces are truly inspirational. We’re also honoured that Malala Yousafzai, the youngest-ever Noble Peace Prize recipient and now Nobel Laureate and UN Messenger of Peace, will be godmother of Celebrity Edge. She’s an amazing inspiration to young women everywhere, and she inspires all of us at RCL too.” Celebrity Edge will homeport at Port Everglades in Florida, thanks to RCL’s new agreement to give its brands preferential berthing rights at two of the port’s terminals until 30 September 2026. As part of the deal, which could potentially be extended up to 2035, the two companies will also complete a US$100 million renovation of Cruise Terminal 25 to accommodate Celebrity Edge.

This March, RCL also broke ground on a new terminal at PortMiami, which has been dubbed as the ‘Crown of Miami’ owing to its structural appearance from the water. To be completed in October 2018, the 170,000 square foot terminal was designed by Broadway Malyan and will be a base for Royal Caribbean International’s 5,400-passenger Allure of the Seas and 6,780-guest Symphony of the Seas, which will be the world’s largest ship following her April 2018 delivery. Projections suggest the terminal will help Royal Caribbean International generate at least 1.8 million annual passenger moves at PortMiami.

“Miami has been RCL’s home for half a century and the new terminal is expected to have a major economic impact on the city,” says Fain, adding that the facility will have Leadership in Energy and Environmental Design certification as a green building. “Both the projects at PortMiami and Port Everglades will generate jobs in South Florida and boost the economy. This will solidify Miami’s status as the ‘Cruise Capital of the World’, and ensure Port Everglades isn’t far behind.”

Buoyed by the continued popularity of the Caribbean, RCL has now started itineraries to Cuba with its Royal Caribbean International and Azamara Club Cruises. It is also ramping up its investment in the Bahamas. This March, Royal Caribbean International signed a multi-year agreement with the Bahamas government to help grow the island’s tourism industry by making major enhancements at CocoCay, its private island destination. These upgrades will include a new pier capable of accommodating the Oasis-class ships, additional guest amenities, and new opportunities for vendors and craftsmen to promote the culture of the Bahamas to visitors. In addition, the line has committed to increasing the number of Bahamian nationals it employs over the next five years.

“We’ll work with the Bahamas government to create a curriculum that will prepare thousands of students for careers at sea onboard one of our ships,” says Fain. “Classes will be led by dedicated instructors who will give students the theoretical and practical knowledge they need to develop valuable and marketable hospitality skills. In addition, students will receive on-site guidance and training from shipboard professionals. It’s a win-win for Royal Caribbean International and the Bahamas.”

Given that Royal Caribbean International’s first Quantum Ultra-class ship will spend her maiden season in China when she debuts in spring 2019, Asia is another key market for RCL. Ovation of the Seas, which made history in June 2016 when she became the first newbuild to be christened and homeported in China immediately after delivery, continues to sail from Tianjin and will offer itineraries to Japan in 2018.

“Our decision to put another of our newest and best ships in China shows our confidence in the market,” Fain comments. “In just a few years, we’ve established ourselves as the market leader in China and proven that we understand local market conditions and Chinese guests’ needs and preferences. That’s why we have, and will continue to be, successful in China.”

RCL’s brands are also investing in the wider Asia region. In Malaysia, the company will work with Penang Port to extend the cruise berths at Swettenham Pier Cruise Terminal (SPCT) from 400 to 688 metres, enabling it to simultaneously host two cruise ships with more than 4,900 passengers.

Meanwhile, SkySea Cruise Line – co-founded in 2014 by RCL and Chinese travel company Ctrip.com International – will deploy Golden Era to a record five seasonal homeports in China and Taiwan in 2018, and make its Vietnam debut. Plus, Royal Caribbean International has planned its longest-ever deployment in Singapore between 2017 and 2019 – 72 cruises on three ships – and formed a second marketing partnership with the Singapore Tourism Board and Changi Airport Group to encourage overseas guests to cruise on its Singapore-based ships. The partnership is projected to generate US$26 million in tourism revenue and brought around 45,000 overseas fly-cruise passengers to Singapore between March and June 2017 alone.

Whether it’s Pullmantur sailing in Spain and Latin America, or TUI Cruises sailing in the Baltics, RCL’s key priority is to ensure that all six of its brands operate in the most environmentally sustainable way possible. Named on the 2016 World’s Most Ethical Companies list, RCL has already cut greenhouse gas emissions by nearly 25% in 10 years as part of its Save the Waves goals and aims to become a zero-waste, low-carbon organisation.

The company is using industry-first software to plan ship speeds and routes to maximise fuel efficiency, and is in the process of a major cross-brand programme to retrofit exhaust gas cleaning systems (scrubbers) on existing ships such as TUI Cruises’ Mein Schiff 5. It is also equipping vessels with advanced wastewater purification systems and advanced emission purification systems.

“RCL’s mantra is continuous improvement, particularly when it comes to environmental conservation and sustainable business practices,” explains Fain.

In January 2016, RCL officially launched a new five-year partnership with the World Wildlife Fund (WWF), setting measurable sustainability targets for reducing its environmental footprint and raising awareness about ocean conservation among its more than five million guests. RCL will also donate US$5 million over five years to support WWF’s worldwide ocean conservation work.

“We believe that what gets measured gets better, and working with WWF has allowed us to set specific goals so that everyone knows what we need to do to achieve them,” Fain comments, adding that WWF is also helping RCL to offer more sustainable seafood and destinations. “Although the sustainable fishing and destinations are less traditional goals, they are no less important. The targets are also challenging to achieve because so much of the process is in the hands of our partners.”

In another industry first, RCL is collaborating with Finland-based shipyard Meyer Turku to pioneer the use of fuel cell technology on two newbuilds. Codenamed ‘Icon’, the vessels will join the Royal Caribbean International fleet in the second quarters of 2022 and 2024 and will likely house around 5,000 passengers each. They will primarily run on LNG to eliminate sulphur emissions and significantly reduce the production of nitrogen oxides and particulates. However, they will also be able to operate using distillate fuel in ports without LNG infrastructures.

“With Icon class, we move further in the journey to take the smoke out of our smokestacks,” explains Fain. “We’re dedicated to innovation, continuous improvement, and environmental responsibility, and Icon gives us the opportunity to deliver against all three of these pillars. These goals are particularly pertinent now that all ships must adhere to the International Maritime Organization’s 0.5% global sulphur limit by 2020.”

Although fuel cells are relatively new, RCL has been considering the technology for nearly a decade and Fain is certain that it will be successful. This year, RCL’s newbuild team will work with Meyer Turku to begin testing fuel cells as a supplemental energy source on an existing Oasis-class ship. The trial will be followed by progressively larger fuel cell projects on new Quantum-class vessels that will be built over the next few years.

“Our guests expect us to push every envelope, so with the Icon ships we’re challenging ourselves to find a new approach to power and propulsion that is safe, reliable, and more energy-efficient than ever before,” says Fain. “The beauty of fuel cells is that they produce electricity with zero carbon footprint – the only emission is water. The science behind fuel cells is well known, but the challenge of manufacturing them at a size appropriate for marine applications is only just coming into its own. We’re pleased to be working with manufacturers to develop the technology to make them practical for our cruise ships.” These technological advancements and investments in new markets and ships are helping RCL’s six brands to drive growth, despite recent political upheaval and continued terrorism-related threats across the globe, says Fain. “While we would like to see more stability in the world, the fact that RCL continues to do so well is evidence that we can chart the correct course, even in the choppiest waters.”

Certainly, RCL is doing something right. This August, the corporation surpassed its own second quarter forecast, turning in earnings per share (EPS) of US$1.71, more than 60% higher than a year ago. Net revenue yield was up 11.5% in constant currency, and is expected to increase by another 4-4.5% in the third quarter of 2017, driven by strong demand trends for Europe and North America cruises. Meanwhile, RCL’s booked position for the remainder of 2017 continues to set new records, and its booked position for 2018 shows an increase in both rate and volume, versus the same time in 2016.

By focusing on yield improvement, effective cost control and modest capacity growth, the company has also attained the goals it outlined in its 2014 Double-Double programme – to achieve double-digit return on invested capital and double EPS by the end of 2017.

“The Double-Double programme has proven amazingly successful in rallying our massive organisation across both land and sea,” says Fain. “We’ve used it to inculcate a focus on effectuating step change in our profitability and it’s done just that. However, our success and financial performance is a direct result of our employees’ drive and determination – if we give our people focus and a clear vision, then nothing stops them from achieving extraordinary results.”

As RCL heads into its 50th year, its employees continue to be more focused than ever to ensure it remains successful. Between 2018 and 2024, RCL’s brands will welcome a total of 12 vessels – two new Mein Schiffs for TUI Cruises, four Edge-class vessels for Celebrity Cruises, and Symphony of the Seas, a fifth Oasis-class ship, two Quantum-class vessels and two Icon newbuilds for Royal Caribbean International. Meanwhile, Azamara Club Cruises, Pullmantur and SkySea Cruise Line will continue to look for ways to improve their respective cruise offerings.

“A few years ago, guests still liked to purchase material goods like large TVs, but now they want to spend their money on experiences with families and friends so they can develop memories that will last a lifetime,” he says. “We’re benefiting from this cultural shift and we’ll work hard to ensure we deliver these experiences with all of our new, and existing, ships.”

Fain, who will also be celebrating his 30th anniversary as RCL’s chairman and CEO in 2018, is confident that the company has a long and prosperous future ahead.

“I’m constantly in awe of RCL’s men and women who work so hard and with such passion to produce the best vacations on earth,” he enthuses. “Their skills, determination and spirit inspire me every day. How will I celebrate my 30-year anniversary? The same way I spend every day – working with some of the finest people and feeling like I have the best job in the world as I look for how my 10,952nd day can be even better than my 10,951st.”

 

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