A guiding hand in Italy

A guiding hand in Italy

The last couple of years have been fairly traumatic ones for Carnival Corporation, culminating in a major managerial shake-up last year which saw Micky Arison withdrawing from the CEO role (while remaining chairman). At the same time, longtime vice chairman and COO Howard Frank also stepped down to become special advisor to the new CEO, Arnold Donald.

Frank says: “Micky and I had been talking about downshifting for a couple of years but the timing had not been right until then as first we had Costa Concordia in 2012 and then it was Carnival Triumph.

“But we both believed that – at some point – change would be good for the company. When Micky finally stepped down as CEO, he handed over to Arnold who had been on the board for 12 years so knew the business well and would be perfect for how we wanted it to run in the future. Companies need refreshing with new thinking and new strategies. I was happy Arnold was there to do that and to step down from my day-to-day responsibilities. The plan was for me to work with him for six months to transition him into the role as CEO and then leave at the end of the year, which I did.”

That was not the end of it, though. Frank says: “I love the business and am very loyal to it so, when Arnold and Michael (Thamm – Costa Crociere CEO) then felt I could help in Europe by becoming Costa chairman and adding value to the brand, I was very happy to take that on. After all, it would have been very hard to go cold turkey and completely leave the business. Now I love what I’m doing – but am also happy to have more time for myself, too. My role in Costa is to chair the board and to support Michael, his team and their efforts. It’s not a day-to-day reporting job but I do talk to Michael weekly and we meet monthly to discuss strategy and progress.”

He adds that his extensive experience in Italy, most recently talking to the Government and the Venice port authority over the situation with the ban on ships over 96,000gt, will come in useful in his new role. He was also obviously much involved in the aftermath of the Costa Concordia accident, which was a major setback for the brand in Italy and across Europe.

“We enjoyed a period of major improvement in Costa brand business in 2013, with pricing and yields both up in Italy and most other European markets,” says Frank. “The perception of the brand showed dramatic improvement in 2013 which has continued into 2014 but our research shows that it takes time to turn that perception change into price improvement. But, in 2013, we saw pricing rise 4% - 5% and we expect to see another improvement this year as all markets started 2014 quite strongly.

“We are seeing continued confidence in the brand and part of the catalyst for that happening was the successful project to get the Costa Concordia upright last year and ready to be towed away.” With the refloating of the vessel now scheduled for the spring prior to removal from the Italian coast in June, he says of the parbuckling project that saw the ship set upright in September: “It was an extraordinary engineering achievement and I think the Italian Government appreciated how it was done without causing any harm to the environment. That really contributed to Costa being seen more positively in Italy and I think the ship still being on view there is no longer an issue in the brand’s recovery.”

He says that although Italy has suffered a recession from which things have only now started to stabilise, he is optimistic regarding the outlook. “We hope to see more improvement in the country’s GDP this year and we do get a sense that things are getting better. Based on Costa’s bookings, it would certainly seem so.

“People seem more confident about the future and we feel pretty good about ours as – in addition to the Italy upturn – the French and even the Spanish cruise markets seem to be coming back while Germany has remained strong throughout.” He adds: “Although the wave season has been OK in Europe, we lost a lot on pricing two years ago and we are still working our way back to where we were. We are not back yet but we are making progress.”

As is Donald in his plan for the corporation’s 10 brands to work more closely together to maximise the gains from their synergies and Carnival’s overall size and buying power. Frank says: “The direction Arnold had given in leveraging Carnival’s size was something we had been evolving for the last couple of years but he has taken it to the next level. From the Costa standpoint, Michael started that process nearly a year ago when he recognised that the scale of Costa, AIDA and Ibero together could be combined in certain back of house operations.

“I think this will feed right into what Arnold wants to accomplish. The corporate group will use Costa and P&O in the UK to help the whole group in terms of negotiating and leveraging scale in Europe at the ports where we call, with the facilities we use and the supplying of the ships. P&O and Costa already work together on procurement and it has been very effective so that is what is going to happen across the corporation.”

He says Thamm has also worked very hard to make sure Costa Cruises and AIDA Cruises cooperate and complement each other in the German market. “There is one sales force selling both but the marketing is different as are the brand offers, with AIDA being a German-speaking product and Costa being pan-European with an Italian slant. Some Germans only want German products but some want an international one so each brand serves complementary needs.”

Frank says the overall growth of Carnival’s worldwide operations has surprised even him.

“When I joined Carnival, it had just bought Holland America Line but that only had four ships to add to Carnival Cruise Lines’ six and I wasn’t so smart that I saw how big Carnival would become from that modest base. But Micky and I did realise that we could grow the business, not just internally by building ships but globally by acquisition. It started with us buying a share of Seabourn. Then it was Costa (with Airtours), Cunard and then the ultimate transaction was that of P&O Princess. It was just a matter of one step at a time; each acquisition had to make strategic sense from a geography and brand complementary point of view. And now we have 10 brands and more than 100 ships.”

He concludes: “It has been a lot of hard work, a lot of fun and we have had a lot of success and now I am happy that we have quality executives in place to take it on from here. It always takes time to settle down after major management change but I am confident Carnival will go on to even better things in the future.”

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.

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Tony Peisley
By Tony Peisley
24 March 2014

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