Four brands, one lens

Stein Kruse talks management changes at Carnival Corp.
Four brands, one lens

By Tony Peisley |

Stein Kruse is now not only CEO of the newly-expanded Holland America Group, president and CEO of Holland America Line (HAL) and chairman of Seabourn but has also become CEO of Princess Cruises and chairman of the board of MANCO, which oversees Carnival Australia operations including P&O Cruises Australia (P&OCA), in the process.

While admitting that this has presented the commercial stationery department with something of a challenge, he points out that the changes have already paid dividends in terms of strategic decision making.

“The beauty of me wearing all these hats is that it allows me to look at four brands through a single lens. This makes it much easier to make decisions which help the whole group, such as selecting where it makes the most sense to deploy the 40-plus ships operated by the brands,” he says. “When I looked more closely at P&OCA, I did so with an awareness of the numbers Princess has been generating in the Australian market and also of the growing success HAL and Seabourn have been having, both sourcing from there as well as bringing international passengers to the region.”

He adds: “Australia is a very strong market which is growing so fast that it is now ranked number one in the world in market growth and penetration. But, although P&OCA is the most powerful brand in that market, it only has three ships. HAL has a new ship with the equivalent capacity of two S-class ships arriving in early 2016 and P&OCA is ready for more tonnage to meet its own demand. This was a clear portfolio management opportunity when we looked at the earnings potential for two S-class ships in one brand against the other and at their strategic fit with their individual growth plans.”

Kruse explains that switching the two ships was discussed first with Carnival Australia CEO Ann Sherry, then within the Holland America Group and finally with Carnival board directors, including chairman Micky Arison and CEO Arnold Donald.

“Everybody agreed it made perfect sense to make this strategic investment in the growth of the Australian market as we saw it as a very positive development on a whole host of levels. It is not just about putting additional capacity there but it also allows the brand to operate broader deployments, using new homeports and opening up new source markets.”

He says that, as the ships are a similar age and size to those the brand already operates, “they did not need massive, costly conversions – just a little money spent on cosmetic work to make them more appealing to the Australian market.

“This means we are looking at only a short time out of service for refits which will be carried out en route to Australia, probably in Singapore.”

Asia represents another example of how Kruse believes his new role controlling four brands will bring benefits to the whole Holland America Group as well as to the corporation.

He says: “Princess had already embarked on an Asia strategy when it became part of my group. I endorsed that initiative as, strategically, it makes a lot of sense to build organisational and brand awareness in China, Japan, Taiwan and Singapore.

“Using Princess as the pioneer and pathfinder for Asian sourcing allows HAL and Seabourn to continue as destination brands for the region, bringing international passengers into the area. As Princess develops the Japanese and, in particular, the much larger Chinese market, we will be learning from its experiences so that, when we look at deployments beyond 2015, we will start exploring the idea of Asia sourcing for HAL and Seabourn passengers, too.”

There will also be opportunities for P&OCA, which he says is much closer to Asia than the other brands.

China offers huge potential with its growing population, affluence and overseas travel market, says Kruse. “We are using the skills and tactics we have learned in other markets and the very strong organisational structures we have built up to enable us to market effectively. To me, it is inevitable that Asian markets will become very lucrative for this industry but it is definitely going to take time.

“For a start, China is not one market, it is many. We have to do things differently depending on whether it is Shanghai, Beijing, Tianjin or Hong Kong. It is such a vast place, there can be no single China message and there is such low awareness of cruising that we have to educate both the distributor and the consumer at the same time.”

Back home in North America, Carnival Corporation – along with the rest of the industry – has sought to recover consumer confidence following the series of unfortunate incidents which marred the early part of last year. Kruse says: “We have managed to change the conversation and are now moving in the right direction and gaining some momentum. Passenger satisfaction levels are very high and yields are also improving.”

This more buoyant mood will have been boosted by the recent alternative compliance deals forged by Carnival Corporation (among other companies) with the US Environmental Protection Agency.

These allow the brands to operate in the North American Emissions Control Area (ECA) without having to use the much more expensive marine gas oil low-sulphur fuel. This is based on their operation of exhaust gas cleaning systems (scrubbers) and Kruse points out that this is not without its challenges.

This article appeared in the Autumn/Winter 2014 edition of International Cruise & Ferry Review. To read the full article, you can subscribe to the magazine in printed or digital formats.

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