MSC Cruises: The global brand with a local touch

Pierfrancesco Vago and MSC Cruises have come a long way in a short time. Bringing two prototypes on stream in a year says much about this dynamic company, reports Susan Parker

MSC Cruises: The global brand with a local touch
Pierfrancesco Vago, executive chairman MSC Cruises
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.

I first met Pierfrancesco Vago, executive chairman MSC Cruises, 14 years ago when the cruise ship side of privately owned container company Mediterranean Shipping Company was a very small part of the business. With three small ships to its name and a brand that was virtually unknown, the idea that it would become the third largest player in the industry in just over two decades and carry close to five million passengers would have been unthinkable. However, the brand has come into its own with a raft of newbuilds and plenty more to come, not least four LNG ships due for delivery between 2022 and 2026.

On 3 June, the first of two prototypes to be delivered this year was christened in Le Havre, France. Built by STX France, MSC Meraviglia is a vessel for all seasons, while the second prototype MSC Seaside is under construction at Fincantieri’s Monfalcone yard and is built for sunnier climes. “Designing a prototype is very complex,” Vago comments. “We began these two ships in 2013 and we’re starting to create technical roundtables to explore the best in class and set new standards.”

While much of what MSC does to create its tonnage is under wraps, Vago is clear that the company wants to be at the forefront of technology. “Every time we spend one billion for one asset, it’s important that we have the latest technology,” he says. “Whether in leisure or technology, our intention is to have the least possible impact [on the environment]. LNG is what the world has to offer and as technology develops, I promise we’ll always try to improve and reach the goal of zero impact.”

LNG is one technology investment. “LNG operation is very important in terms of zero impact on the environment,” says Vago. “There’s an incredible future ahead of us and also an advantage over other holidays.”

Harmonising supply standards is key. “Each country and region has its own set of regulations, making it quite complex for ships operating globally,” Vago comments, adding that another factor is finding a way to pump LNG into the vessel that reduces the 150-400-feet no-access area. “We’re designing a double-hosing pipe to increase the level of safety and reduce the no-access area. It’s an important piece of the journey towards LNG operation.”

Another recent technology enhancement is communications system MSC for Me, which went live on MSC Meraviglia. Partnering with Deloitte, Hewlett Packard Enterprise and Samsung, MSC wanted to set up an onshore trial system to achieve what is notoriously difficult to accomplish on a moving platform. All the signs point to success. “We live in a fast world, so we must give everything we can and that is why we have such a digitalised ship,” Vago explains. “There are 3,050 [Bluetooth] beacons throughout the ship to guarantee the experience.”

MSC has also launched the first shipboard wayfinding system, which isn’t enabled through Google maps, but a personalised platform. Vago reveals that MSC is researching how MSC for Me can be adapted for man-overboard detection. “We have a two-year exclusivity deal with an amazing partner,” he says. “We’re in the testing phase now and need to certify it.”

Although the container business supported the cruise division in its early years, the latter is now standing squarely on its own two feet. Its meteoric growth was initially inspired by the knowledge that its older, smaller tonnage was not going to make it in the modern cruising world. The knock-on effect was that loyal seafarers would be put out of work, which owner, Gianluigi Aponte, was not prepared to entertain.

“In 2001-2002 we realised the world of cruising had changed,” remarks Vago. “It was no longer about taking passengers from A to B, but about the cruise being the destination itself. Someone approached us to buy the three ships, but Aponte said he’d never sell his own people so the only way was to create an industrial plan for the future.”

That plan saw 12 ships being delivered in the first 10 years (2003-2013) for a cost of €6 billion (US$7.1 billion), which prompted an 800% growth that allowed MSC to reach the right economies of scale to move forward. It took two more years to ensure systems were in place before MSC prepared for a second tranche of 11 newbuilds – an investment of €9 billion (US$10.6 billion).

MSC’s decision to order newbuilds at a time when no one else was proved advantageous. “We achieved some extremely good prices,” says Vago, adding that his brand and cruise holidays were making waves with first-time cruisers. “The moment you establish the base, potential and revenue management will ensure the bottom line.”

In terms of shipyard capacity, Vago believes the small number of relevant yards and slots is an advantage. “The market is controlled by how many ships can be built, and year on year, 4-6% extra beds are coming in,” he says. “It’s a healthy industry. With new global regulations entering soon, we may see some scrapping [of older tonnage] which I hope will bring stability to the cruise offering.”

With 25 million passengers taking to sea annually, cruising is now an alternative to land-based vacations. “This brings new confidence to attract first-time passengers, which is why we’re investing €9 billion (US$10.6 billion) in the next few years,” Vago says. “MSC’s vision has always been to be a global brand with a local touch.”

MSC does not just aim for quick results, it plans for the short, mid- and long-term. “In its 40 years, MSC has never paid 1% of dividends – the money has always been reinvested,” Vago explains. “This is an expensive business and you need big shoulders. It took the cargo business to support us, but now cruise is a separate unit with an investment plan for the next 10 years which I think is unique [in this industry] to us.”

Vago says there is also a passion that comes from being a family business and attributes much of MSC’s success to the fact it controls the delivery of its product from A to Z. “The level of quality and delivery to our customer and the commitment we make cannot be given by third parties. This can sometimes be detri-mental to the bottom line, but that’s the promise we make.”

Such rapid growth has had its challenges, but the future is bright. “We’ve made mistakes, but we’re humble and we learn from them, and always improve ourselves,” concludes Vago. “We’ve reached a high level on the hotel side. We know shipping and of course the bottom line is important, but sometimes to give the extra customer touch, we partner with the best in the world, like Lego, Cirque du Soleil and Chicco. It’s expensive, but that’s our commitment to delivering MSC vacations.”

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Susan Parker
By Susan Parker
07 December 2017

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