Owning the market

Kevin Sheehan discusses getting New York City excited
Owning the market

By Susan Parker |

On 8 May this year, the keel was laid for the 144,017gt Norwegian Breakaway at Meyer Werft. In Spring 2013, she will begin sailing year-round from New York. Her sister ship, Norwegian Getaway, comes on stream a year later and will be homeported in Miami.

“I was negotiating these ships on the Southampton inaugural of Norwegian Epic in June 2010,” explains Kevin Sheehan, chief executive officer, Norwegian Cruise Line. “The German, French and Italian yards were there. We were the only ones in the market at that time so we got the best in class and pricing from financiers.”

Since Sheehan took over the helm about four years ago, the company has been undergoing a transformation and the two newbuildings will play a large part in its new era. “We think the marketing and excitement of these ships will raise our stature.”

Not only that, but he believes that the ship “has the economics that will make it a huge success.” With each ship representing more than 15 per cent extra capacity (ie 4,000 lower berths) in the fleet’s stock of 26,200 lower berths, Sheehan says: “We are growing back into our shoes and to where we should have been.”

The goal is nothing less than to own the market from which the ship sails. “As a lifelong New Yorker, it’s critically important to me that Norwegian Breakaway becomes New York’s ship. Our goal is to bring elements of New York on board so that guests will feel a real connection to the ship as New York’s true flagship,” says Sheehan, adding: “Mayor Bloomberg was giddy when we announced it.”

In this vein the artwork on Norwegian Breakaway’s hull will be painted by Peter Max, an artist with strong associations to the city. In July, Norwegian Cruise Line announced another New York connection. Celebrity chef Geoffrey Zakarian, who has deep roots in the city, is to create and oversee a seafood concept, Ocean Blue, on the ship.

Entertainment on board will be “another step on from Epic, which is going to be very exciting,” says Sheehan. Of course, Broadway is a main ingredient of city life and NCL will be featuring Rock of Ages along with two other shows, Burn the Floor and Cirque Dreams & Dinner Jungle Fantasy onboard. He is also excited about the top three decks, comprising the first Aqua Park at sea with five full-size water slides including twin freefall slides. Also included in the three-deck sports complex are a ropes course, miniature golf and basketball.

Norwegian Breakaway will be the largest ship ever to call the Big Apple its homeport. It is estimated that the 140,000 additional embarking passengers over two years will bring about $35m in additional direct spending to New York. From May to October she will sail weekly to Bermuda and for the winter season to the Bahamas and Florida as well as the Southern Caribbean.

There has also been investment in the rest of the fleet. For example Moderno is now on all the ships except Norwegian Sky. However, as the latter has recently been acquired from Genting Hong Kong – making Norwegian Cruise Line the owner of all the ships – she will now be brought to the level of the rest of the fleet.

Much has changed at Norwegian Cruise Line since Sheehan took the helm. “It took three to four years to make sure everything was working very well and position the company for success going forward,” he explains. Reconnecting with the travel agent community is one example. “We were a difficult company to do business with; very complex. Everything that was incorrect, we were doing.”

To turn this around, a huge focus was placed on guest satisfaction. Complicating matters, freestyle was “very complicated to communicate in an advertisement” but NCL has found it resonates well with guests when they experience it. From investing in the company’s private island and the website to more crew training (so they know 90 per cent of what they are doing before they join the ship), every part of the operation has been revisited. “We have been working like in a laboratory for the last few years to bring it to life.”

When Sheehan arrived, debt was significant related to earnings. “Now, we have a pretty good balance between debt and earnings power so we are able to look towards the future. There is more money in the kitty.” Remembering the days when he sold newspapers outside a church, Sheehan comments on spending: “It must be carefully thought through. Every single dollar needs to be spent smartly for us to achieve the goal and wish for the future, which is really to properly position this brand. I think we have a great unique brand which is the right one for the future. We know the competition is interested in what we are doing as they have tried to move towards it.” He is confident that the company has the right recipe for the future with the ships, the management team, the travel agents and the crew all working towards success.

Commenting on today’s market, he says it has been “sluggish” since the Concordia sinking at the beginning of the year. “We thought it was coming back a bit after eight weeks from January but there has been a significant impact. There is a lot of pricing going on. We are taking each week, each month at a time. We are fine for 2Q and 3Q and we do see some hope for the fourth quarter and next year. As we get further away from that tragedy, people will remember that it is a great vacation at affordable prices.”

From the company’s perspective, he can be forgiven for wishing that it was not quite so affordable. “I would love to see pricing up 20 to 30 per cent because the industry has built itself on value and price. When you think of the alternatives, for example our ship in Hawaii, it is a fraction of the price of a hotel there.”

So what of the future? When it comes to the IPO that has been mooted in the past, he comments: “In the next 18 months, if the market returns to a better place, we will probably file an IPO. We have had it on file. The later we wait the better it is for the company as there will be more clarity with the new ships coming.”

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