It looked like a bad idea at the time. Royal Caribbean International’s Oasis of the Seas, the world’s biggest cruise ship, pulled into port in Florida a year ago just as the US economic recession hit bottom. The company’s motto, “Why Not?” has driven its business decision.
The skeptics were wrong. Oasis of the Seas has delivered spectacular results – and now RCI is doubling-down. The naysayers assumed the $1.4 billion ship was just too big and American consumers, facing near 10% unemployment at home, were too budget conscious to spend on Caribbean cruise vacations.
RCI’s second Oasis class vessel, the Allure of the Seas, took its maiden voyage Dec. 1 and was filled with even more ground-breaking amenities, entertainment choices and creature comforts.
“Most of the questions I received were skeptical,” recalls Adam Goldstein, RCI’s CEO and President of Royal Caribbean International. “Today there are really no questions. There is universal acceptance that the Oasis of the Seas product formula is a winner.”
RCI’s recipe for success is rooted in a series of cruise industry firsts in fleet design, cost-controls and on-board, customer-centric innovations since the 1980s by the predecessor to its parent company, Royal Caribbean Cruises Ltd., Mr Goldstein says. Moreover, the leadership and attention to detail by Chairman and CEO Richard Fain, during the design and development of each of the series of vessels, is stupendous.
Aggressive expansion
Mr Goldstein was an early reader of the global holiday market for cruise vessels as far back in the early 1990s, as a much younger Executive (VP). RCI is aggressively expanding into overseas markets to exploit higher demand at a time that passenger capacity growth in the industry is slowing. Next summer, for instance, nearly half of RCI’s fleet of 22 cruise ships will operate in Europe, while others operate from ports in Brazil, Colombia, China, Dubai, and Australia.
“That’s incredible,” says Mr Goldstein, RCL’s former international sales chief. “We are bringing ships in our brand to these markets where we can source volumes of customers and rapidly grow the markets.”
Shares of Royal Caribbean Cruises Ltd. have surged since earnings jumped 55% in the third quarter of this year. The larger-than-expected quarterly earnings jump was powered by strong bookings and a decline in operating costs and fuel consumption. Wall Street analysts predict strong revenues for the company during the fourth quarter holiday season.
Cuts and lay-offs
RCL has been whipsawed by the sluggish world economy. Two years ago, RCCL recorded record revenues and was poised to launch an ambitious, upbeat marketing campaign. But in the face of rising record fuel prices, weak dollar, and expensive to complete the build out of the Oasis of the Seas and Allure of the Seas, the company cut spending by $125 million and laid off 400 shore-based employees.
“There are cycles. Things go up and down. That’s the way we managed the fleet,” Mr Goldstein explains. “People would say, ‘Why are you bringing this ship into service in the middle of a recession?’ We didn’t plan it that way. But in some ways, it worked to our advantage because it gave people something to be upbeat about.”
Why not?
The Royal Caribbean’s motto, “Why Not?” has driven its business decision. The first ice shows at seas? No problem. The first private guest islands off the coast of Haiti and Bahamas? Sure. The biggest cruise at sea? Absolutely.
Today’s Royal Caribbean Cruises Ltd. took shape in 1997 through a merger of Royal Caribbean International and Celebrity Cruises, and the new company decided to keep the brands separate, tracing its bloodline to a string of groundbreaking cruise ships.
With 43 ships in service under five brands, the Oasis class vessels are the King Kong of cruise vessels. Mr Goldstein suggests that the Oasis class might be at the upper limit of size that makes good business sense for Royal Caribbean. He declines to disclose specifics, but says RCI executives are actively debating internally its next generation of cruise vessels.
“We have said we don’t have plans to build additional Oasis class ships at this time,” he says. “We’re not looking to outdo or mimic Oasis class ships … We realise we could not endlessly replicate that formula and have the type of success we expect to have.”
To build market share in Australia, Mr Goldstein explains, “You can’t expect more and more and more people to fly to Miami. We have to bring ships to Australia to do that, and the way to do that is to bring ships that fit there.”
The Oasis and Allure were built at STX Europe’s Finland Cruise Yards in Turku, Finland. They each measure 1,200 feet (360 metres) from bow to stern, and their height from sea level is 236 feet (72 metres). Royal Caribbean says both ships would be based year-round at Port Everglades, Florida and sail seven-night voyages to the Caribbean.
The Allure of the Seas’ 1,380-seat theatre and an ice skating rink will be the first at sea to feature DreamWorks Animation characters, such as Shrek, part of a new partnership between DreamWorks and Royal Caribbean. It will also host Broadway-style shows, including Chicago the Musical and Blue Planet, a mix of theatrical performance and acrobatics.
“There was an element of risk taking a six-time Tony Award winning musical that is normally two hours and ten minutes with an intermission and making it into a 90-minute version,” Mr Goldstein explains. “Not to mention it’s an Academy Award Winning movie. That set high expectations.”
Well, Why not?
Text: George Jordan
Date: 08 March 2011