Some of the leading people in top positions are exiting the business suddenly
Has cruising lost its cachet as a business? If the very sudden departures of several key industry players in any indication, it is possible.
In the last month some very important people have left their jobs at various cruise lines; Carnival Corp (owner of Princess, P&O, Cunard, Holland America, Seabourn and Carnival Cruise Line) and also Royal Caribbean International (owner of Celebrity, Azamara and Royal Caribbean, among other brands).
It seemed to start with Micky Arison leaving the position of CEO for Carnival Cruise Line, but make no mistake, Micky has not given up any power, he merely changed his visibility so he can no longer be criticized for his obsession with his basketball team (he owns the NBA championship team Miami Heat) rather his cruise ships.
But since Micky left this is who we have seen leaving the cruise industry:
Lisa Bauer of Royal Caribbean, Carol Marlowe and Peter Shanks (two former presidents of Cunard Line, most recently with P&O Cruises in the U.K.), Edie Bornstein of Azamara (the upscale cruise line in the Celebrity family). Make no mistake, all of these people were key figures in the topmost levels of the cruise business, and all have departed in the last 30 days. What is going on here?
Is it that cruising has become something of a "less desirable" business recently because of the bad news, etc. Are they bored with it, is it a good time cash out because lower stock prices are coming, has pay compensation gone downhill. are the CEO and Board of Directors too grouchy and critical?
Cruise lines have been changing over the last many years, and not necessarily for the good. Micky was great for Carnival and wonderful for cruising. He brought the cruise industry from something 'only for rich people' to something the average person can now enjoy, especially families. At the same time, he listened to passengers and respected what they had to say. Because of this, ships began to change in design. For example, conventional wisdom was that you could not have balcony cabins on a ship - now, ships have upwards of 85% balconies. They also began to push the limits and advance the technology. Ships use to be all steel because in the past they were made for transatlantic crossings. Now the upper structures on ships are made from aluminum allowing for major changes in design.
Ships have also become huge in size because bigger allows more amenities, which attracts passengers and therefore increases profits. Smaller ships simply don't have as good a profit margin as big ships. But then passengers also have to be herded like cattle.
For the most part, all of these changes have come within the last 30 years. Now, pretty much everyone in the U.S. knows about cruising and it's become a mainstream vacation option.
So what's next?
Again, just my personal opinion, but when Micky left, the cruise industry began to change again. It began to be taken over by 'bean counters' who seem to be more interested in the bottom line than in providing a wonderful vacation experience. They seem to be constantly trying to fine-tune their product, not to service the passengers, but to save expenditures where possible while getting the most profit out of each dollar.
I don't know the exact numbers, but in the past a cabin steward would be responsible for a lot less staterooms than they do now. They were able to take their time and make sure the staterooms were perfect and the passengers were taken care of. Now, they have more staterooms to clean and it's more of a quick assembly-line style of production. Less about quality of service and more about quantity.
This holds true throughout the ship. I had a 1-1/2 hour conversation with one of the head chefs on a ship and it amazed me as to how they have changed. Where they use to cook and bake everything from scratch, now many products are brought onboard pre-prepared and ready to 'heat-n-eat'. This costs less and requires less staff, but it also has impacted the quality of the food compared to what it was like many years ago. Again, less about quality and more about quantity. Take a look at the Oasis-class ships. You simply cannot feed 7500 people (passengers and crew) within a 4 hour window for dinner and do it with a high level of quality. It has to be done with a conveyor belt production that relies on quantity. And as with most things in life, many times an increase in quantity results in a decrease in quality.
Look at McDonald's. When I worked there back in the mid-60's, we made the french fries from scratch starting with fresh potatoes at each restaurant and they were excellent because the finished product was fresh. Same for the burgers. Now, everything is prepared in a massive plant in huge machines, then frozen, and shipped out to the restaurants to remain frozen until cooked. They are no where near as good as they use to be. Yes, they're still cheap, but at the cost of quality. That's why places like Five Guys are so popular. People are willing to pay more to get better quality. It's unfortunate that for the majority, the cruise industry is following the McDonalds way of doing business more than Five Guys.
So, to get back to the question, where is all this heading?
They've tried to keep the price of cruising down to a manageable amount for the majority of Americans. In doing so, they have decreased the overall quality of cruising. Ships have become destinations in themselves in an attempt to keep the interest going.
But what's next on the horizon? There are only so many ports available in the Caribbean, so do they concentrate on building floating resorts so the ships truly do become the destination?
At the same time, do cruise lines continue to concentrate on the mass production assembly line way of taking care of passengers?
As I said in the first sentence, it's all about the money. We would be naive to think otherwise.
While some of these executives left on their own, some where 'phased out'. They may have you believe it's a way to streamline management, cut out redundancy, and save money. While it could be some or all of these, it could also be that they are choosing to go in a different direction and are making changes towards that. Obviously, I don't know the answer to the question, but I will say it'll be interesting to see where all this is heading. I just hope the changes will result in a better quality product keeping in mind that sometimes bigger is not necessarily better for the passengers.
__________________ Travel Agent/Cruise Specialist w/12 yrs exp and 47 Cruises on 11 cruise lines! Favorites: Paul Gauguin - Tahiti: Uniworld River Cruises - Europe; Celebrity Solstice-class ships; Holland America - 12-nights Baltics & Russia; RCCL - 14-nights Greek Isles, Turkey, & Croatia; Holland America - 14-day Alaskan cruisetour; 10-night Canada/New England cruise; 21 days Hawaii w/7-night NCL cruise; Oceania - 25 days in Asia; more than 3 months touring Europe by train. And many all-inclusive resorts!
THAT IS JUST ABOUT AS GOOD A SUMMATION OF THE INEVITABILITY OF ALWAYS TRYING TO GET BIGGER AND BIGGER AS A BUSINESS AS I HAVE READ.
On Wall street that is called commoditization - when a product becomes commodity it means it has become all about volume and less about quality. You make your money by selling more units, usually developed in some kind of assembly plant where everything is reduced to its simplest produced and most easily managed and maintained form.
I agree that the cruise lines participated in making this happened, but it also has a lot to do with the price of fuel AND new ecological standards that have been put upon the cruise lines when sailing anywhere near US waters. Soon they will not be allowed to burn their traditional fuel and will have to go to more expensive fuels for more of each trip. This leads to shorter itineraries where the destinations are secondary to the ports of call.
It was inevitable.
But I am actually more interested in exactly what has happened lately. I agree it is "money" but I think it boils down to Carnival having to cut rates so much just to get people on board - and pricing then affects every cruise line. When stock prices go down so do executive bonuses.
However, a lot of the people I named were not board members, they were just below that - more like top management. Maybe they are just tired of the bean counters dictating everything - making it so mechanical and less innovative.
Also - we are at something of a stagnation point, especially at Carnival corp. where there are very few new and innovative ships coming out. Kind of like the music business in 1969 - sometimes I get the feeling the cruise industry peaked in 2008.
Royal Caribbean Ltd seems to be reducing layers of management in all of their brands. Those who previously reported to Lisa Bauer will now report directly to Adam Goldstein. It would appear the same idea is being implemented at Azamara with Edie Bornstein leaving, and her subordinates will be moved under Larry Pimental directly. The same will likely happen at Celebrity, if it hasn't already.
I wonder how much of this has to do with the recent shake-up of the RCCL board? They changed the bylaws to require all of them to be elected annually instead of staggered terms. They appointed a 'lead' director, yet still have Richard Fain as Chairman. Why a 'lead director' too? I get the sense the board is trying to exert more power and grew tired of being a rubber stamp for whatever Fain wanted. They saw too many chiefs sitting in corporate offices and so forth, and pushed some people out.
I agree that eliminating middle management is also a great way to cut costs and the similarities are as you described.
I have to say I am a little surprised they would cut Lisa Bauer. Now, I really love Vicki Freed, but she is a Joanie come lately to the RCL party. Plus, you never really hear that much from her, whereas Lisa was at the forefront of design options for Oasis, etc.
But Vicki's focus is on travel agents. Just maybe cruise ship design has "peaked out" in many cases, and the focus going forward will be on selling cruises, not so much designing ships.
It feels like maybe they have run out of (affordable) ideas for new ships and the new thing is only building more of the same (Carnival has been doing basically that for 10 years, just upping the size). And Celebrity does not need any more ships right now. Princess have also all been the same for over a decade now - just getting bigger but no huge design changes.
BUT - all that is assuming the retirements are coming from the cruise line side. What if they are quitting, not being fired? Didja think of that? Maybe it is that bonuses are not what they used to be. Maybe they have had too many years of no "performance" bonuses because the stock prices have been languishing? Maybe its because they know something we don't know - like that the new rules for fuel and (possibly - though I doubt it) taxation will eat cruise line profits like crazy.
Maybe we are in for a real cruise recession where they really can't fill ships and have to scrap half of them. Ugh - that would be ugly.
I was told that many mid and upper level managers at Carnival were shocked when Vicki left after she didn't get Dickenson's job when he retired. Royal Caribbean saw an opportunity and probably had a lucrative compensation package sitting in the top drawer of Richard Fain's desk, just waiting to put a name on it. But I also know more than one agent who is not especially impressed by Vicki or her presentations. There was some speculation that she was hired to replace Lisa Bauer, but Lisa's position was actually higher than the one Vicki took. It's all so confusing, the world of corporate politics.
RCI stated Lisa left on her own accord and was not fired or 'encouraged to resign', and while that kind of remark is typical and often crapola, in her case I tend to believe it. I think she might very well show up in a new job not involving a cruise line. Her husband died rather suddenly last year, so perhaps she just wants to get away from everything for a while.
Lots of variables to consider. Cruise line profits stagnating and thus the 6 and 7 figure bonuses vanishing is certainly one of them.