Higher prices are the ‘only way’ to boost cruise revenues, Carnival Corporation chief executive Arnold Donald tells Hollie-Rae Merrick and Lucy Huxley
A lack of capacity in cruise will hold back growth in the sector, according to the world’s most powerful cruise boss, Carnival Corporation president and chief executive Arnold Donald.
Speaking exclusively to Travel Weekly at the launch of Carnival brand P&O Cruises’ Britannia, Donald said a lack of cabins in the sector ruled out a massive spike in passenger numbers.
Countering industry fears of overcapacity, he said growth would have to come through revenues and higher price points, not increased supply.
Donald noted sector analysts were constantly highlighting the growth potential of cruise, but he warned expectations of a rapid increase were unrealistic.
“Cruise passenger numbers are going to be stuck at the same point,” he said. “It’s going to be difficult to get those numbers up because we only have so many cabins.
“Everyone keeps looking to get bigger numbers and to grow the market, but the reality is that we have a certain amount of space.
“The size of the sector will go up a little bit when we have more cabins. It will go up a little [in the UK] because of Britannia and Anthem.”
Donald’s comments came as Clia UK & Ireland revealed that UK cruise passenger figures dipped by almost 5% in 2014, compared with 2013.
The number of UK passengers dropped from 1.72 million in 2013 to 1.64 million, meaning Germany overtook the UK to become the biggest market in Europe.
There was also a decrease in the number of passengers from Italy and Spain last year.
Donald said Carnival’s nine brands needed to make sure customers were getting good value and “exceptional variety” – a combination that would help drive growth in revenues.
He said: “From a business standpoint, we need to make sure what we have on offer resonates with guests, and then we get the value we should.
“We need to create demand ahead of capacity, so we can get the pricing we need to be able to build more ships.
“The reality is that there is room on pricing. There is room to get more value; people like to feel they’ve got a good deal.
“We have to grow through revenues because we can’t grow through cabins. We have 100 ships, so when we build a ship like Britannia, it is 1% growth.
“Our shareholders aren’t going to see much from 1% growth. We have to grow through revenues, and to do that, you have to give people what they want.”
Donald said variety, provided through different dining options and the range of experiences available with each brand, would help to drive revenues.
Carnival has ships on order for Carnival Cruise Line and Holland America Line, both of which have vessels launching next year and in 2018.
Luxury brand Seabourn and Princess Cruises also have ships on order.
Donald said there were no plans for a new-build to follow Britannia for P&O Cruises, but said the line’s team would discuss its updated strategy with him in the spring and the corporation had slots at shipyards to play with.
He said he expected some existing P&O Cruises passengers would prefer the line’s smaller ships to its large new flagship, but it was important to offer variety and choice.
Arnold champions agents and word of mouth as key ways to boost cruise sales
Carnival Corporation boss Arnold Donald has highlighted agents and word of mouth as two important tools to help spread the message about cruising.
He said hosting more than 3,000 agents on board new ship Britannia was the best way to get the trade up to speed with P&O Cruises’ offering.
“Having 3,000 travel professionals on board Britannia was important because they get to see it first-hand,” he said. “They can go back knowing the product and can get the right people on the ship.”
As reported in last week’s Travel Weekly, Donald urged agents to put the customer experience ahead of their commission when it comes to converting a new-to-cruise customer.
Donald also said he believed word of mouth was key, but that it was important to spread the word about cruising in different ways.
“The most important thing to help us attract those land-based holidaymakers is to exceed guest expectations,” he said. “There is nothing more powerful than word of mouth.”
In the US, a Carnival Corporation advert that aimed “to get people talking about cruising” was broadcast during last month’s Super Bowl. It was the corporation’s first multi-branded advert.
The company created four adverts and ran a social media campaign before the game asking the public to vote for their favourite.
Donald said before the chosen advert was even broadcast, the campaign had generated five billion impressions.
Carnival Brands to discuss efficiencies
Carnival Corporation is looking to benefit more from the scale its nine brands offer to ensure the lines are run more effectively and efficiently.
Arnold Donald is encouraging the lines to “communicate, coordinate and collaborate”, something that hasn’t previously been prioritised.
He said that in the past, efficiency wasn’t as important as building the brands, but the lines now had the scale needed to work together and, in turn, boost revenues.
Donald said Carnival Corporation was the fifth-largest purchaser of flights in the world but that, until now, the brands had bought flying separately.
The brands also negotiate separately with port agents and shore excursion companies.
Donald said: “We need to get everyone to communicate and collaborate, to share best practices. That helps our bottom line tremendously across cost and revenue management.
“We’re no longer reinventing the wheel. If one brand is doing something well, we’re communicating it and seeing if it works on another.
“We’ve always been about the brands and didn’t worry about efficiency.
“That is how we’ve got to being the world’s largest cruise company.
“We needed to build the brands and we would always make more money building the brand than we would by saving on efficiency.
“That was about early growth, but now the brands have scale; that matters from a revenue management standpoint.”
Royal patronage is a ‘privilege’ for P&O
Having the Queen name Britannia was hugely valuable and a reflection of the British heritage of P&O Cruises, according to Donald.
He said the involvement of the royal family had been an “extreme honour and a privilege”, and he was excited to get cruise on the front pages of newspapers and magazine.
Donald said the value of the coverage around Britannia’s launch and naming celebrations was “mindboggling”.
“We’re very fortunate to have the royal family connected to the brands, which are all great legacies of British history,” he added.
“It is obviously a huge statement about our British brands and the quality of the ships.”