“Nobody buys a cruise because they saw an ad on Google,” said Royal Caribbean Cruises Ltd. Chairman and CEO Richard Fain. Especially in an election year.
At an informal breakfast with the press and on the podium at the Signature Travel Network Owner’s Meeting in Austin on Friday, he wrote off the economic pundits who predicted “Eighteen of the last 2 recessions.” With the election pushing advertising rates to new heights, though, selling through the travel advisor channel will be more cost-effective and vitally important than ever in making 2020 another record-breaking year for cruising.
Here’s more of his slightly edited thoughts on the economy, the Bahamas, investing in short cruises and Perfect Days — and a slip of the tongue on what’s in the works.
On the economy
“In 2017, I said, ‘This is the strongest economy I ever remember seeing.’ In 2018, we had a unanimous view that recession was about to happen; everyone was talking about recession and seemed to be trying to talk us into a recession. And this year, again, there’s an awful lot of talk about recession by people who have successfully predicted eighteen of the last two recessions. But so far, we’ve seen an amazing strength to the economy and an amazing depth. We see this in a longer booking window, in people buying higher category cabins and going for longer cruises.
“I think we are looking at another very strong year. I really think cruising has come of age. Normally in the lifecycle of an industry, people learn about it, it grows, it takes off, and then growth begins to slow down. But now, we seem to be on a second wind.
“We did go back and tried to correlate [cruise sales] to past election years and we were unable to find any correlation. Advertising rates have gone up — and one result is the role of the travel agent continues to be a key driver, not only in terms of individual sales but also agents are the ones who really get the word out. [Our growth] in large part is due to travel agents. Nobody buys a cruise because they saw an ad on Google.
“But more important for us is that we are a very long-term business. When we took possession of Oasis of the Seas in 2009, the economy was just desperate and it seemed it would never recover. People asked why we would order a ship to deliver in the middle of a recession. But Oasis was amazingly successful.
“Recessions will come and we will suffer, but the world doesn’t come to an end. We’re not gearing ourselves to the next quarter. After 9/11, also [people said] nobody is ever going to get on an airplane again and business really was terrible. For weeks, I was getting calls from investors saying, ‘Richard you have to cut your costs.’ Then, I got a call from one board member who said, ‘I don’t know what the right answer is, but we have said that our perspective is long-term; we are not interested in our share price today, but our share price three and five years forward. So, as you are making your decisions, that’s what you need to be looking at.’ It was very empowering. And that has served us well.”
On the travel advisor distribution channel
About the line’s partnership with travel advisors, Fain said: “Our relationship with the distribution system and with travel advisors has been an exception to most areas of modern business. The relationship has remained symbiotic, and it’s remained this way not because people in the cruise lines like travel advisors and want them to be successful, but because the travel agent community has made us successful. We are not altruists. Most people don’t have the luxury of understanding all the options; the travel professional is the one who makes that real to the customer. We are absolutely convinced that the symbiotic relationship between us makes us successful.
On RCCL’s rescue efforts in the Bahamas
Next up, on the topic of the Bahamas, Fain offered: “The nice thing was that it wasn’t someone making a decision. I wasn’t pushing; everyone was pushing me.
“It’s hard to comprehend what happened in the Bahamas. The news is showing the extreme, but what’s really heartbreaking is the pervasiveness of it. [On the affected islands] everything was damaged. It’s a devastation you don’t normally see.
“Bahamas was RCCL’s first stop on its first voyage 49 years ago, so it’s very meaningful to us. The mechanics of getting aid to the Bahamas was devastating; we had ships and people who wanted to go, but we couldn’t go ashore because the ports weren’t open. But we had tenders from our island, so we moved stuff box by box, crate by crate, hand over hand. We said to our passengers, ‘Sorry, in order to do this and also feed you, we need to start at 1:30 in the morning’ – and at 1:30, there were passengers asking how they could help.
“In Freeport, business is devastated, the economy is devastated. So, we really are focused on rebuilding the tourist infrastructure. We’ve created a kitchen that can feed 10,000 people, 20,000 meals a day.
“The strongest motivator in the world is pride in what you do. And even though what we did was a drop in the bucket, our people are proud of it. And if anything, our projects in the Bahamas are accelerated. We are moving ahead with our investment; it will be a major shot in the arm for Grand Bahama and create a new momentum. “
On investing in short itineraries
“We had gotten ourselves into a vicious cycle and we’ve been able to break that. We invested hundreds of millions of dollars in rebuilding our ships. [In cruising] it’s about the ships, the crew and the destination. We added Perfect Day at CocoCay and now it’s not just the ships and the crew and the entertainment, but also the perfect day. And now you start looking at pricing that is comparable to seven-day cruises. And then you say oh, now I can invest more [in those ships on short itineraries]. I don’t think people appreciate just how transformational that process is. We are getting a very good return on our investment.
“One thing I’m proud of is the muster drill. We are looking at the next level of that evolution, which will be quite exciting.
On priorities for 2020
Regarding the cruise line’s plans for 2020, Fain said: “The table stakes are to provide a great experience, great food and entertainment and beautiful ships, and to maintain a level of sustainability. Those are part of who we are. But those don’t get you to where you want to be in a changing world. The No. 1 thing people look at [when choosing a cruise] is the destination. We need to make sure we take people to the right destination and provide sustainable tourism and the facilities to provide the kind of experience our guests are looking for. Today, we are an integral part of the communities we partner with; we provide the facilities, the buses, and the safety and security.
“Second is technology, what we love to hate. The beauty is it allows us to do wondrous things — but it’s tough and expensive. It requires massive amounts of work, but it’s what our customers want. It’s not just about frictionless arrival at the pier, it’s also about what allows employee to come easily to the pier and to know who is boarding.
“And last, is the thing no business succeeds without: An exceptional work force, both motivated and passionate. That requires you to give them the tools, the respect, and the training and education."