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How to Save a Cruise Line: One CEO Speaks Out

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Last week, the new Carnival Cruise Line CEO Arnold Donald said it will take three years to turn the cruise line around. Norwegian Cruise Line CEO Kevin Sheehan understands what he means. When Sheehan came to the new Norwegian Cruise Line, formerly called NCL, it was suffering financially. Since then, he has 19 quarters of success in earnings growth in an environment where the competitors have been completely flat for 15 years. The cruise line is poised to go farther this year with the launch of the Norwegian Breakaway and the rebranding process. Peter sat down with Sheehan to find out how he turned the business around and his insight on cruising today.

Peter Greenberg: Let’s talk about the cruise industry. I’m sure you’re aware of the latest stigma. When I told people I was getting on a cruise, they now say “You’re going on a ship? Is it safe?” It’s not about Norwegian, but the industry has taken a hit.

Kevin Sheehan: It’s unfortunate because there’s a lot of focus on a couple of incidents that have happened with some of the players in the industry, but if you look at the enormity of this industry and the long history of the industry over 40 years, this is the safest way to take a vacation by far. This stigma will pass and the cruise lines that are affected will do what they need to do to right themselves.

I think the cruise industry goes by the record. Each potential cruisers should look at the records of the companies and understand where they feel they’re going to get the best vacation experience.

PG: Let’s go back to let’s say 2005 when the economy was great. Everyone was ordering ships. And they started building ships like nothing. And all of the sudden, by the time those ships came online, the economy tanked, and you had all that excess capacity.

KS: When you go back and look at cruising over the last 12 years, it has grown at a 6.6 percent growth rate each year, in spite of the economy. And then what happened is, exactly as you said, they were building all these ships right through the economic downturn.

All the other major cruise lines ordered ships and, of course, we didn’t. We saw that the economy was going to eventually turn. Instead, we said let’s get this great pricing on the ships and let’s then go to the governments and get the great financing packages, so we’ve got the industry leading pricing and financial backing from the government. Our ships are coming in now when no one else was ordering.

We’re going into a period over the next five years where the industry will grow at half the rate that it did over the last 12 years. Norwegian Cruise Line is coming out with these spectacular new ships that are the future of the industry at the time when the industry is growing slowly.

PG: What’s the one thing you want to change about this line right now?

KS: I think it’s getting the travel agents to understand how much we care about them and their success. We want them to understand that it’s a two-way street. They need to continue to stay relevant; they can’t be sitting doing business the way they did five years ago because the world is changing so dramatically.

When I came, it was called NCL. We are now Norwegian Cruise Line or even more precise, we’re the new Norwegian Cruise Line with the launch of this unbelievable ship the Norwegian Breakaway. This is the answer to everything that people who have never really looked at cruising before. There’s unbelievable entertainment options: three Broadway shows, nothing that’s ever been done before on a ship. There are venues all over the ship for people to have a ball well into the morning hours.