Carnival Corporation owns many well-known cruise lines.* At one time, most of these cruise lines were not under the Carnival umbrella. However, Carnival did not acquire them for the purpose of melding them into its original brand, Carnival Cruise Lines. Accordingly, the different lines have traditionally acted more like a loose confederation rather than like divisions of a corporate monolith. Indeed, Holland America is managed out of offices in Seattle, Washington while Princess is based in California; Cunard and P&O Cruises call Southampton, England home; AIDA Cruises' headquarters is in Germany; Costa Cruises is based in Italy and P&O Australia is located down under. All of these are very far from the corporate headquarters and home of Carnival Cruise Lines in Miami, Florida.
“Operating our brands independently has been a basis for our great success and has led to our industry leading position,” explains Arnold Donald, President and Chief Executive Officer of Carnival Corporation.
The reason for having the various cruise lines operate independently is straightforward. “The brands each cater to a different psychographic - - [a] behavior oriented group of guests. There is not much overlap in terms of guests. For example, a Seabourn guest, in the main, is not going to sail on Carnival and the Carnival guest, in the main, is not actually interested in sailing on Seabourn.”
“But it is not what a lot of people think - - it is not just demographics, it is not just stage of life or compensation, wealth, that kind of thing. It is really a psychographic - - how people choose to spend their time and that is the distinction in the brands.”
To illustrate: “Princess [emphasizes] magical moments and is a very destination-oriented experience. It is onboard activities for sure but it is wrapped around having a real destination experience. While there is socializing, it also tends to be more about the individual, more about the couple and the family with each other.”
“If you look at Carnival, it is the Fun ships. It is a very social environment. The destinations matter, of course, but it is people going to have a great time together with people that they don't know that they have just met. It is being the life of the party or being around people who are the life of the party. That is a different type of experience.”
“Any human being on any day could want one or the other [experience] but we all have something that is more natural for us as our way of being and what we like to do.”
The atmosphere, the dining, the entertainment even the ships themselves vary from line to line in order to appeal to different sets of people. “Each brand, looking at their psychographics and their market segment, tries of develop things that they think will resonate with their target audience.”
Of course, some things appeal to more than one type of person and so sometimes one line will adopt its own version of an idea that was first implemented on another cruise line. “It is a copycat industry and so at some point in time some other brand might say that 'would work on ours too.”
Mr. Donald noted that one of the challenges facing Carnival and the cruise industry in general is explaining to the public that not all cruise lines are alike. “If an individual cruises [and he or she] has an okay experience or an experience that just wasn't right for them then not only does it hurt in terms of [that person] being a future cruise guest but it also hurts in terms of all the other people that they talk to about their experience. That is where the travel professional can play a huge role in terms of ascertaining what is the best fit for this person, this couple, this family. How do we in an emotive way effectively convey the various cruise experiences without someone having actually taken the cruise? That is a great marketing challenge and one we are taking on.”
Going forward, Carnival Corporation will continue to follow the fundamental strategy that has brought it success but with some refinements designed to create a more efficient overall enterprise. “The brands will remain independent especially at the guest interface level as they become increasingly distinct in the psychographics of the guests that they source and service. But starting in 2014, we will change how we work together across brands to leverage our scale.”
“Our core product is the best vacation value there is. With over 100 ships and 10 million guests a year - - 78 million passenger/cruise days - - our scale gives us tremendous opportunity for improved performance. We want to leverage it far more than we have historically, through greater communication, through collaboration, and cooperation across the 10 brands.”
“We have $6 billion of expenditures non-people and non-fuel - - that is not counting people or fuel. To have that all on the line and uncoordinated is clearly a missed opportunity. Similarly, from a revenue standpoint, we have 10 different customer satisfaction surveys. We have each brand doing its own market segmentation studies. All those things ultimately drive demand and drive revenue.”
The first steps toward increased collaboration have already been taken. “We announced in November a re-alignment of our leadership team and we have begun to change in our work process and incentive process to facilitate those efforts. The reconfigured leadership team includes the best and brightest in the industry and has identified a large number of opportunities to work together both on the revenue side and the cost side.”
“Could there be [more personnel] changes in the future? Of course, we have 120,000 employees and 10 brands with organizational structures so I am sure there will be changes going forward.”
Increased coordination between the Carnival brands should not blur the distinctions between the various cruise lines from a guest's perspective. “The guests love their brands. They love that particular experience that their brand delivers. So for them, it should be seamless. At some point down the road, through the communication, collaboration and coordination, could there be cross-brand loyalty programs that sort of things . . . that would be at the level that they would see something. There could be collaboration in destination ports where there are some joint activities that seem to make sense. Those things are possibilities but we didn't do it that. That might be an outcome.”
*They are: Carnival Cruise Lines, Holland America Line. Seabourn, Cunard Line, P&O Cruises, AIDA Cruises, Costa Cruises, Princess Cruises, P&O Australia, and fathom.
Cruise Interview - - Carnival Corporation - - Arnold Donald, President and CEO