An Interview with Micky Arison: Chaiman & Chief Executive Officer of Carnival Corporation

The dynamic leader of the world’s largest cruise company speaks out on the influence of his father, the future of Carnival and the industry, and the Miami Heat.

By Robert C. Spicer

MarEx: There is a plaque with a picture of your father, Ted Arison, in the lobby of Carnival’s Miami headquarters. I am always impressed when I see that plaque because it reminds me of the great things people can do at any age. Your father was in his early fifties when he formed Carnival. How did he influence your business thinking and your leadership style?

Arison: Ted was the ultimate optimist. He launched Carnival Cruise Lines in 1972 after the breakup with his partner in Norwegian Caribbean Lines and watched as many of his employees joined NCL. Nevertheless, he was determined to remain in the cruise business and was optimistic that Carnival would be successful although it wasn’t so apparent from the beginning. My father created a wonderful, familylike atmosphere at Carnival and lived by the credo of hiring good people and letting them do their jobs – and we strive to live up to this philosophy to this day.

MarEx: Carnival has a famous and important story in its history that is remembered by all those who were there in the beginning. It’s the grounding of the TSS Mardi Gras on her maiden voyage. What was that experience like and how did it help bring the Carnival team together?

Arison: My memories of Carnival’s early years are quite vivid. I remember being on the bridge wing of the Mardi Gras when it ran aground on a sandbar outside the Port of Miami in 1972, garnering worldwide media attention. With the media monitoring the ship’s radio communications, my father and Meshulum Zonis, his trusted confidant and Senior Vice President of Operations, began communicating in Hebrew to avoid having their conversations intercepted and reported by the press. With the help of the tides, the Mardi Gras was eventually freed. However, the struggles continued, When the ship arrived in San Juan we were unable to get credit to buy fuel, so we had to empty the cash registers to pay for fuel for the return trip to Miami.

MarEx: I have always been amazed at the Carnival story. Your father created an entirely new industry from the ashes of the dead transatlantic liner era. He envisioned a unique kind of vacation experience that would be available to the average family and that you then built into today’s Carnival. How did he come up with the idea?

Arison: My father believed that cruising was such a wonderful vacation that it should be made available to everyone, not to just the well-heeled, as it was back in the 1970s. He thought by creating a fun onboard environment that Middle America could afford, Carnival could carve out a niche in the cruise market. He obviously was correct as within 15 years we went from the back of the pack to the world’s largest and most successful cruise company.

MarEx: Carnival has always had an exceptional and dedicated management team with longevity who helped grow the company into the largest cruise ship operator in the world. When you first assembled your own management team, what attributes did you look for?

Arison: At Carnival Cruise Lines I really inherited most of the senior management team from my father when I was named president in 1979. He had hired very talented and dedicated people in whom I had a great deal of trust. With some of the other brands we’ve acquired over the years we made a number of management changes and conducted searches to make sure we had the right people leading these companies. We were looking for bright, trustworthy people of integrity who had demonstrated excellent management skills in previous positions. Some had a cruise industry background while others came from the outside.

MarEx: Looking back, could you ever imagine Carnival would become the industry powerhouse it is today?

Arison: Very early in the creation of Carnival we had no grand scheme – it was really just about survival. My father bought a second ship, the Carnivale, so that just in case something happened to our first ship we wouldn’t be out of business. When I took over the Carnival presidency in 1979, our revenues were $44 million with earnings of $12 million. I didn’t have a grand scheme either, but I knew we had a winning formula with our “Fun Ship” philosophy. By the 1980s when we were launching the Tropicale – the first new cruise ship in many years – and debuting the cruise industry’s first national TV ad campaign, we were on our way to becoming a cruise industry innovator and leader. But we knew that a Carnival cruise wasn’t for everyone and that there was tremendous potential in other segments of the market in North America and beyond. We ultimately developed a strategy for becoming a global operator. We looked at launching new brands but ultimately decided on acquisitions. That started with the purchase of Holland America in 1989 and continued with Seabourn, Costa and Cunard until 2003 when we completed the P&O Princess merger. By then, we were truly a global company with some of the world’s most successful and respected cruise brands in our portfolio.

MarEx: Early in your career you worked in Reservations and helped develop new sales strategies with your father. You worked in most of the other departments as well. Which one did you enjoy most?

Arison: I was bitten by the cruise bug very early and knew there was no other business I wanted to be in. All of the positions I held gave me a greater understanding of how the business works. My very first job on board was as a cruise staff member, and it helped me understand the challenges that shipboard employees face each and every day. I really enjoyed Reservations though because working there felt like you always had your finger on the pulse of the company. Even today, we get pretty detailed reservations reports from our 10 brands.

MarEx: Innovation is defined as the creation of something new. Your father created a new business and put tens of thousands of people to work, maybe hundreds of thousands if you count all the related industries surrounding Carnival. Why was he so innovative? Was he like that in his other ventures also?

Arison: My father was very entrepreneurial and an optimist in a “glass half full” kind of way. No matter what happened, he wasn’t afraid to take chances and follow his instincts. Not all of his ventures turned out as well as Carnival, but it only takes one big success to be a successful entrepreneur.

MarEx: What is the greatest lesson you learned from your father?

Arison: The best lesson I learned from my father was to hire good people to run your businesses, give them the support they need to be successful, and let them do the jobs you hired them to do.

MarEx: In 1978 Carnival acquired the S.A. Vaal, which underwent a $30 million refurbishment before entering service for Carnival as the Festivale. At the time she was the largest and fastest vessel sailing from Miami to the Caribbean. Compared to today, however, she was a small ship. What is the optimal size of cruise ships in your view? Do you see larger ships entering the marketplace or will the next generation be scaled down?

Arison: The optimal size ship is different depending on the market segment. For a luxury brand such as Seabourn, smaller, low-density ships in the 32,000-ton range are a better fit whereas contemporary operators such as Carnival or Princess build higher-density ships in the 130,000 to 140,000-ton range. That’s not to say we wouldn’t build ships a little larger for these brands, but I would not expect any quantum leaps. Our largest ship currently is the Queen Mary 2 at 150,000 tons, and it is unlikely we will build anything larger than that.

MarEx: Carnival is recognized for carrying more passengers than any other line in the world. Yet the market has been mostly North American and European-based. Do you see a more aggressive outreach to market China in the near future?

Arison: There is a tremendous opportunity in China. We’ve been operating in China under our Costa brand since 2006. While there are challenges with any new source market, China is a growing cruise region with tremendous potential.

MarEx: Carnival has multiple distinct brands offering service in North and South America, the United Kingdom, Germany, Italy, France, Spain and Australia. How large do you see the Carnival fleet becoming during the next decade? Will the number of ships level off?

Arison: The cruise industry went through an incredible period of growth in the 1990s/2000s, and there was simply no way that it could maintain that pace for an extended period of time. For Carnival, we don’t envision introducing more than two to three vessels a year on a corporate-wide basis. In fact, we have 10 new ships scheduled to enter service between now and 2014, which works out to two to three ships a year for the corporation.

MarEx: When you go to sleep at night what is your biggest worry?

Arison: The things that have the most potential to hurt our company are things we have no control over. I learned long ago that we can only worry about the things we can control.

MarEx: What do you see on the horizon as the biggest challenges to the cruise industry generally and Carnival specifically?

Arison: Emission Control Areas (ECAs) are going to be a challenge for the entire shipping industry. ECAs will require us to use a higher grade of fuel, which currently is some 15 to 20 percent more expensive than the fuels used today. And with all of shipping required to comply, demand will increase so supply availability could be an issue too. ECAs could have wide-ranging impact, including on ports of call and homeports. We’ll need to generate higher pricing to offset at least a portion of the expected increase in fuel costs.

MarEx: Business is about risk. What is the biggest risk you took in growing Carnival?

Arison: Probably the biggest risk we took was undergoing such a rapid expansion in the 1980s – introducing four new ships in a period of five years, nearly tripling our capacity – that it propelled Carnival Cruise Lines from a middle-of-the-pack brand to the world’s number one cruise operator. We were betting that the market was ready for expansion, and obviously we were right.

MarEx: Do you have any plans for turning over the helm soon?

Arison: Right now I have no plans on going anywhere. I still really enjoy the cruise business and my job. When that time comes, however, there is plenty of great talent within our company to fill my shoes.

MarEx: Finally, the answer we all need to know: As the owner of the Miami Heat, when do you think we will see the next Heat championship?

Arison: Can you ask me this question in June? I’m superstitious so I’m not going to make predictions, but this team is really fun to watch.

MarEx: Fair enough. And thanks for a great interview.