A Predictable Success

Investment in the Chinese economy has been a standard business strategy for international growth over the past two decades. When the global economy collapsed in 2008, China’s $7.3 trillion economy staggered a bit but continued to expand, and in 2012 foreign trade and domestic growth grew without the help of the U.S. or EU. Interestingly enough, one of the hottest businesses in China today is the cruise industry, and the government has jumped onboard by investing billions in constructing two new major cruise facilities in Tianjin and Shanghai, both capable of handling 1.5 million passengers per year. 

China’s emerging middle class, which is estimated to number about 300 million or 25 percent of the population – and 50 percent of the urban population – wants something more exotic than to sail down the Yangtze River. Royal Caribbean International (RCI) began operating from Singapore in 2008 and from Shanghai in 2010 with the 1,804-passenger Legend of the Seas, and the company enjoyed a 100 percent increase in business. The Chinese cannot get enough of sailing on a five-star resort and visiting exotic places. 

RCI sent the 3,114-passenger Voyager of the Seas to China during the 2012 cruise season, and its sister ship, Mariner of the Seas, will join it during the 2013 season. The ships offer Chinese menus, entertainment and enhanced shopping. There were only 110,000 Chinese cruisers in 2008. Last year that number jumped to 365,000. 

International Branding for Royal Caribbean 
Adam Goldstein, President & CEO of RCI, told MarEx he is excited about the prospects for the Asia Pacific region, and for good reason. Along with the new mega-cruise facilities in China, Singapore dedicated a new $400 million, 28,000-square meter terminal in May 2012. The first cruise ship to call at the Singapore Marina Bay Cruise Center was RCI’s 138,000-ton Voyager of the Seas. In 2013 it will be joined by Mariner of the Seas. The two vessels are deployed to China in the northern summers and Australia in the southern summers.

“There are lots of people looking to cruise for the first time,” said Goldstein. “So our goal is to position our brand so we are the number one choice for people from around the world seeking a top-notch cruise vacation.”

RCI is one of six brands under the Royal Caribbean Cruises Ltd. (RCL) umbrella and by far the largest. The others are Celebrity Cruises, Azamara Club Cruises, Pullmantur, CDF Croisières de France, and TUI Cruises through a 50 percent joint venture with TUI AG of Germany. Of RCL’s 41 ships, 22 sail under the Royal Caribbean International brand. In fact, the company was one-branded for a long time and saw no reason why the Royal Caribbean name couldn’t be successfully marketed on a global basis. And it was right. It’s become the largest and most versatile brand in the industry, and it’s the only brand that is a leading competitor in both the U.S., the number one cruise market in the world, and every other significant global cruise market.

Meanwhile, however, competitors like Carnival were busy gobbling up other brands, some of which RCL had also looked at. When the opportunity to purchase Celebrity came along in 1997, RCL jumped at it, believing that Celebrity offered a level of premium-ness that was distinguishable from Royal Caribbean and could be successful in its own right. Then came a series of Euro-centric acquisitions that included Pullmantur, a leading brand in Spain as well as Brazil and Latin America. Out of Pullmantur came Croisières de France, aimed at the French market. TUI Cruises is aimed at the German market and benefits from the marketing muscle of the TUI Group, the most important tour operator in Europe, if not the world. 

When Goldstein took over international sales and marketing duties in 1991 he inherited an international customer base of only 26,000 passengers. Today it is 1.5 million. The first thing he did was to reach out to the ‘rag-tag’ collection of general sales agents because he needed them to believe in the Royal Caribbean brand and to sell it as something special to their clients. He renamed the agents “international representatives (IRs),” and he started to prioritize markets like France, Italy, Spain, Australia and Brazil. RCI converted a few of the larger IRs into company offices, which now number eleven worldwide. Goldstein says that most of the independent IRs have become so successful that they have remained in the same families for generations.  

In 1998 the company created its Anchored in Excellence program, which included an annual visit to the ships by senior management. Goldstein said he never missed one and went 117 times to visit the ships and speak to entire crews and answer their questions, noting that the visits were some of the most challenging off-the-cuff speaking experiences he has ever had. The Anchored in Excellence and Total Guest Satisfaction programs are testament to RCI’s commitment to outstanding customer service. “We want our customers to have the best experience possible,” Goldstein stated.

While Royal Caribbean is an international leader in cruises throughout the world, North Americans still make up the bulk of the industry’s annual business. Industry leaders say about 20 million passengers will cruise in 2013, but the U.S. and EU economies will remain sluggish. Experts predict that at a growth rate of eight percent per year 28 million passengers will board cruise ships by 2018. Goldstein has led the charge into Asia Pacific, and especially China, because that’s where the new growth is coming from. 

Big Ships - Better Ships
Royal Caribbean was founded in 1968 by Anders Wilhelmsen & Company, I.M. Skaugen & Company, and Gotaas Larsen, three Norwegian shipping companies. In 1970 the company deployed its first ship, Song of Norway, followed by the Nordic Prince and, eventually, the Song of America, which was the third largest cruise ship in the world at the time. Since then, each class of cruise ships seems to get bigger and better. Though the goal each time was not to build the largest cruise ships, Royal Caribbean’s aim to deliver the best collection of experiences to guests sometimes determined the size of its ships.

Along the way the company achieved a remarkable series of firsts. Song of Norway was the first cruise ship to be “stretched,” in 1978, when an 85-foot midsection was added that increased capacity from 700 to just over 1,000 passengers. Two years later Nordic Prince was stretched. As cruise ships became larger and larger, Royal Caribbean was in the forefront every step of the way, culminating in today’s Oasis Class, the largest passenger vessels afloat and the wonders of the industry.

As the company began launching its bigger and better ships, it also developed the private island destination concept for passengers. In 1986 it leased property from the Haitian government, which is today called Labadee. It pays a per-passenger fee for guests disembarking. That same year the company purchased a second private destination in The Bahamas, which is called CocoCay. In 2009 RCI spent $55 million to further develop the resort of Labadee as well as build new docks to accommodate the Oasis Class ships. 

When RCI started building its own class of cruise liners, it began christening each vessel with “of the Seas” as part of its name. The Sovereign of the Seas was the first in its class and the first to use the branding phrase. The Sovereign Class ships at 73,000 GT were also the largest cruise ships of the time (1988) and the first to have open atrium areas. The Vision Class ships, which were the next in line and built during the 1990s, were not really a class of ships at all but actually three pairs of sister ships. The most widely recognized is Legend of the Seas, which has been based in every part of the world during its 17 years of service.

In 1999 the 137,276-gross ton Voyager of the Seas was the first in the Voyager Class and once again considered the largest cruise vessel in the world. It introduced innovations such as an indoor mall known as the Royal Promenade, skating rinks, basketball courts, and cafes and bars, and were truly marvels of the day. The Voyager Class also had two generations. The second generation began in 2002 with Navigator of the Seas and continued with Mariner of the Seas in 2003. The second generation of Voyagers included more modern cabins and contemporary upgrades to the common areas and restaurants. 

The Radiance Class, introduced from 2001 through 2004, was designed to address the company’s carbon footprint and many of the other environmental issues of the time. The class was constructed to be smaller (90,000 GT) and environmentally friendlier by employing gas turbine engines. Meanwhile, the entire industry was dealing with the issues of waste water, garbage, airborne emissions, sewage and contamination.

Click image to enlarge.
The Freedom, Liberty and Independence of the Seas were delivered from 2006 to 2008 and, at 154,407 gross tons, were once again considered the largest cruise ships in the world. These Freedom Class ships carried 4,370 passengers and 1,300 crewmembers and offered new features such as the FlowRider, an onboard surf simulator, the interactive H2O Zone for kids, and the largest rock-climbing wall in the world.  

The Largest Cruise Ships in the World
It’s like déjà vu all over again to call the Oasis of the Seas and Allure of the Seas the largest cruise ships in the world because isn’t that what RCI has been known for all these years? For Royal Caribbean the third Oasis Class ship has been ordered and is expected to be delivered by STX France in 2016. The massive 225,282-gross ton ships of the Oasis Class have 16 decks and can transport 5,400 guests in compelling luxury. 

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RCI has created seven neighborhoods – Central Park, Boardwalk, Royal Promenade, Pool and Sports Zone, Vitality at Sea Spa and Fitness Center, Entertainment Place and Youth Zone on the Oasis ships. The price tag is a hefty $1.4 billion, but the Oasis ships have been embraced by passengers and critics alike. Goldstein said management was terrified that if it didn’t get things exactly right with the Oasis ships it would be criticized from the perspective of “You made this ship too big! We told you! We said you would have problems if that ship was too big!” As it turned out, the company’s supersized terminal in Port Everglades is the greatest in the world, and the ships are the highest rated and most profitable in the fleet. “The Oasis and Allure have the highest customer satisfaction rating in the industry,” Goldstein stated. “They are just winners, and that’s great for multi-generational families onboard. We are very proud of them.”

RCL has embarked on a new ship called Project Sunshine, but Goldstein couldn’t say much more on the subject beyond the fact that it will be a whole new class of ship and the first ship will be smaller than the two Oasis ships. Each class of RCI ship just seems to get better and more exciting and more innovative. The headquarters in Miami must be a grueling place to work because they are always planning the next generation of ship, but can you imagine the satisfaction that comes with it?