"Cruise Like a Norwegian"

What exactly does it mean to “Cruise Like a Norwegian”? According to President and CEO Kevin Sheehan, it’s a state of mind, an approach to cruising that encourages flexibility, choice, and no boundaries. It means “We’re different from the other guys.” And Norwegian is different. It’s the industry innovator. It’s the freethinker in a room full of “yes” men. Its ships are immediately recognizable by their colorfully painted hulls. And it’s the most profitable of all the major cruise lines.  

It wasn’t always that way. And therein lies a story. 

Inventing the Industry 

In 1966 the modern cruise ship era began when Knut Kloster and Ted Arison, with just an 830-ton ferry-car ship, began offering low-cost passenger voyages to select destinations in the Caribbean. It was a radical idea since up until that time passenger vessels were used mainly for trans-Atlantic crossings. They were a form of transportation, a means of getting from point A to point B. When you got to point B, you got off. No one thought cruising could be an end in itself. 

Not Kloster and Arison. They thought differently. And so Klosters Rederi A/S, based in Oslo and one of the oldest and most respected shipping companies in Norway, acquired the M/S Sunward in 1966 and repositioned the vessel to the obscure port of Miami. Kloster and Arison formed Norwegian Caribbean Line, which began offering regularly scheduled cruises to the Caribbean in single-class, informal luxury. Soon thereafter, Arison left Norwegian Caribbean to form Carnival Cruise Lines. 

Under Kloster’s leadership, Norwegian went on to pioneer many firsts in the industry including the “Out Island Cruise” on Great Stirrup Cay, which offered passengers exclusivity on an unspoiled tropical island in the Bahamas. “Cloud 9 Cruises” combined air and cruise fares for passengers, another first, and the company offered voyages into exotic ports in the Caribbean such as Ocho Rios in Jamaica.  

Norwegian’s second ship, M/V Starward, which was a converted car carrier, provided a two-deck movie theater at the stern of the ship as well as a full casino. But the company truly revolutionized the industry when it invested $100 million to acquire and rebuild the former S/S France, which it renamed the M/S Norway in 1979. The Norway was the largest and fastest cruise ship of its day and provided huge common areas, specialty dining facilities, and a variety of entertainment venues. 

Building the Brand 

The 1980s brought new ships and new routes for the company, which in 1987 changed its corporate name from Norwegian Caribbean Line to Norwegian Cruise Line to better reflect its expanding voyage structure. The company also began retiring its “White Fleet” and in 1988 introduced the newbuild M/S Seaward, which was 42,000 tons and accommodated 1,518 passengers. In 1992 the company launched the M/S Dreamward, which offered departures from the new cruise port of Fort Lauderdale.  

Norwegian built its brand by being the most innovative company in a period when public interest in cruise vacations was growing. The company continued expanding the fleet and offering cruises to Alaska, Europe, Bermuda and Australia. In an effort to strengthen the brand, most of the ships’ names were changed and given the “Norwegian” prefix. For instance, the Seaward was renamed Norwegian Sea and the Windward renamed Norwegian Wind, while the Dreamward is now called the Norwegian Dream. 

In 2001 the company simultaneously christened the Norwegian Sun and Norwegian Star in Miami. And in 2002 it introduced a third ship, Norwegian Dawn, while promoting its “Freestyle Cruising” campaign. Freestyle Cruising allowed guests to have more flexibility and independence and encouraged them to “do their own thing,” meaning no fixed dinner times, relaxed attire, and minimal restrictions.  

In 1998 Norwegian subsidiary Orient Lines, which was founded to run the cruise ship Marco Polo, was sold. A year later Norwegian Cruise Line itself was acquired by Star Cruises, a subsidiary of the Malaysian-based Genting Group. In 2002 Norwegian bought a half-constructed hull from American Classic Voyages after that company went bankrupt. The hull was being constructed at Ingalls Shipyard in Mississippi, and it was towed to the Lloyd Werft yard in Germany for completion. 

In 2003 Norwegian announced its new U.S.-flag brand, NCL America, which would offer exclusive inter-island service in the Hawaiian Islands. The new line was officially launched on July 4,
2004 with the Pride of Aloha, which was the first newbuild U.S.-flag cruise ship in more than 50 years. The Pride of America joined the fleet in 2005 followed by the Pride of Hawaii in 2006. 

In 2007 Norwegian announced the temporary withdrawal of Pride of Hawaii, which was renamed Norwegian Jade, and in 2008 the company pulled the Pride of Aloha from service and redeployed her to Miami as the Norwegian Sky. But the Pride of America continues to operate in the Hawaiian trade and remains an extremely profitable service. In fact, it’s the company’s most profitable route.  

Sheehan tells the story of taking his family on the ship and sitting next to two Hawaiian couples at dinner one night who were on their honeymoon. He approached them and said, “Hey guys, you’re Hawaiians. What are you doing here on your honeymoons?” They said, “There is no better way to see our islands than on this ship.” So he knew right then and there that it was a home run. 

Changing of the Guard 

In 2007 Apollo Management LP, a private equity group founded by the well-known investor Leon Black, invested $1 billion in Norwegian and gained 50 percent ownership. Apollo was no stranger to the cruise industry, having earlier bought a stake in Prestige Holdings (Oceania and Regent Seven Seas). In Norwegian it smelled opportunity. 

The next year Kevin Sheehan was named President and CEO. He had been installed by Apollo as CFO before taking the helm. Sheehan was familiar with turnaround situations and start-ups. His background included launching Telemundo and the Sega Channel, which was the first interactive game platform over cable. He had been Chairman and CEO of Cendant Corp.’s troubled Vehicle Services Division and helped revitalize Avis Rent-A-Car, Budget Rent-A-Car, Budget Truck, PHH Vehicle Management and Wright Express.  

Nor was “Cruise Like a Norwegian” the first time Sheehan made advertising history. While he was leading Avis he pioneered the “We Try Harder” campaign that overnight made Avis the darling of the rental car industry. He then transformed Avis from an employee-owned company to a publicly traded one and integrated the Avis and Budget brands into one network. 

Sheehan is moving Norwegian to the next generation of Freestyle Cruising as well as launching the 4,000-passenger Norwegian Breakaway (2013) and her sister ship Norwegian Getaway (2014). The Breakaway is Norwegian’s “New York” ship and the Getaway its “Miami” ship – tributes to the company’s two most important cities. The company is already planning its next class of ships, called Breakaway Plus and named Norwegian Escape and Norwegian Bliss, for delivery in 2015 and 2017. 

Green Initiatives 

As the cruise industry builds ever-bigger ships and safety issues become more prominent, Norwegian has established itself as a leader in onboard security and environmental stewardship. The company introduced Eco-Smart Cruising to protect the sea and air from pollution. Every Norwegian vessel has advanced wastewater treatment and exhaust gas reduction systems. The Breakaway class also has second-generation ballast water treatment systems and fuel oil recovery systems. 

In fact, Norwegian has a shore-side department devoted to environmental compliance and officers onboard each ship who oversee operations and monitor performance. In 2010, the U.S. Coast Guard awarded Norwegian its Gold William M. Benkert Marine Environmental Protection Award in the foreign vessel category.  

The upcoming Breakaway Plus class will be the first ships in the industry to feature emission scrubber technology from Norway’s Green Tech Marine. Green Tech’s scrubbers are certified to ensure the engines are compliant with the 0.1 percent sulfur limit that goes into effect in Emission Control Areas in 2015. Norwegian’s Hawaiian-based Pride of America has already been fitted with Green Tech scrubbers. 

A New Start 

In January 2013, Norwegian Cruise Line was officially listed on the NASDAQ stock exchange under the symbol “NCLH.” Its major shareholders include Genting Group at 31.4 percent, Apollo Management at 23.5 percent, Texas Pacific Group at 7.8 percent, and individual shareholders at 37.3 percent. 

Sheehan says the company has hit its “sweet spot” in the 4,000-passenger range with the Norwegian Epic (2010), Breakaway (2013) and Getaway (2014). The company now has a young and growing fleet of 13 ships and is in better financial shape than it ever was. “Norwegian has gone from last in pricing to first in pricing,” Sheehan explains, “last in onboard revenue to first, and last in operating margin to first. We have created the right recipe for long-term sustainable growth.” 

The company that started the industry and created a large number of industry firsts somehow stumbled along the way and, for too long a period, became a case study in what not to do. Today, it is back on an even keel and at sea speed. And there is an unmistakable air of confidence about Sheehan, who has his entire team marching in the same direction. We think he’s having too much fun watching his plans succeed and his company grow!  

 

Tony Munoz is Publisher and Editor-in-Chief of The Maritime Executive.