Kevin Sheehan : President & Ceo, Norwegian Cruise Line

>Norwegian was the first modern-day cruise line. Tell us about that.

This is an unbelievable time in the company’s history. This brand started the industry as we know it today. It had a large number of innovations. It had a lot of neat ships. But the company was so poorly managed for 40 years that it became a case study in how not to do things. Just about every single thing that could have been done wrong had been done wrong. The joke I made when I first came here was when I was walking down the street or coming in and out of Starbucks on South Beach, half the people I would run into would say “Hey, I used to run Norwegian Cruise Line” or would say “NCL” because that was the name at the time. It was a turnstile of guys running the company. We were the leaders and then we lost it. Now we’re reclaiming our rightful position.

How did you manage to “right the ship”?

At first I was like, “Holy cow, what did I get myself into?” We took delivery of six or seven new ships and there was no change in the cash flow of the business. I thought, “What is going on here?” The more you dug into it, the worse it looked. Yet now, as you know, we’ve just announced our twenty-first quarter of consistent earnings improvement. We’ve gone from being last in line and not even considered a formidable competitor to being the most profitable company in the industry. 

I remember when I first joined we had a constituency of banks that funded all the ships, and I went to London and thought I did a great job presenting and telling our story and what my strategy for the future was going to be. When I finished, one of the guys said, “Hey, Kevin, great presentation! But why should we believe anything you say? You’re like the twentieth CEO that’s come here and told us what you wanted to do and not a single one of you ever executed.” So that’s a message I took back to our management team and said, “This is what’s at stake. This is how the world looks at us. This is our opportunity to break out and show what we can do as a team.” 

When was that?

That was in 2008. Back then the offices were a mess. The rugs were ratty. There were holes in the wall. The furniture was broken. So we spruced things up and brightened the offices and showed people we cared. We wanted them to feel good about coming to work. We had an All-Hands meeting, which had never been done before. Fifteen hundred or so shoreside people in this geographic area heard my message, and it was played out to all the ships and crew. Now I do that every year, and today we are all marching to the same drummer. 

Last year I showed everyone the original slides from 2008 and explained how we had exceeded every single goal we set: from last in pricing to the top in pricing, last in onboard revenue to first in onboard revenue, last in operating margin to first. We lead the industry in return on investment capital and all those things that are the right recipe for the long-term sustainable success of the company. Now it’s so much fun to be here.

How would you describe your management style? 

Those who know me know I am completely nuts, and I’m 24 hours a day driving people crazy and they understand it. Especially my leadership team. I drive them crazy. I’m very tough at times, but I think they know I am immensely fair. It’s really about all of them. 

But we’re not riding off into the sunset. We’re only halfway through our journey. Our IPO last January was one of the most successful of 2013. We have a lot more to do.

Did you come in as CEO?

No, I came in as CFO but not the CEO role because my predecessor was here and we had to get in the door. I came in through the Apollo side after they made a $1 billion equity investment in the company and the existing owners, the Genting Group of Malaysia, admitted they couldn’t fix the company. They were kind of rolling along and at some point became open to the private equity guys and the opportunity to navigate a little differently and make change happen, and that was me. 

I had been part of the group that started Telemundo and also the Sega Channel, an interactive game platform, which became a wild success. I also helped transform Avis from employee-owned to a public company. Avis was part of Cendant Corporation, where I was the CFO. So I had a lot of experience founding companies and turning them around and changing the culture. When Apollo tapped me for the Norwegian job I was the Distinguished Visiting Professor of Accounting & Finance at Adelphi University on Long Island, where I thought I would end my career. 

The turnaround started with Norwegian Epic, right?

Yes, that was the first big success, but it wasn’t easy. It had already been ordered when I arrived in 2008. And what did I know about ships? The only ship I’d ever been on was the Staten Island ferry, and that was my senior prom. We had some significant challenges in the beginning because it hadn’t been spec’d out right. My predecessor did everything in a room by himself. No one knew what was going on. So we completely redrew the specs and turned it into the best ship in the industry. 

Now we do things as a team. We gather everyone in a room – the engineers, the architects, the hotel guys, the laundry guys, the marketing and food and beverage guys – and I say, “We’re all in this together. Give me your ideas.” It’s a collaborative effort. And the result was Norwegian Breakaway last year and Norwegian Getaway this year. They were completely spec’d out. Everything was a team effort. We got it right.

Norwegian is much smaller than Carnival and Royal Caribbean. How do you compete?

We learn from one ship to another. We have the youngest fleet in the industry. The new ships provide a more complete experience. They’re larger and can do more – more entertainment, more venues. Norwegian Epic carries 4,100 guests, Norwegian Breakaway and Getaway 4,000, the others about 3,200. We’re staying in that range. That’s our sweet spot. We have something for everyone. Yet people think they’re on a small ship. You can go places and there’s no one there – “I can’t believe there are 4,000 people on this ship!”

We’re a twelve percent player in a field dominated by a fifty percent player and a thirty percent player. So what do we have to do? We have to be different. I can’t get to the same number of people as they can through advertising and TV and whatever. So we have to think differently. We have to step out of the box.  

Is that what led to your appearance on “Undercover Boss”?

Yes. We do things like “Undercover Boss” to differentiate ourselves. It was all about getting our name known. One of the very first to do it was Jim McCann, who founded 1-800-Flowers, a good friend of mine. He said to me, “Hey Kevin, you’d be perfect for this.” So I went to the board and told them what I wanted to do. And they said, “Kevin, you’d be perfect.” It was impossible, though. I couldn’t keep up. I am in awe of the crew and the work they do. Here I am competing with 23-year-old muscle-bound bodybuilders, and I can’t do anything. I did six different activities and couldn’t keep up at all. It just tells you how much these crewmembers do for the company. 

Now we have individual cabins for the crew. Most crew cabins have six beds and no place for privacy, so we provided a cabin where you could shut the door and be in your own space. But it’s a balance. We have some crewmembers who like to be together. And telephone service is another thing. Most of the crew live half a world away. You provide telephone service at night when everyone else is asleep, and it’s cheap. And we’re the only ones in the industry who do that. You have to go on the ships and listen to people and hear what they have to say. 

Are you “Kevin” to the crew and staff?

I’m Kevin, and I want them to call me “Kevin.” But they call me “Sir Kevin.” It’s a respect thing, I guess. When I step onto a ship and walk along the deck, everyone smiles at me. They’re happy to see me. It’s critically important that I get on every ship at least once a year.

What does it mean to “Cruise Like a Norwegian”?

It doesn’t mean cruising like someone from Norway. It’s a state of mind. It’s what we call our cruisers – they’re “Norwegians.” The message is being able to do what you want to do. It’s freestyle cruising. It’s flexibility. It’s choice.  So that’s in all of our campaigns. We’re different. 

In the lobby we noticed a poster for the Norwegian Cruise Line Campus of Camillus House. What is that?

Camillus was a 16th century saint who ministered to the sick and homeless, like the Good Samaritan. Camillus House here in Miami does the same thing. When I came here I looked at the history of this company and in 40 years they’d never given a penny to anyone or anything. Bob Dickinson, the former CEO of Carnival Cruise Lines, was Chairman of Camillus House and asked me if I’d make a contribution of a couple hundred thousand dollars. Then he asked for half a million to help build a new campus. I went to the board and said, “Listen, we have to do something really special here to help build this new campus.” Then I went back to Bob and said, “We’re going to make a five-million-dollar contribution.” He nearly fell over. The day of the dedication I got an email from an employee who said she was so happy to see what we were doing because several years earlier she had lost her home and her husband had fallen on hard times and left her and she was living out of her car. It’s hugely important to give back.

What is your goal for Norwegian?

It’s very simple. We’re on a ten-year journey. In the next four years, if we continue on our journey, we will deliver everything I told my team and transform this company. We were the joke of the industry even though we were the ones who invented it. And now we’re leading it again. How did this horrendous accountant who knows nothing about cruising come in and transform the company? What a fun thing!