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Royal Caribbean International: Cast in Shadow

18 November 2011 Abhishek Dutta




Adam Goldstein is tight-lipped about Project Sunshine, but he is clearly excited by the changes being ushered in. Royal Caribbean International’s CEO tells Phin Foster how the company is responding to a shift in guest demographics, and why the new-build process is in RCI’s DNA.


It's June 2011 and Royal Caribbean International (RCI) has secured financing for its next generation of ships, dubbed 'Project Sunshine'.

With delivery set for 2014, and the option for a second-class member the following year, the promise is that this 158,000t, 4,100-capacity vessel "will offer features for everyone, from grand, spectacular spaces, to small intimate settings; from active, invigorating activities to the serenity of more personal space; and from a plethora of dining alternatives to a cornucopia of opportunities for families".

So far so exciting, but a problem persists: Royal Caribbean is not being particularly forthcoming about how such qualities might be achieved or the ways in which Project Sunshine will differ from, say, RCI's Freedom class, which boasts an almost identical tonnage, albeit with a somewhat smaller capacity.

The silence emanating from Miami HQ has prompted widespread speculation on message boards and blogs, but those awaiting a press release any time soon had better get ready for a long wait.

"It's great we've got people talking," says Royal Caribbean International CEO Adam Goldstein. "But there's still a long way to go ahead of delivery, and we put so much into these ships, so much stock into the development of various features and amenities, that we're nowhere close to disclosing what will be so different about Sunshine.

"We've proven in the past, however, that when the time comes, we won't be shy, and certainly want to make a lot of noise. People are just going to have to be patient for now."

Don't be surprised if the CEO's plea falls on deaf ears; any new RCI project announcement is guaranteed to cause a huge amount of excitement.

In 2009 and 2010 there was the launch of the two largest ships in the market; the previous three years ushered in the arrival of those currently sat in fourth, fifth and sixth position on the all-time list. This is an operator that likes to build big and create an impact, although Goldstein is keen to stress the company continues to move along a singular trajectory.

"There has to be a continuum, and you will never develop a class of ship that's 100% different to what came before," he insists.

"In our entire history, we've had just seven classes. The first two, three or even four ships of each are relatively consistent, but when you get past that there tends to be further evolution.

"Navigator and Mariner were our fourth and fifth Voyager-class ships, for example. They certainly had features and specific design touches that made them quite different to what had come previously, but it was Freedom of the Seas that expanded on the concept in a truly meaningful way. It moved things along to such a degree that we had to define a new class, and the process of evolution started over again."

Building on the past

It has ever been thus at RCI. As much as Goldstein and his team insist on looking forward for inspiration when it comes to delivering a product suited to next-generation cruisers, it is from the operator's legacy that they draw the confidence to succeed.

"It's in our DNA," declares the CEO. "We are the only major cruise brand that launched with entirely new ships, and for more than 40 years, focus on the new-build process from across the organisation has remained at our very core.

"You see that in the way all senior management views involvement in the process as absolutely critical, and in the manner in which input is provided from all departments."

"You need to listen to those people who are dealing with our customers on a daily basis, because they are the ones who really know what is required and where their desires lie."

This is driven from the top of the organisation, and Goldstein is keen to stress the value of encouraging participation and ownership throughout RCI. Royal Caribbean Cruises Limited (RCCL) has an in-house fleet design and new-build team working across the group's five lines, leading the process and tackling the practicalities, but the driving force for ideas lies elsewhere.

Prior to signing a letter of intent with Meyer Werft shipyard in February - the first public declaration of Project Sunshine's existence - more than a year's worth of intensive research and development had been conducted, including pouring over guest survey results and eliciting in-depth analysis from RCI's marketing and operations teams.

"You need to listen to those people who are dealing with our customers on a daily basis, because they are the ones who really know what is required and where their desires lie," says Goldstein.

"This may seem obvious, but unless you have a way of managing such participation, valuable input can be lost. We don't have to motivate people to get involved, but it helps that they see the highest executives within the company fully immersed.

"Not only does that encourage them to come forward; they also see it as perhaps the best way of interacting with the senior leadership of the company."

An executive steering committee is led by Goldstein, RCCL CEO Richard Fain and executive vice-president of maritime, Harri Kulovaara. It convenes at least once a month in Miami to discuss progress, but travelled to Papenburg, Germany, back in May to hold its meeting at Meyer Werft, something Goldstein would like them to do a couple of times a year from now on.

"History has proven time and again that the quality of relationship between shipyard and ship owner has a critical bearing on the quality of the final result," says Goldstein. "It's essential that Richard, Harri and myself are fully invested in that relationship and set the tone for others to follow.

"Not only are we trying to push the envelope in terms of innovation and efficiency, but so too are the yards, and Meyer Werft has made a tremendous effort to advance the cause of cruise ship building in relation to this project. We're talking about a crucial partner here, and we need to be able to drive one another to become even better."

Revamp programme

But an emphasis on innovation and new ways of thinking has not been restricted to new-build projects, and Goldstein insists the opportunity to focus on the next generation of cruise ships has had a major knock-on effect across the operator's existing fleet.

RCI's Royal Advantage programme encompasses a $300m commitment to re-energise all classes, meeting the expectations of an increasingly demanding and varied passenger demographic. Over the course of the next three years, all 22 ships will enter dry dock and undergo significant enhancements.

"Starting with a blank piece of paper enables you to be extremely responsive to current and future trends."

"Starting with a blank piece of paper enables you to be extremely responsive to current and future trends, but it can also help you look at your older fleet afresh," Goldstein believes.

"When you really focus on re-energising your ships, as we are doing now, it's quite surprising how many of the newer features and amenities can be incorporated. Once it's done it all seems quite obvious, but before embarking on Royal Advantage, I don't think we'd fully realised quite how much was possible."

Radiance of the Seas is the most recent ship to undergo the revitalisation process, boasting such additions as a new array of dining options, a nursery, Diamond Lounge and television upgrades. Splendour of the Seas goes into dry dock later this year, and the overriding impression is that now is not a time for resting on one's laurels.

Although events in the Eastern Mediterranean and Asia-Pacific regions forced RCCL to slightly downgrade profit forecasts, Fain has gone on record as saying that the group is on course for one of the best years in its history.

This has been driven in no small part by a growth in demand well beyond the industry's traditional US base, and meeting the demands of new groups coming onboard makes change essential.

Shifting demographics

"Throughout a period of significant macro-economic challenges, we've continued to see consumers around the world becoming increasingly aware of the benefits of a cruise vacation," Goldstein explains.

"The global dimension has become front and centre in everything we do, whereas for many years it was an adjunct to the priority of driving US business. We are now generating almost half of our revenue outside the US, and there remains huge potential for growth."

This means wider geographical deployment - more than half of RCI's fleet is European-based this year - and the urgent requirement to ensure that new tastes are catered for.

"The global dimension has become front and centre in everything we do."

"People are more similar than different," Goldstein believes, but he is also ready to acknowledge that there are marked divergences that need to be addressed. Comfort foods vary widely, for example, requiring renewed focus on increasing dining options, and a wider range of age groups coming onboard necessitates looking at activities and facilities afresh.

"US vacationers have come to see cruising as one of the best multi-generational family holidays you can purchase," Goldstein begins.

"In Europe, however, it's still better understood as a pursuit for couples. We have quite a number of years ahead of us in terms of marketing and execution to bring about that shift in mindset."

Until that point is reached, the emphasis will fall squarely upon maximising variety and choice onboard. Plenty of effort has already been invested into customer research ahead of Project Sunshine, but as markets undergo radical change one gets the impression that this will be a continual process, irrespective of looming large-scale undertakings.

"We've spent a tremendous amount of time as a management team trying to understand the mountains of data generated from our guests and independent research," Goldstein reveals.

"But the drive is to be as futuristic in our thinking as possible. It's not enough to look at and respond to what is happening today; where is the industry going to be in five, ten or 15 years' time? Ships give you the opportunity to return and look at these things afresh, fix mistakes and make additions. That is an endless process, but it's also an exciting one."

Those eagerly awaiting news on Project Sunshine can testify to that.