In January 2008 Fred Olsen added a new vessel, the Balmoral, to its fleet of four mid-size ships. The introduction of this larger ship has meant an increase in the cruise line’s market share at a time when the number of people taking cruises is rising.

As a result, the company has experienced a 40% capacity up-lift in one year, but Nigel Lingard, director of marketing at Fred Olsen, expects the extra capacity will only mean 20% on the company overheads.

In Britain, the cruising market has increased 15-fold in the last 20 years, from 100,000 passengers in the late 1980s to one and a half million this year. As managing director Mike Rodwell points out: “It is a substantial change – and we have to increase staffing in various areas to compensate for that. But as a smaller operator, and with a 96% British custom, we have to grow to remain visible in the market place.”

The Balmoral was first the Crown Odyssey, then the Norwegian Crown. When Fred Olsen acquired it, it was cut in half to be lengthened by 99ft and refitted, creating additional cabins and public areas. In terms of décor, it has the feel of other Fred Olsen ships: they are an interesting Norwegian-take on the British country house, though the Balmoral has a more modern, lighter wood finish.

The ship’s main difference is a larger passenger capacity of 1,400. It is, however, still small enough to make the experience intimate. “We believe that small is beautiful, and part of our attraction is that people feel like they are part of a family when they are on board our ships,” says Lingard. “At the same time, however, the world is changing, and people expect extra facilities: there are more restaurants – and this slightly larger ship enables us to broaden the spectrum of entertainment for our customers.”

With the Balmoral, there is more of an emphasis on the destinations around the Americas – with cruises now coming out of Miami. “Because the ship had already been trading in America, we knew we wouldn’t have any trouble with the US coastguard and public health approvals, so it was an opportune time to do a bit more of an America-related product,” notes Lingard.

The customer base from Miami is 85% British by charter aircraft, leaving 15% sold locally in the US. With this in mind, does Lingard think there will be a further increase in the American up-take? “Yes, but it is a very ‘British’ product, which narrows the American market that will want to travel with us,” Rodwell explains. “We don’t have a casino; we don’t have any slot machines. We deliberately market in America to people who are looking for a quiet, middle-class British experience. We attract educated and cultured people who enjoy good quality lectures and tours, and like to visit places of cultural interest.’ It is clearly not the cruise line for heavy metal fans or extreme sports fanatics.”

Britain and beyond

With a largely older British clientele, how is Fred Olsen catering for their needs when it comes to local port accessibility? “In the past few years we’ve pioneered what we call ‘taking the ships to the people’. We started operating cruises from more British regional ports, which means people don’t have the hassle of a very long drive across the UK. This year we have ships sailing from Newcastle, Edinburgh, Glasgow and Liverpool. This is key in the winter months, when the weather is poor.” says Lingard.

The majority of the cruises leave from Britain for ports in northern Europe, the Mediterranean and the Atlantic Islands. England-based Fred Olsen has been aiming its cruise ship brand at the British consumer since 1966, with the delivery of the Black Prince (2). The British cruise market is the second largest in the world, so Fred Olsen is certainly appealing to the right people. But would they ever want to broaden their clientele? “With other cruise lines appealing to new demographics and introducing new ideas, there aren’t many traditional cruise ships left, so by default, by not doing too much we are quite unusual,” says Lingard.

With the population of Britain’s over- 50s expected to increase by more than two million in the next five years, the company’s potential customer base is getting larger. “Other cruise lines, which have products to suit younger guests and families, capture them younger, and then they will mature into our product.” says Lingard. Or, at least that’s the plan.

With more people going on cruises, does building more ships seem like the bestway forward? “Yes, definitely, there’s a fairly big order book at the moment,” notes Lingard. “When you sit back objectively and look at cruising in context, it’s actually only about 15 million people a year taking a cruise in the world. And that’s a tiny amount; four-times more people visit Las Vegas each year than take a cruise. So, that one city is bigger then the whole of the cruise industry. If only 1.5% of the holiday makers of Britain are taking a cruise there’s much more room to grow.”

With other countries only starting to look at cruising as an option, there is tremendous growth potential. In line with this, Fred Olsen introduced the 916- person Braemar in July 2008, increasing public space capacity.

Scaling up

Fred Olsen’s main competitor is P&O Cruises, while other companies offering a similar product out of the UK include SAGA Cruises and Voyages of Discovery.

How does Lingard it is are fairing alongside other brands? “Fine, we’ve outgrown the latter two, but P&O are much bigger then us, being part of a very big group. So, we’re the largest of the independent cruise lines. And we’re doing pretty well. On a typical cruise, the average repeat customer load is about 45%. And it can be as high as 80%. With the Balmoral, and its new itinerary, it packs with repeaters who’ve been waiting to go somewhere different.”

With such high demand, does the company have to turn people away? “On some cruises, yes, you get booked up very early and that’s a great position to be in. But life’s not always like that, there are winter months when it’s not so easy – and you have to go out there and work to find the customers,” says Lingard.

As with any business, marketing is crucial. As people tend to use travel agents to book cruises, Fred Olsen puts effort into working with agents, such as joint marketing and direct mailing. “Working with the retail trade is important,” says Lingard, as is working with existing customers. “We operate quite a lot of loyalty cards and get-friend schemes, thereby letting our happy current customers act as ambassadors for us.”

Fred Olsen is a brand that is clearly doing well, but what are the challenges of being a smaller operator? “A difficulty we face is economy of scale, so it can be hard to be price competitive,” explains Lingard. “A lot of the costs in cruising are pretty fixed: the capital, the starting levels – and the fuel, which is a real nightmare for us at the moment. We buy fuel en-route, and we have international contracts, but the price does vary a bit, so you try to optimise your trading patterns to include ports where you know fuel is available at a reasonable to-buy rate. It’s hard to control these costs, you can’t slow down a cruise ship too much, or it won’t get to where it’s supposed to be going, you have to burn fuel to operate the product.”

What are Fred Olsen’s plans for the future? “We’ve got one more ship that we’re extending this summer, the Braemar, so that takes us back to a reasonable market share in Britain, about 6.5% but looking ahead we need to address it further, Other companies and the overall market will continue to grow, so within another year or two we’ll need to make some more decisions. We have to keep adding capacity, but try to remain true to our tradition because there isn’t any point in trying to copy other people’s products. We want to retain our distinctive identity.”