In the Hot Seat: Richard Fain & Adam Goldstein

CEOs, Royal Caribbean Cruises & Royal Caribbean Int’l

Royal Caribbean Cruises Ltd. CEO Richard Fain and Royal Caribbean International CEO Adam Goldstein were in New York last week to reveal the newest details of the upcoming Royal Caribbean cruise ship, the Oasis of the Seas, slated to be the largest in the world when it debuts in 2009. Cruise Editor Johanna Jainchill sat down with them to talk about the ship's new "neighborhoods," fuel surcharges and Royal Caribbean's stock price.

Q: Your Freedom-class ships seemed more amenity-driven, with a surfing machine and boxing ring, while this seems more about experience with the neighborhoods. Is that what your market wanted?

Richard FainFain: It wasn't so much that we wanted something different from Freedom, which has been unbelievably successful. But the large platform opened up architectural opportunities that nobody had imagined on a ship before. When you start with a blank piece of paper and the enormous space, you can do almost anything. We [asked], what would give people something else, something more? Fairly quickly we focused on the neighborhood concept. It's a wonderful thing and an important element to make it easy to go around the ship. But there are a lot more amenities to come.

Q: It seems like you are making it very Vegas-like by re-creating existing neighborhoods.

Fain: We'd say it's a natural extension of what we've been doing. The key word is choice. People want to do what they feel like doing at the time. Freedom offered people an amazing array of choices unlike anything they'd had before. But when we were designing Oasis, the platform was so large it allowed them to take that concept a quantum step beyond, and you've seen the results.

Q: So far the ship is very outdoor-focused. Should we not expect to see it sailing in Northern Europe?

Adam GoldsteinGoldstein: We don't have preconceptions at this point. It depends how the market develops. We have tended to focus on the exterior aspects because opening the superstructure to create these spaces is so dramatically new. But we really do have a lot more to say. A good amount of the rest will be about the interior spaces of the ship.

Fain: When we built the Voyager, we never thought you'd see anything that large doing European itineraries. Now you see Voyager and Freedom in Europe and just how well-received they've been.

Q: You just raised your fuel surcharges. Could it go any higher?

Goldstein: We are mindful of the oil price, which is painful for us and has been going up. We have no desire to be charging our customers any fuel supplement. But the level of cost to us is significant, and we, like so many other industries, companies and governments, have felt that we need to ask our guests to share part of our fuel costs. We hope the price doesn't go higher, and we hope we don't have to raise it higher. But we do need to balance our cost structure so that we can continue to deliver these great vacations to our guests.

Q: Is there a point where it deters people from taking a cruise?

Goldstein: Any escalation in cost has some supply-and-demand effect.  We're fortunate that our product represents great value and that people respond to it at any level of economic conditions and want to be onboard our ships.

Fain: Anything that raises the cost of our vacation or any other vacation is unfortunate. But I think it's also important to recognize that in difficult economic times, people tend to be more careful about the way they spend their money. They study the true all-in cost of the vacation they are looking at more closely than they do in other times. The cruise is a great value compared to their alternatives. While we don't like anything that raises the cost to the consumer, we start from such a good base that we think we can absorb it better than other industries.

Goldstein: I felt that recently. We went to a land-based resort, and it really reinforced the value of our proposition.  They charged for the youth program, to go to the fitness center, for the rock-climbing wall. There were just constant charges. What you get for our ticket is special, and we think that will serve us well in challenging economic times.

Q: Have you thought of other ways to recoup the cost of fuel, like the airlines are doing?

Goldstein: We think of a million ways to save energy. That's probably the most important thing we can work on to do what we do. We certainly are in the business of commanding the highest price that we can for our product. But there are very significant differences between our industry and the airline industry. They are taking people from point A to point B. We have people living with us on vacation. The quality of our products and service ... is of paramount importance.

Q: Are you guys concerned about your stock price?

Goldstein: [Laughs] Yes!

Fain: Obviously, no company management ever thinks that they're fully appreciated by the stock market. But I think the market is concerned about what is happening or could happen with the price of oil and the economy. We as an industry have held up remarkably well despite the economy, but think of how much better we'd be in a more balanced economy.

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