CEO interview with Arnold Donald: Agents, technology and industry disrupters

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Photo Credit: Courtesy of CLIA

This interview was originally published as part of Phocuswire's "In the Big Chair" series. Phocuswire is a sister publication to Travel Weekly.

Carnival Corporation is the world's largest leisure travel company, with more than 100 ships sailing under nine brands, including Princess, Carnival, Holland America, Costa and Cunard. The company has 120,000 employees worldwide and serves more than 12 million travelers each year, accounting for nearly half of the global cruise market. 

Arnold Donald became CEO of Carnival Corporation in 2013. Previously, he was an executive at agricultural company Monsanto Company. He joined Carnival's board of directors in 2001. 

Q: The distribution landscape is different for cruises than for other sectors of travel. According to Phocuswright, traditional agents account for 69% of cruise bookings and that number is expected to inch up to 71% by 2022. What are your thoughts about the role of agents in the cruise sector?

Travel agents and travel professionals are extremely important partners to the cruise industry and invaluable to our growth and success, because as you said, travel agents still book the majority of cruises. They deliver significant value to their clients -- who become our guests -- by providing in‐depth knowledge of the industry and different cruise experiences for different occasions, so they play a key role in helping our guests make great vacation choices.

Our job is to consistently exceed our guests' expectations when they go on a cruise vacation. So before our guests board our ships, travel professionals very often work with their clients to understand what they are looking for from their cruise vacation. The role they play in providing clients with expert guidance as to which cruise line would be best based on their client's input, lifestyle, personality and other factors has tremendous value. Using their knowledge and skills, travel professionals help people book the right cruise line -- and that is one of the best ways to make sure people have a great vacation experience.

Once our guests are on board, we are very focused on making sure they have an extraordinary vacation -- and that, in turn, helps us win over guests to want to sail with us again and again. The research shows that when people go on a cruise, over 90% have a great time and cannot wait to go on another cruise.

When that happens, they often return home and tell their family, friends and co‐workers how they had a great time on their cruise. Those word-of-mouth testimonials are the most effective way to spread the word and help influence others to consider a cruise vacation.

Q: We've seen disruption in both ground transportation and accommodations from companies such as Uber, Airbnb and others. What could disrupt the cruise sector -- or do you think its asset values and long‐standing distribution model provide immunity?

Cruising is a unique vacation experience and a great value, even a better value than land‐based vacations, and so we're attractive in almost any environment.

Over 28 million people are expected to cruise in 2018, and the number of people going on a cruise vacation has increased by about one million a year. And since we have nine of the world's most popular and iconic cruise line brands, almost one out of every two people who go on a cruise do so with us, so we are excited about our growth and the industry's increasing popularity.

At the same time, we're still a relatively small percentage of the overall travel market. In fact, all of the cruise ship cabins in the world add up to less than 2% of the hotel rooms. The reality is, we're under-penetrated as an industry in every market in the world, and we're capacity-constrained because there are only so many shipyards to build ships.

As a result, our ability to grow exponentially is capacity-limited and the cost of entry is very high. That presents a major challenge for anyone looking to disrupt the industry and to disrupt a business model that currently works very well. We will continue to see the growth of smaller specialty, expedition and other niche cruising offerings, but of course at nowhere near the scale of our operation and others.

Q: This year the Princess Cruise line has been rolling out its Ocean Medallion wearable device that powers payments, access control, information and entertainment for guests while on board. How do you balance the technology with the human touch? Will you develop similar wearable devices for other Carnival cruise brands?

Our rollout of OceanMedallion to our guests sailing on Caribbean Princess from our Princess Cruises brand has been a tremendous success, and we're adding Regal Princess also as a MedallionClass ship. Our guests have been wowed by the platform's ability to create a more personalized and customized travel experience, and it has been resonating well. We are excited for its ongoing expansion.

One of the most important things about our approach with MedallionClass vacations is that while the technology we developed is very advanced, OceanMedallion is all about the guest experience, and the technology, for them, merely serves as a way to enable an elevated level of personalized service, and on a large scale.

So, for instance, our Medallion cruises enable our guests to enjoy hassle‐free payment, keyless and personalized stateroom access, frictionless embarkation, on‐demand services and more. Those are exciting advancements, but even more importantly, OceanMedallion enables our crew members to provide an even higher level of service to our guests.

Using their own tablet that communicates with a guest's Medallion, our crew members can greet our guests by name, can ask if they would like to have the same refreshment they had at dinner the previous evening, can see what is on their agenda for the day and can help with any questions they might have, and so on.

Our crew members are renowned for providing world‐class customer service, and with OceanMedallion, they can provide an even higher level of personalized service. We believe it has the potential to be a game‐changing development in the broader travel industry.

Q: You have nearly two dozen new ships in production. How are you incorporating technology into those?

As you might suspect, technology is coming to bear on almost every aspect of modern cruise ship building. From the computer‐aided design of the ship itself to state‐of‐the art energy, entertainment, communication, navigation and environmental systems, technology is making for a better cruise experience.

Everything we do is to consistently exceed our guests' expectations, and as we consider new technologies, we are focused on how that technology can help us exceed our guests' expectations -- on every ship, every brand and every sailing.

Q: What role can voice technology and chatbots play in the cruise industry?

At the risk of being repetitive, we are always evaluating new technologies to help our guests and our employees, but at the end of the day, it all comes back to the guest experience. We evaluate many new technologies at our Experience Innovation Center in Miami, a land‐based version of a cruise ship environment, and voice and other control technologies are a few of the many areas being explored.

We are always cautious not to jump in too aggressively in changing what is already a great guest experience, as there often can be unintended consequences.

Q: How do you attract new customers to Carnival's portfolio of nine cruise brands?

Our focus is on consistently exceeding guest expectations across our brands, and as we do that over and over, we generate strong advocates and positive word-of-mouth testimonials, which is one of our most effective forms of marketing. We have more people considering a cruise for their next vacation based on all the positive things they hear from friends and family who love to cruise.

We also have been executing on innovative forms of marketing and creating original content that inspires consumers to try cruising for the first time. Our Ocean Originals TV programs are a good example of that. These are original TV shows that we produce to run on major national networks in the United States and abroad, along with our own digital streaming channel called OceanView that provides free travel content to consumers.

Our programs are designed as compelling experiential travel TV shows that transport viewers to new destinations, cultures and adventures, showing why travel -- especially travel on a cruise -- is such a great vacation experience.

Some of our Ocean Originals shows are now in their third seasons after winning multiple creative awards and continuing to draw millions of viewers each week who say they look at cruise vacations more positively after watching our shows. We are proud of that effort, and we believe it is making a difference in broadening our exposure to the broad consumer market.

And of course, new innovations such as OceanMedallion also help create interest and media attention for the cruise industry and attract consumers to the idea of a new personalized way to travel, which helps consideration for cruising. We also introduce new cruise ships with great fanfare, and that helps us drive interest and demand for the industry.

Q: When we talk about future growth in the travel industry, all eyes turn to China. It has one of the world's fastest-growing economies, and its travel market is projected to grow 9 to 11% annually for the next several years. What are your plans for the Asian market in the coming years?

We were the first international cruise company to homeport in China, over 13 years ago. It is important to note that while China is currently still a very small piece of our overall business, China has a large population base, a growing middle class and over 140 million outbound travelers. In fact, China has prioritized cruising as a growth area in its five‐year economic plan, so the future for cruising in China has much promise.

Longer term, the cruise market in China could be as large as the entire industry is today, so with that potential, we will continue to be a leader in the market and play an active role in developing the future of cruising in China.

We just recently launched our China cruise joint venture that will begin serving Chinese guests next year, while also investing in China‐built ships designed for the China market. We are excited to see our joint venture efforts, together with our brands that are already serving the market, continue to help fuel broader awareness, consideration and demand for cruising in China.

Q: Excursions are an important element of the cruise experience. How do your brands work with local operators and do you think this will change as third‐party sites such as GetYourGuide, TripAdvisor, Expedia et al, gain a higher profile for tours and activities?

We sail to more than 700 of the most beautiful destinations in the world each year, and we work closely with local tour operators, governments and community organizations in each of those locations to make sure we give our guests a wide choice of exciting excursions to consider.

This is a major priority for us, and we have an excellent team of professionals dedicated to understanding the various excursion opportunities we can offer our guests, and we take much pride in working with our partners to provide what we believe are among the best excursions available.

At the end of the day, it is all about relationships and partnerships on a local level. Our guests understand they can explore on their own, or can look into others offering excursions, and of course that can include new entrants. However, over a long period of time, we have developed a very solid reputation and track record for providing highly popular shore excursion options.

As part of this, we believe strongly in being partners with the communities we visit, and in leaving communities even better than we found them. There are two mantras in cruise that I believe are true: "happy crew, happy guest," and "happy locals, happy guests." If the locals in a destination aren't happy and aren't welcoming to the guests, the guests may not have a great experience.

So to do that, we partner with and listen to the locals, and from there, we work closely with them to make sure our cruises integrate in a way that's mutually beneficial. We believe that also plays an important role in our ability to partner with locals who value their relationship with us and do their very best to make sure our guests have a great experience.

Q: Your first job in the travel industry came when you joined Carnival Corporation as CEO in July 2013. How did your prior experience prepare you for this role?

Coming into this role, I was on the board for 12 years, and it was helpful that I had familiarity with the company, its metrics and how strong the leadership team was, along with some working knowledge of the business, and I knew how great the culture was throughout the organization. However, I also knew being an operator was a very different proposition.

Overall, I think everything you experience in life culminates into who you are today. From my youth to my education and throughout my career, all of those different events and influences have had an impact on how I view the world, run a business and manage people to help maximize success for everyone involved.

I have been fortunate to have led the transformation of other industries in my career and in having a broad, global business background and perspective. I am also a strong believer in the power of diversity and inclusion and have always made sure my management teams reflected those traits.

I always strive to create an environment where people are aligned on the company's goals and take ownership and pride in their work; where they are truly making a difference, growing in their job and having fun doing it.

Q: What part of that transition was most challenging?

One of the most important things we needed to do immediately was engage with the media in new and different ways and change the narrative about cruising. Media coverage at that time had become negative on cruising as a whole, so we needed to work on doing a better job of telling our story to the media and helping educate the broader public to begin repairing our reputation.

We worked quickly to ensure we were providing ample amounts of information, while being responsive and providing even more access to our company. We have such a great story to tell overall, so our focus has been on sharing that narrative more effectively, which we've been able to do with our PR and marketing efforts in the past few years.

Secondly, we had cruise line brands that were all great unto themselves, but there was a lack of communication, coordination or collaboration. So, after everyone self‐aligned around a strategy to work much more closely together, the goal became to leverage the scale advantage that we have, not just from a purchasing and cost standpoint, but from a creativity standpoint as well, and getting the brands to see there was power in working together.

The results generated by our employees speak for themselves -- we are exceeding guest expectations by working together to innovate the entire guest experience, while also finding new ways to create awareness and demand for cruising as a great vacation at a tremendous value and improving our model for strategic global sourcing. As a result, we're performing very well, the industry is growing at a record pace and we are positioned well for the future.

Q: What are your priorities for the next three to five years?

Our main priority is to continue executing against our plan, and with everything we do -- always consistently exceeding guest expectations. That mantra drives our entire business, and together with our 120,000 dedicated employees, has enabled our strong momentum and success over the past five years, and will continue to propel us forward in the future. One of our key corporate initiatives was to reach double‐digit return on invested capital by the end of 2018, which we achieved, and sustaining that achievement long term will be important for us.

Overall, we have made great progress in driving the cruise industry to be the fastest‐growing segment of the vacation market, but the reality is that we are still under-penetrated in every region and have significant growth opportunities everywhere in the world.

Our goal is simple: We want to be in the consideration set when people are sitting around the kitchen table making their vacation plans. To do that, we have to continue to dispel myths about cruising and tell our story in a way that gets people excited about the possibility of going on a cruise vacation.

People from all walks of life love to travel, so our focus is on finding ways to show them that cruising is an extraordinary vacation and exceptional value. Once travelers try a cruise for the first time, most of them are hooked for life, and you can't ask for a better growth opportunity than that.

Q: What is one characteristic every leader should possess?

I'm sure there are many, but for me -- I'm a firm believer in being a really good listener. It sounds simple, but it is not always easy to take the time to truly listen -- to your shareholders, employees, guests and truly everyone who has a stake in your success. And if you don't know how to listen, you have to learn how to listen.

I believe everyone you encounter has something to offer and something you can learn from, but you have to be patient, ask the right questions and sometimes extract the most important information. Even when you think you know the answer, you should listen first.

If you listen to your customers, they will tell you what they want. If you listen to your employees, they will tell you how to deliver on what the customer wants, which for us means consistently exceeding guest expectations and constantly innovating every aspect of the guest experience. If you listen to your communities, partners, suppliers and other stakeholders impacting your business and your goals, they will also help provide solutions and ideas that work for the greater good. If you are sincere in your listening, you will be rewarded with insights that can fuel your ongoing success.

Q: What is something about you that we wouldn't learn from your resume?

Most of what you could learn about me is not on a resume. I love to dance and read, and I'm a movie buff. I also love to write, including poetry -- and although I enjoy writing poetry, no one is ever going to see it! Spending time with family and especially my six grandkids is a big priority and a highlight of my life these days. Oh ... and Geaux Saints! I grew up in New Orleans and am a die-hard fan.

I could go on, but those are a few examples.

Source: PhocusWire

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