ABOARD THE PRIDE OF
HAWAII -- As passengers on the deck gazed at the emerald cliffs of
Kauai's Na Pali coastline last week, it is fair to say they
probably were not thinking about executives at Norwegian Cruise
Line's headquarters in Miami.
But this ship and two
sister vessels plying Hawaiian waters were no doubt very much on
the minds of NCL management, because they represent an extremely
challenging business model.
On its face, NCL's
Hawaii plan seems like a recipe for success: Be the only cruise
line able to sail a chain of picturesque, tropical islands with one
language, culture and currency.
Yet NCL's Hawaii
venture has generated a long trail of troubles for the world's
third- largest cruise company.
The upside is that as
U.S.-flagged vessels, NCL America's Pride of Aloha, Pride of
America and Pride of Hawaii, are the only ships that can offer
seven-day, interisland cruises in Hawaii without having to make a
stop at an international port.
But being
U.S.-flagged vessels also means having to employ American crews,
pay U.S. wages and forgo an onboard casino, all of which detracts
from the value of the company's seven-day Hawaii cruise
business.
During NCL's last
earnings call, the challenges of its Hawaii program were blamed for
much of the company's 2006 loss of $130.9 million, compared with a
$16.2 million profit in 2005.
The strongest
indication of continued weakness was NCL's decision not to replace
the Norwegian Wind, the one foreign-flagged ship NCL sails in
Hawaii, when it transfers the vessel to sister company Star
Cruises' Asia fleet in June. The Norwegian Sun was supposed to take
its place, but NCL decided to send that ship to Miami
instead.
"There will be no
further downsizing," Andy Stuart, NCL's executive vice president of
sales and marketing, said during an interview at the Seatrade event
in Miami last month. "We will examine the whole business to make
sure we're optimizing it."
Stuart and NCL CEO
Colin Veitch mostly blamed increased competition from
foreign-flagged competitors for recent pricing pressure in
Hawaii.
Capacity
expansion
"We have seen
enormous capacity expansion," Stuart said. "We didn't expect to see
that level of increase in the foreign-flagged market. There is a
significant addition of itineraries with a Hawaii component."
Stuart and Veitch
also acknowledged that much of that capacity increase came from
NCL's own ships. Veitch said during the earnings call that
"consecutive quarters of 60% NCL America capacity growth" had
contributed to "severe downward pricing pressure, as well."
Holland America Line
will increase sailings that include Hawaii from 11 in 2006 to 14
this year and to 18 in 2008. Princess Cruises increased the number
of cruises that include Hawaii to 22 this year and next, from 15
last year. Only Celebrity Cruises will reduce its Hawaii visits, to
11 this year from 13 in 2006.
However, unlike those
three brands, NCL America is not a premium cruise line, and its
ships are still the only ones offering seven-day, interisland
cruises that begin and end in Honolulu. The foreign-flagged ships
generally require 15-day itineraries so they have time to include a
foreign port, usually Vancouver or Ensenada, Mexico. Some ships
stop in Hawaii on much longer South Pacific voyages.
NCL America's Hawaii
fares are less expensive than the HAL and Princess cruises, and
their seven-day sailings are designed for vacationers who can take
only a week off -- a school break, for example.
The Norwegian Wind
sails a longer, 11-day Hawaii itinerary that touches the closest
foreign port to Hawaii, Fanning Island, part of the Republic of
Kiribati, which is two sea days from Hawaii and two back. The Pride
of Aloha will take over that route when the Wind moves to
Asia.
The economic reality
of staffing a U.S.-flagged ship means paying unionized workers U.S.
wages, overtime, benefits and vacation. It also means dealing with
high turnover and a relatively small pool of workers willing to
live at sea for months a at a time.
What's more, that
expensive workforce early on earned a reputation for lacking the
service ethic associated with the mostly Asian and Eastern European
staff on foreign-flagged ships. Overcoming that rap now seems among
NCL America's biggest challenges.
On a recent cruise
aboard the Pride of Hawaii, many passengers had come looking for
problems. They had heard things; they had read comments on Internet
chat boards; their travel agents had warned them.
Many were pleasantly
surprised.
On the last evening
of the cruise, Jasbina Ahluwalia and her husband, Rajnish Jain,
lounged above the pool deck and reminisced about a week they had
enjoyed so much that they declared they would only do NCL's
"Freestyle" cruises in the future.
Pleased with
the Pride?
"The idea of getting
dressed up for dinner and having to eat at a proscribed time is not
our idea of a vacation," said Ahluwalia, a lawyer and founder of
Intersections, a matchmaking service in San Francisco.
The couple said they
had been pleased with the variety of onboard eateries; some nights
they would visit several, trying an entree from each. They also
enjoyed shore excursions like parasailing in Maui.
As to why she had
chosen this cruise in the first place, Ahluwalia said, "It really
attracted us to see four islands in a week's time and spend so much
time in each port. We came in with no preconceived notions and no
expectations."
But preconceived
notions were definitely part of the baggage that some of the 2,200
passengers had brought onboard.
A couple from England
said they had heard the American staff was not on par with an
international staff.
"Maybe the crew
hasn't jelled together yet," said Ian Rixon. "But they haven't
gotten their act together. The staff has no urgency at all. They
don't do 'hurry.'
"On a cruise you
expect to be pampered. The expectation here is you do it yourself.
They are taking the Freestyle concept to be too free."
On the flip side, Ted
Herd and his wife, Lauren, of Foresthill, Calif., who had
previously sailed with both Carnival Cruise Lines and Royal
Caribbean International, said they found the staff to be hard
working, accommodating and friendly. They also said they felt that
the demands of their fellow cruisers were unreasonable.
"Some people expect
servants," Ted said. "People on cruises have delusions of
grandeur."
Several experienced
cruisers said they felt the staff were polite but not deferential
enough. A man from Chicago said that as nice as his server was, he
was too "buddy-buddy" with him. On the other hand, the Pride of
Hawaii's hotel director, Scott Hamby, said that many guests viewed
such familiarity as a plus.
"I get comments from
passengers that they are able to convey their thoughts and have
casual conversations [with the crew] because there is a lot of
commonality," Hamby said. "People don't get an awful lot of that on
an international ship. ... They don't have that common ground with
the crew."
He also noted the
advantage of avoiding language barriers while still having a crew
as diverse as the U.S. population. Indeed, the staff's tags showed
them hailing from all 50 states as well as Guam and American
Samoa.
The Freestyle concept
seems to work well on the Pride of Hawaii, primarily because it is
a port-intensive cruise. The trip offers 96 hours in port and two
overnights, in Maui and Kauai. Passengers return to the ships at
all hours of the day and can eat at any of the ship's 12 eateries
whenever they want. Five of the restaurants have additional fees of
$10 to $20.
"It's nice to come
back from an excursion and be starving and go eat a nice dinner and
not have to go to the Lido because your dining room seating is at
8:30," the passenger from Chicago said aboard a catamaran on a
snorkeling excursion.
As for passengers who
complained that lines were too long and that differing reservations
policies led to long waits, Hamby said it was a peak dinner hour
phenomenon.
"I can only compare
it to being back home at my favorite restaurant," he said. "If I go
at the most popular peak time of 7 o'clock or 7:30, there's going
to be a wait."
Outside peak hours,
he said, passengers usually don't have to wait, even at the ship's
most popular restaurants.
To contact
reporter Johanna Jainchill, send e-mail to [email protected].