Ratcliffe: Agents are vital to cruise lines

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The following Q&A is part of a continuing series of interviews with industry leaders. Peter Ratcliffe joined Princess Cruises as chief financial officer in 1986 and became the line's president 1993. Travel Weekly West Coast bureau chief Jerry Brown talked with Ratcliffe at the cruise line's Century City, Los Angeles, headquarters.

TW: Since we're getting close to the Alaska season, let's start there. You've got six ships in the state again this coming season. Could you eventually have more? Is there a chance that that market could get bigger?

Peter RatcliffeRatcliffe: Alaska has grown about 10% a year for the last decade. This year, we'll carry over 72,000 tour passengers, whereas 10 years ago we carried 12,000. We still have a lot of confidence in the potential for growth in that market.

TW: What about your investment in land facilities? Are you planning to expand that?

Ratcliffe: Yes, we are. We are one of the two major players in Alaska and we've each approached the market in slightly different ways. We have invested much in Gulf of Alaska cruising and so we have invested in wilderness hotels [in Denali National Park, on the Kenai Peninsula and elsewhere] and we're very happy with how that's turned out. This year we're going to expand the Mount McKinley Princess Lodge and probably the Denali Princess as well. The whole concept of taking people across the gulf and then giving them this wilderness experience we find is very attractive.

TW: Did that controversial marketing strategy of taking on Holland America one-on-one, comparing yourself directly to the other major player succeed in its aims? Did it move market share?

Ratcliffe: What we were trying to do was point out the differences in our respective products. We had a clear business purpose to make people realize that we were focusing on the gulf and that the gulf is very different from the Inside Passage. We are now very successful in the gulf and I think we are clearly distinguishing ourselves, simply pointing out that we do it this way and they do it that way. That was the purpose of the campaign.

TW: You're not conceding the Yukon Territory, which is primarily an Inside Passage cruise-tour destination, to Holland America Line, though?

Ratcliffe: We're not conceding it, no, but they carry a lot more people through the Inside Passage and we carry a lot more across the gulf, so while we have similar products we each tend to focus our advertising on different parts of Alaska.

TW: The Island Princess -- a small ship -- did an interesting itinerary the year before last, including Kodiak and Homer, among other less-visited spots. Was that successful? Could it be repeated?

Ratcliffe: It gave people an aspect of Alaska that they hadn't seen before and it was successful; it was sold out. We could, indeed, bring a ship back to do something similar in the future, but we try to increase our capacity each year by gentle percentages and we've introduced a lot of big ships there in recent years.

TW: Obviously, the ship that might be brought back to do that can't be the Island Princess since you just sold it. Had you been planning to sell it for a while or was it just an offer you couldn't refuse?

Ratcliffe: We had been planning it. With all the new ships coming into the fleet, we were looking for the right opportunity and Hyundai came along with just that opportunity.

TW: Are there any plans for more Grand Class ships beyond those already announced?

Ratcliffe: We have confidence in this industry's future and we intend to be a large part of that future. Is that a suitably enigmatic reply?

TW: I guess it answers my next question as well. We keep hearing rumors about P & O buying this company or that company and merging it with Princess. Is that a live possibility?

Ratcliffe: We never talk about things like that. Clearly we have been successful with the introduction of the Grand Class ships but we also started the cruise line merger trend by buying Sitmar in 1988. Anything's possible.

TW: The company has said Pacific Princess, the same size as the Island Princess, with 640 berths, is committed to the Bermuda market for three years starting in 2000. But could you substitute a bigger ship if somebody came up with a good offer for the Pacific Princess?

Ratcliffe: We're going to position ourselves slightly differently from other cruise lines in the Bermuda market by trying to carry a lot more non-Northeastern states passengers, concentrating more on the West and Midwest. For that, I think the Pacific Princess is the right ship while we see how the market grows.

TW: Are there any places left that haven't been discovered as cruise destinations?

Ratcliffe: I think it's easier to change the combinations of ports than to find new destinations. We call at 220 ports in all continents except Antarctica.

TW: And I take it Antarctica doesn't figure big in your future plans.

Ratcliffe: You never know. As I said, all things are possible.

TW: Princess has always used its small ships to pioneer new destination areas, hasn't it?

Ratcliffe: Yes. East Africa, west Africa, India and other wonderful places.

TW: The Grand Princess, all 107,000 tons of it, has been fabulously successful in Europe, by all accounts. Right?

Ratcliffe: Amazingly successful.

TW: When Princess started in Europe, back in the mid-80s it had just one small ship. In recent years you've had both of the small ships, plus the Royal Princess and the Grand Princess.

Ratcliffe: I think we can safely be said to be committed to Europe. We always try to be the No. 1 line in every destination trade we're in and I think we are in Europe; we have more capacity than anybody else.

TW: Which brings us to a destination in which you are NOT the No. 1 in capacity ...

Ratcliffe: The Caribbean ...

TW: Exactly. You've never had a year round presence there.

Ratcliffe: The Grand Princess fleet will be our pioneers in the Caribbean. The second and third ships in the series are programmed to go into the year round market there. I don't believe we'll ever be No. 1 in capacity in the Caribbean but we'll certainly be a significant player.

TW: Look ahead 10 years. Where do you see Princess and, indeed, the cruise industry in general, at that time?

Ratcliffe: I'm very positive about the cruise industry. All the research shows enormous demand for the product and potential for growth. Research shows that 67% of the population of the U.S. would like to cruise but can't right now for various reasons. There aren't many consumer products with that level of desire. There's an enormous upside to the cruise business. The demographics are going in the industry's favor; Americans are getting older and wealthier and within that framework, I think Princess would be positioned very well.

TW: Where do you see travel agents in that picture?

Ratcliffe: One of the major reasons for our success has been our consistent attitude toward travel agents. I think it's generally accepted that we have developed policies that are completely supportive of the travel agent. Rick [James, Princess' senior vice president customer services and sales] has done a tremendous job in that regard. Clearly, the agent industry is going through a lot of changes in the area of commissions and so on but I don't think we'll ever change; our commitment hasn't wavered in 15 years. The average cost of a Princess cruise is $2,000. That's not the sort of thing you buy on the spur of the moment so we want a healthy travel agency community and we will continue to be supportive of it.

TW: Princess is about to get on the Internet. How will that affect agents?

Ratcliffe: The Internet is really just another marketing tool, just a way of disseminating information reasonably effectively. We will use it only to get our agent policies out, not for going direct to the consumer or offering special prices or anything like that.

TW: Will you offer an agent-reservations capability?

Ratcliffe: We might do that eventually. Remember, we were the first cruise line into the CRS's and we found that very helpful. We could well have a booking system for agents but it seems to me that the Internet always gets confused with 'direct' and to me the key thing is that you mustn't make available prices which undercut agents. As long as you don't do that, it's just one more way of communicating with various people, just another natural evolution, if you will.

TW: So what will consumers find when they plug into the Princess site?

Ratcliffe: Well, for one thing, they'll find a travel agent locator. It will offer a map with the consumer's location in the middle, and a list all of the agencies within a one-mile, two-mile, five-mile radius, whatever he or she asks for. I think a healthy travel agency distribution system is vital to this industry -- absolutely vital.

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