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
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?
Ratcliffe: 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
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
TW: You're not conceding the Yukon Territory, which is primarily
an Inside Passage cruise-tour destination, to Holland America Line,
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
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
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
Ratcliffe: We have confidence in this industry's future and we
intend to be a large part of that future. Is that a suitably
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
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
TW: Are there any places left that haven't been discovered as
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
Ratcliffe: You never know. As I said, all things are
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
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
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
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
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
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
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 --