Mass-market Carnival Cruise Lines recently announced it will attempt to cut a niche for itself in the upscale market – the business it admits has the most potential for overcapacity – by offering an upscale product at mid-level prices.
When asked how the line would be successful in the crowded market, Sr. VP Sales and Marketing Robert Dickinson said, “Say there was overcapacity in the car industry and someone started selling Cadillacs at the price of Pontiacs. Don’t you think they would be successful?”
Getting more specific about the plan called “Project Tiffany,” Dickinson said the new product, which would be producted through newbuildings or the acquisition of an existing line, would be a “Royal Viking-type product sold at a Holland America price.”
The niche they intend to create, said Dickinson, is the “best value in the traditional market. We will have a unique price value that will constitute a pre emptive niche,” he said.
The “traditional market” is used to describe the upper market category now occupied by, among others, Royal Viking Line, Cunard’s Vistafjord and Sagafiord, and Princess Cruises, said Dickinson.
Besides these and other, recently formed cruise lines with ships on order, including Signet Cruises, Sea Venture, Windsor/Navtol, and Goliath Group, all intend to break into the upscale market within the next few years.
Advantage to Being Latecomer
Dickinson said that becoming a player late in the game will work to the line’s advantage. “We can learn from other’s mistakes,” he said, pointing to travel agent research that indicated traditional cruises are not what they used to be. “People are paying for something they are no longer getting,” said Dickinson refering to shipboard amenities which travel agents believe have declined somewhat over the years.
Travel agents have also told Carnival that offering an upscale experience to 1,200 or so passengers is inappropriate, said Dickinson.
“Our product hard points will be one-sitting dining, on smaller, intimate vessels carrying no more 700 passengers. All cabins will be outside with all or most having verandas,” he said.
These features are extremely similar to those of RVL’s current ships, and they are the same as those that will be incorporated into its new vessel Royal Viking Sun. They also resemble the promises of Signet, Seaventure, and other upcoming players.
Same For Less
Dickinson said Carnival will design and execute the product more efficiently by learning from other line’s mistakes, so it will cost less to produce. The quality will be delivered at a price below that of the competition, as Carnival can depend on its huge operation to generate volume that translates into lower costs for necessities like food, fuel, and hotel supplies.
Exact per diems are not established yet for Project Tiffany, which is only in the planning and design stage, with some negotiations going on for possible newbuildings. However, according to published reports, average per diems on an RVL cruise are well over $350; on a Holland America cruise, average per diems are less than $250.
Carnival’s travel agent network, believed by many in the industry to be the largest, will come in handy selling the new product, said Dickinson.
Financing the Project
According to a company spokesperson, financing will come from Carnivals’s initial public stock offering of 18 percent of its stock back in August, and record profits for fiscal 1987.
The cruise line raised about $400 million on the public offering, according to its underwriter Salomon Brothers, Inc.
Actual earnings for fiscal 1987, although not finalized, said the spokesperson, are estimated at $150 million on revenues of $560 million. This represents a 50-percent increase over last year’s earnings of $97 million.
(Latest reports say that Carnival plans to pay shareholders a 10-cent-a-share dividend for the fiscal quarter ending February 29, 1988. The line carried 552,774 passengers in fiscal 1987.)
