SCG 2016 report - Industry captains discuss innovation and Cuba

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 16 March 2016 16 March 2016

Alan Lam reporting from Fort Lauderdale

During the customary opening State of the Industry address at this year’s Seatrade Cruises Global, currently underway at Fort Lauderdale, the four industry captains – Arnold Donald of Carnival Corporation & plc, Frank Del Rio of Norwegian Cruise Lines Holdings, Richard Fain of RCCL, and Pierfrancesco Vago of MSC Cruises – shared their views on innovation, differentiation and potentials of the Cuban market.

On innovation

While ‘differentiation’ is now the buzzword of the rapidly maturing industry, the definition of ‘innovation’, too, has diversified.

For Arnold Donald, the President of Carnival Corporation & plc, innovation is all about meeting guest expectations and providing them with emotional experiences associated with cruising. Moreover, “To be innovative means thinking outside of the box,” he said. “It is not just about ship size; it is not just about spaces; it is about passenger interactions and transformative experiences.”

Frank Del Rio, President of Norwegian Cruise Line Holdings Ltd., was more specific. “To me innovation means, firstly, understanding your customers,” he said, “secondly, it means what works for your brand; what differentiates your brand. Otherwise it will be a total flop.”

He also pointed out that innovation did not necessarily mean building new ships “I think the industry made the mistake of only looking at new ships,” he said. “You can be innovative with older ships, too. In future, we will adopt a more balance approach by maintaining the existing fleet to a higher standard and generate better yields with them.”

For Richard Fain, President of RCCL, innovation was something very important. “It defines us as an industry,” he said. “Innovation has nothing to do with ship sizes; you can be innovative here, there, and everywhere; big or small. Creativity is about ideas; innovation is putting them into action.”

Pierfrancesco Vago, Executive Chairman of MSC Cruises, broadly concurred with his peers. “Innovation means designing something totally new,” he said. “Innovation must concern with the experience of the passengers. We want to create a different experience. But innovation can be seen in many different ways.”

As the industry matures, it is becoming ever more important for the brands to be innovative in the face of increasing competition, shifting operational geography and the changing customer tastes. Different approaches to innovation can only mean more product differentiation and choices in the future.

On Cuba

Aside from redefining the concept of innovation, the four chiefs of the cruise industry shared their perspective stances on cruise business in Cuba. Arnold Donald saw opportunities beyond the boundaries of the island. “Cuba will benefit the entire Caribbean,” he said. “People will return to the Caribbean because of Cuba.” But there were still many hurdles to overcome particularly for the US-based cruise lines, chiefly among them, for example, US credits cards still could not be used in Cuba.

Frank Del Rio was critical of the US policy towards the maverick island nation. “After 55 years of failed strategy, something must change,” he said. “We have had a shorter Cold War with Russia than we do with Cuba, and we are now doing business with China. It is time to change. This is nothing more than a family feud.”

Cuba has every attraction available: beaches, culture and a rich architectural heritage. But in practice, according to Frank Del Rio, when Cuba eventually opens up completely, it will be a low-volume start because of its limitations.”

It is widely accepted assertion that Cuba will not have a negative impact on cruise business in the rest of the Caribbean. “In terms of its size Cuba is not going to divert too much traffic from other destinations,” said Richard Fain. “Its infrastructure will not be able to support that.”

Cuba will become a part of the differentiation process. Perhaps it will occupy a different niche on account of its unique characteristics. As more players enter this market, they will be forced to be innovative in order to thrive.

As a non-US cruise line, MSC is already off the starting blocks on the great Cuban race and reaping the enviable rewards. But, to maintain its market share in the long run, it will need to be innovative.