Norwegian Cruise Line – A Simple Business History.
Norwegian Cruise Line
Norwegian Cruise Line has a complex and difficult history, and despite being the first ‘modern’ cruise line born out of the cruise boom in the Caribbean it has been slow to adapt to market trends and has been dwarfed by competitors Carnival Corporation & PLC and Royal Caribbean.
Norwegian Cruise Line was founded by Knut Kloster and Ted Arison, as Norwegian Caribbean Line with a small cruise ferry, the success of which was very quick and soon addition vessels where launched, not much notice was taken to the fledgling industry until in the 70’s NCL acquired the world’s largest passenger vessel, SS France, and converted her into the Norway. Upon arrival the Norway was the world’s largest cruise ship and developed the idea of the vessel being the destination in its self.
In 1972 Ted Arison left Norwegian Cruise Line to found Carnival Cruises, he reportedly took money from reservations and records with him to fund the new start up, this left NCL in total disarray. Carnival launched with the Mardi Gras, marketed as a ‘fun ship’ the vessel was still being reconstructed from its previous operation as a transatlantic liner.
On the maiden voyage of the Mardi Gras its went aground, which competitors at first found amusing, however it was quickly realised that the Mardi Gras was blocking all other vessels from leaving the harbour. A clever bartender launched a new drink named Mardi Gras on the rocks. From then onwards a strong rivalry developed between the lines, who actively try to out smarten each other, when NCL and Royal Caribbean vessels pass Carnival ships, they regularly announce that Carnivals ships are the ‘Kmart of the sea’. Kmart being a low class US discount store.
In the mid 90’s with a resurgent Royal Caribbean and growth from P&O owned Princess Cruises, as well as long standing nemesis Carnival Cruise Lines, NCL collapsed into bankruptcy; it hastily merged all of its brands together into the main Norwegian Cruise Lines brand. This destroyed the consistency of the product and of the slain brands the goodwill and image that had been built up over years.
In an attempt to revolutionise the cruise market NCL seized the opportunity to develop a ‘freestyle’ cruise model, this gives guests a wider variety of restaurants and activities as well as allowing them to eat when they want, rather than at set meal times, as had previously been the norm. This has become the main ethos of NCL today.
In the 2000’s the line was still haphazardly losing market share to its core rivals, namely Carnival Corporation, and Star Cruises of Asia launched a bidding war with Carnival for NCL. Star Cruises won, and a large new building project was started at the line, as well as the disposal or transfer of some of the older tonnage. Under the leadership of Star, NCL began a plan to launch a fleet of vessels flagged in the United States, and received official government approval for the plans.
The American line, based in Hawaii, was launched named NCL America, its all American staff was expensive and the operation never made a profit. In the face of these problems Star sold half of the business to Apollo, the American private equity group, the American based fleet was shrunk to one vessel.
Two new vessels where ordered, with a third planned, from STX Europe. These vessels where coded as the F3 class, standing for Freestyle 3, the third evolution of NCL’s signature product. Following the investment by Apollo and a management shakeup construction was stopped on both vessels and the third cancelled. This is due to Apollo wanting more of a say in the vessels onboard amenities. The outcome was the cancellation of the second vessel entirely and the cost increase for the first vessel. This vessel has since been launched as the Norwegian EPIC. Unusual in the industry as a sole vessel, as cruise ships usually have multiple sister ships.
In October 2010, NCL announced it was planning to list on the stock market and that it would be building two new ships slightly smaller than the Norwegian Epic. A return to the market is expected to be difficult as NCL is still significantly smaller than Royal Caribbean INC and the market leader, who is dual listed Carnival Corporation & PLC. Carnival Corporation & PLC was formed following the merger of the British owned P&O Princess Cruises PLC and the American Carnival Corporation. Finally after nearly 30 years NCL appears to be back on track to maintaining a solid and profitable business.
Devils on the Deep Blue Sea, By Kristoffer A. Garin, A book about the dreams, schemes and showdowns that built America’s Cruise Ship Empires.