CEO Conversations: Carnival Corp.’s Donald on stability and innovation

Carnival Corp. CEO Arnold Donald, far right, was joined onstage during the CEO Conversation panel by John Chernesky-the-puppet of Princess Cruises. The session was moderated by editor in chief Arnie Weissmann, seated, left.

Carnival Corp. CEO Arnold Donald, far right, was joined onstage during the CEO Conversation panel by John Chernesky-the-puppet of Princess Cruises. The session was moderated by editor in chief Arnie Weissmann, seated, left. Photo Credit: Jamie Biesiada

FORT LAUDERDALE — Carnival Corp. CEO Arnold Donald told an audience at CruiseWorld that being the largest cruise company in the world comes with two key advantages — stability and innovation — that help Carnival’s brands deliver industry-leading results.

The company has more than 100 ships, and it operates in every segment and several global source markets. “One of every two people who cruise go with one of our nine brands,” Donald said, which include Princess Cruises, Holland America Line and Cunard Line, in addition to the namesake Carnival Cruise Line.

“Because we have such a large portfolio, it’s difficult for anyone thing happening somewhere in the world to take the company down,” Donald said.

Size matters in innovation too. “We have the scale and the capability to take on projects that others can’t,” he said.

A prime example of that is the costly OceanMedallion personalization technology that Carnival developed and rolled out initially on Princess Cruises.

“We invented it,” Donald said. “It’s not off-the-shelf apps.”

Donald ran down a list of developments at various Carnival brands, such as the roller coaster on next year’s Carnival Cruise Line newbuild, the Mardi Gras.

But when he forgot to mention Princess Cruises, a surprise guest made an appearance.

From behind the couch where Arnold was seated, up popped a Muppets-style character designed to look like Princess’ senior vice president of sales and trade marketing, John Chernesky. The puppet ribbed Donald and amused the crowd until the real John Chernesky bounded on stage to complain that the puppet has been impersonating him all over town.

The larger message to the puppet tomfoolery was to billboard the Jim Henson Creature Shop show, called “Inspired Silliness,” that will debut next month on the newest Princess ship, the Sky Princess.

When Donald finally regained the spotlight, he took some time to outline Carnival’s sustainability initiatives and defend the industry’s record.

He said that very little of the estimated 8 million tons of plastics in the ocean comes from ships, much less from cruise ships. “It comes from land; it comes through the rivers and gets into the ocean,” he said, adding, “Having said that, we don’t want anything going in the ocean. He said that Carnival has accelerated existing recycling efforts and processes to eliminate plastics from its waste stream.

Likewise, when it comes to greenhouse gas emissions, a Carnival brand was the first to use liquified natural gas (LNG) to provide power in port, and Carnival Corp. will be the first to bring an LNG-powered ship to North America, with the Mardi Gras.

“Ultimately we want to get to zero-emission,” Donald said. But he said cruise emissions are a tiny fraction of the global equation. “The reality is if the cruise industry didn’t exist, you wouldn’t be able to measure the difference in emissions,” he said.

Five Ships to Leave Costa Fleet by May 2021

Costa Mediterranea  (Photo: JD Schwartz)

Working to reduce capacity growth in Southern Europe, five ships will leave the Costa Cruises fleet by May 2021, according to Arnold Donald, CEO of Carnival Corporation, speaking on the company’s third-quarter earnings call on Thursday, Sept. 26.

Donald said that two Europe-based ships will leave the Costa fleet in 2020, and he added that two ships will leave the Costa fleet in Asia in 2020.

In addition, he confirmed the Costa Mediterranea will leave the fleet in May 2021. 

The ships will be replaced with more efficient capacity in the new Costa Smeralda, Donald underscored. 

Carnival’s CEO did not mention what other ships would leave the fleet, but based on other Carnival Corp. vessel transfers, these would most likely be the line’s older and less efficient vessels. 

“Some are being sent to China; some are being sent to other markets where we have strength,” Donald said, noting some would also leave the fleet. “When we sell them, we don’t sell them into competing markets.”

The Atlantica and Mediterranea are expected to transfer to Carnival’s joint venture in China with China State Shipbuilding Corporation, but the timeline is behind previously announced goals. 

Recent Carnival Corporation secondhand vessel transactions include not only Costa vessels, but the P&O Oriana, which was sold to Chinese owners and just transferred to the new Astro Ocean brand.

In addition, the Pacific Jewel was sold to Jalesh Cruises, the Pacific Eden moved to Cruise & Maritime Voyages, and the Prinsendam is now the Amera for Phoenix Reisen.

China ‘Stronger Than Last Year’ For Carnival Corp

Costa Serena

“The bottom line is things are stronger for sure that they were last year at this time,” said Arnold Donald, president and CEO of Carnival Corporation, touching on China on the company’s Monday morning second quarter earnings call.

Donald said he still believes China will eventually be the largest cruise market in the world and putting in new hardware (ships) still made sense.

“The market there is very large in terms of overall travel, both from cities in China and, of course, as a huge potential source market for fly/cruise all over the world,” Donald said.

“In terms of the distribution system itself, yes, we’ve moved from full-ship charters primarily now to group sales and partial ship charters,” he continued. “We’ve added a large number of additional distributors. All of that kind of de-risks things a bit from being overly concentrated and what, in effect, today is still pretty much a B2B market. The direct sales component is slowly growing a bit there. There’s an opportunity to grow that over time. But a timeline in China, we’ll see. It’s a small market.

“I don’t see a dramatic increase in per cent of total capacity in the short term there. And the reason is not so much because of China, but because of the demand everywhere else in the world. And then as I mentioned, there are large addressable markets everywhere in the world that are under-penetrated, including the United States.

“And so it looks positive for the year on a relative basis so far. But China’s China, and we have to see how things play out for the full year,” Donald said.

“But right now, conditionally, things definitely look stronger. In terms of sanctions, we haven’t heard of any sanctions on either side that would directly impact the cruise industry.”

Travel to Korea is still unofficially restricted, and Donald said if that opens up, it could help the situation.