Full Steam Ahead for Oceania

Just past its fifth anniversary, Oceania Cruises is a study in extraordinary success against the odds

By: By Marilyn Green

Kitchen Confidential

Oceania Cruises, the only line that has been inducted into the Maitres Cuisiniers de France, is led by the menus of Jacques Pepin, dean of special programs at the French Culinary Institute and holder of the Legion d’honneur, whose television show with Julia Child won a daytime Emmy. Pepin’s new menus will be introduced in May and December, and each new cycle typically includes 350-400 new items.

Twenty-five percent of the staff on each Oceania ship is galley staff, and the company says it has twice as many chefs as other lines. Oceania’s onboard chefs have previously showcased their talents at prestigious culinary destinations.

In addition, many of Oceania’s suppliers provide products tailored to the line’s specifications. The company has its own exclusive producer of foie gras in France; lobsters are raised exclusively for Oceania (according to Oceania’s stringent quality guidelines) at its farm in Maine; and Viron flour from the Beauce region of France is exclusively produced for its ships, allowing Oceania to claim the only authentic French baguettes at sea. The baguettes are only one facet of the line’s special bread program, which was developed by star boulanger and executive corporate chef Frank Garanger. Each dining room has its own distinctive breadbasket — to fill them all, the staff bakes more than 60 varieties.

Another very carefully crafted aspect of the dining experience is the regional cuisine offered on board, much more than a tip of the hat to the countries to which Oceania cruises. To offer authentic cuisine characteristic of the cultures along its itineraries, the line works with distinguished chefs from London to Mumbai.

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It all started with a telephone call from the French government in 2002 — not a stellar time for the travel industry. Frank Del Rio, former executive vice president, CFO and co-chief executive officer of Renaissance Cruises, was relaxing at home when the call came, asking him if he was interested in starting a new cruise line.

Oceania’s Nautica in Australia: One of the line’s strengths is its exotic itineraries. // (c) Oceania Cruises
Oceania’s Nautica in Australia: One of the line’s strengths is its exotic itineraries.

When Renaissance had ceased operations in September 2001, the company’s eight new ships had come on the market. Although two of the 684-passenger vessels found a home with Princess Cruises and three went to long-term charter with European operators, three were still out of operation, and larger cruise lines had their own newbuilding programs and were not inclined to acquire the ships. The French government wanted them in operation and was willing to charter them to a new cruise line. Del Rio said he was interested, as did several other individuals, and a sort of contest ensued.

"The final three were Art Rodney, former president of Princess Cruises, Crystal Cruises and Disney Cruise Line; Joe Watters, former president and COO of Crystal Cruises, and subsequently chairman of Oceania; and me. I was lucky enough to be chosen," Del Rio said.

The French government gave him three months to raise the needed $14 million to start the company.

"This was the fourth quarter of 2002," Del Rio said, "probably the worst period to raise money on Wall Street up to the last quarter of 2008."

He accomplished it, however, primarily with individual investors. Oceania president Bob Binder was one, as was Del Rio himself, along with Joe Watters, who became chairman, and Gerry Herrod, founder of Orient Lines, Ocean Cruise Lines and Pearl Cruises.

Starting out in 2003, Oceania put together a shoreside office staff of 12 and launched its first cruise on the Regatta from Barcelona, Spain, in June.

"It was not the best of times," said Del Rio, now chairman and CEO of Prestige Cruise Holdings, which includes Oceania and Regent Seven Seas Cruises. "We were at war in Iraq and SARS was making people terrified to travel. But we sailed full, and we have been sailing full ever since."

This is something of an understatement; Oceania spent its first years frustrated with long waiting lists of would-be passengers who often had to sail elsewhere because they could not find cabins. Although the last two former Renaissance vessels, now named the Insignia and the Nautica, joined the fleet by 2005, Oceania badly needed new ships.

By November 2006, the company was in the position to purchase its three chartered ships, and in February 2007, they sold the majority interest in the company to Apollo Management and formed Prestige Cruise Holdings, which now includes Regent Seven Seas Cruises.

"That was when the investors really got happy," Del Rio remarked. "They made 100 times their original investment."

Between 2003 and 2007, the line had grown from a start-up with $14 million in capital to being valued at greater than $850 million. Del Rio announced a billion-dollar order for two, new, 1,252-passenger ships — the first, Marina, will be delivered in the fall of 2010 and the second in the summer of 2011. Oceania also has an option for a third ship in 2012. Again, it is launching a substantial move at a time that wouldn’t be called optimal and, again, Oceania expects to sail full.

New Ships on the Way
With 2,500 more beds to fill, Oceania intends to remain a predominantly North American line. Del Rio said that with the two new ships, Oceania will carry 125,000 to 130,000 passengers annually, but the goal is to keep 80 percent of the passengers sourced in North America.

The company plans to continue its policy of running a small, efficient operation. Binder said Oceania will add only about 20 staff members shoreside, going from 160 to 180 people, including retail sales directors. He attributes much of Oceania’s spectacular success to the management team, which has maintained the company’s culture.

Left: Frank Del Rio, chairman & CEO of Prestige Cruise Holdings, Inc. Right: Bob Binder, president of Oceania Cruises // (c) Len Kaufman
Left: Frank Del Rio, chairman & CEO of Prestige Cruise Holdings, Inc. Right: Bob Binder, president of Oceania Cruises

"Only one of the higher-level executives has left the company since we started," he stated. "Our management team is extremely stable. We have been fortunate in our choices; they’re not only good at what they do — they’re good people who enjoy one another."

Binder said an important component of Oceania’s culture is its "One Voice" policy, in which executives and middle management are actively involved in recruitment and training and spend time with new recruits.

Oceania also is paying careful attention to onboard staff facilities for the 780 staff members on the newbuilds, part of its policy of making sure that employees are as happy as the customers.

And the customers should be very happy indeed with the new ships, particularly since their input helped to shape the features.

"We are going to move it all up a notch," Del Rio said.

The changes include more space, both in public rooms and accommodations, with staterooms averaging 50 percent larger than on the existing fleet, now known as the Regatta-class ships. The 440 veranda staterooms, at 312 square feet, will incorporate larger sitting areas, marble bathrooms with a separate tub and shower, ample closet space and extra-large private verandas for relaxation.

The 121 penthouse suites will each be 429 square feet in size, with a large living area, space for in-suite dining, a separate sleeping area, extra-large bathrooms and walk-in closets. The ships will also have three 2,500-square-foot Owners Suites with private elevators, two verandas each and outdoor Jacuzzis; eight Vista suites at the front; and 10 new Oceania suites on the top deck, each at 1,000 square feet. The Oceania suites are designed to stretch beam to beam with wrap-around verandas. The original concept had been two-level suites, but guests preferred staterooms that spanned the width of the ship, where they could enjoy both the sunrises and sunsets and see ports regardless of location.

Each new ship will have 20 oceanview staterooms and 26 inside staterooms; the remaining 96 percent of all accommodations will feature private teak verandas. Binder described the new ships’ furnishings as "elegant, with a little pop to it." Executives are personally picking out furniture and artwork, using a base palette of chocolate and adding cream, cocoa, burnt orange and lavender.

Initially, the new ships and the current ones will be priced exactly the same.

"This means a 322-square-foot penthouse suite on the Regatta and a 429-square-foot penthouse suite on the Marina will sell for the same price," Del Rio said. "Eventually, the market will dictate whether pricing for one group comes down or whether it goes up for the other. We believe guests will choose the ship according to the region they want to cruise. Oceania is definitely destination driven."

One element in the choice is size, since the new ships will hold 80 percent more passengers than the existing Oceania vessels. However, Del Rio points out that the space ratios will be higher than on the present fleet, as will the crew-to-guest ratio.

"We will be maintaining and enhancing the ambience on the ships," he added. "We’re adding elements the guests have said they want, but we’re not jeopardizing the onboard culture."

Another area of innovation is cuisine, and the new ships will feature six open-seating restaurants, all without a surcharge. Oceania has announced a Pan-Asian and a French restaurant in addition to the line’s signature Polo steakhouse, Italian Toscana and the indoor/outdoor Terrace Cafe. Binder said they are ensuring that restaurants and galleys will rival the best shoreside ones; executive chefs are touring the country for ideas to incorporate into the Oceania dining experience.

Also competitive with its counterparts on land is Oceania’s culinary center/cooking school, which has a complete interactive design with multiple workstations and a very impressive roster of guest chefs offering one-day and intensive courses.

Inventive Itineraries
Oceania’s new ships will be 20 percent faster and extend the range of the line’s itineraries. Del Rio said they will be able to arrive in ports at 7 in the morning where other vessels have been coming in at 9; surprisingly, with the additional speed, the newer vessels are also more fuel-efficient.

"Since they are faster, we don’t have to rev them as much and they consume less fuel," he said. "The ship’s speed has less to do with horsepower than with the long, slim silhouette."

Although Oceania has not yet announced specifics, Marina will be taking over Regatta’s core itineraries in Europe — this year, these include 12- and 14-day cruises between Venice, Italy, and Istanbul, Turkey; Istanbul and Barcelona, Spain; London and Stockholm, Sweden.

In planning itineraries for their much larger capacity, Oceania executives are looking at the relative strengths of Regent and Oceania. For example, Regent has very successful World Cruises and is deployed in Alaska, while Oceania’s cruises tend to be longer.

"In the Baltic, we offer 14-day cruises with three overnights in St. Petersburg, Russia, carrying out the destination emphasis," Del Rio said. "We try to avoid days at sea — our clients want to be in port. Regent tends toward seven-day itineraries and the much longer World Cruises. We think it’s a nice balance and that there is a market for both."

Oceania will continue providing the generous overnight stays that have been a success, remaining in smaller ports like Dubrovnik, Croatia, and in 2010, the line will introduce more new European ports than ever before.

"We’re going to continue to operate destination-intensive itineraries and offer something new for past guests," Del Rio said.

Oceania has always eschewed the luxury label, although the line’s guests use it often. With the new luxury features added to its upper-premium experience the line gets even more difficult to characterize. However, Oceania’s fares are clearly in the premium category: A recent comparison between a five-star European land vacation and a 12-day Italy and Greece cruise vacation showed that, with veranda accommodations, airfare and gourmet meals, the Oceania experience cost $3,999 per person, compared to the land-based $7,150.

"The new ships are really an evolution," Del Rio said. "With them we are moving even closer to luxury. Our lower category staterooms have been more premium in size, but on the new ships, all that’s really premium is the pricing."


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