ABOARD THE CARIBBEAN PRINCESS, Fort Lauderdale Ever since the heady
days of “The Love Boat” television series, Princess Cruises has
been top of mind for both experienced and would-be cruisers. But TV
viewers who think cruise ships still have one clover-shaped pool
and a single pirate-themed bar would be stunned to see Princess’
latest three newbuilds all super-sized post-Panamax ships, meaning
they are too large to squeeze through the Panama Canal.
(To illustrate how long it’s been since “Love Boat” originally
aired in the late 1970s, check out the photo at right of bride Jill
Whelan, who played Capt. Stubing’s preteen daughter. Whelan got
married April 2 on the Caribbean Princess just before she
christened the ship.)
What’s more, the Los Angeles-based line is introducing the three
new vessels, which increase capacity by 40 percent, within a span
of three months an unheard-of accomplishment even during the
shipbuilding frenzy in the late 1990s.
Princess ships have always been at the cutting edge of
innovation, featuring early-on such now-standard features as
24-hour, flexible dining and plentiful stateroom balconies. Plus,
Princess was the first to base 100,000-ton-plus ships in places
like the Mediterranean and Alaska.
The new Caribbean Princess features a million-dollar outdoor
movie screen while the West Coast-based Diamond Princess and
Sapphire Princess each have four dining rooms with a themed menu
and decor, as well as a fifth restaurant for traditional
Despite its spectacular success, several years ago Princess
found itself in a peculiar situation that threatened its long-term
“We were becoming bigger than our holding company, and we needed
more capital to expand,” CEO Peter Ratcliffe said. “The demand for
the Princess product far exceeded the capacity we had.”
So began the process of breaking off from the British-based
P&O Group. Princess put itself on the market and one year ago,
on April 17, became part of industry giant Carnival Corp.
In this article, we take an in-depth look at Princess Cruises’
last four years as well as its future with its cash-rich parent and
a new but very experienced management team.
Through exclusive, one-on-one interviews aboard the Caribbean
Princess with each of the three top executives Ratcliffe, new
President Alan Buckelew and Executive Vice President Dean Brown,
each with more than a quarter-century at Princess or P&O we
present our cruise industry version of the Princess Diaries.
2000: Breaking Away
P&O Princess Cruises “demerged” from the P&O Group,
which also had extensive operations in cargo and shipping.
The separation made P&O Princess an independent company,
with a goal to grow and a way to do it, likely by merging or being
acquired by another cruise giant.
“We pursued all options and were willing to keep all options
open,” Ratcliffe said.
P&O Princess included Princess Cruises; P&O Cruises,
aimed at U.K. travelers; and several smaller brands focused on
specific overseas markets.
2001: Terror, Merger
While still reeling from the Sept. 11 terrorist attacks, P&O
Princess stunned the industry with a surprise announcement that it
planned to merge with Royal Caribbean Cruises Ltd.
Not only was Princess scurrying to handle the post-9/11 plunge
in travel, the company was buried in research and corporate
paperwork to get such a major merger approved by the Federal Trade
Commission and European bureaucracies.
“Post-9/11, there was a huge focus on how to deal with the
resulting drop not just drop, but almost complete elimination of
business,” recalled Buckelew, who was executive vice president of
corporate services at the time. “There were a lot of ships that had
to be redeployed and a new emphasis on homeporting ... and security
took on a very salient new meaning.”
The merger announcement came on Nov. 21, but within weeks,
Carnival Corp. Chairman Micky Arison, who also coveted Princess and
battled RCCL previously over high-profile acquisitions, leapt into
While the P&O board publicly stuck to its endorsement of the
RCCL merger, Arison was an ardent pursuer and he had the money and
the clout to fight to the end.
“We were the belle of the ball with two handsome suitors,”
Buckelew said. “But we had a lot of work with the Federal Trade
Commission preparing that either case would be in the best
interests of the consumer.”
Meanwhile, there was still the business of filling berths.
Prices were slashed, as they were throughout the industry, until
cheap fares overrode the fear of travel, a point Buckelew called
“the intersection of greed and fear.”
2002: Low Fares, Big Splash
Princess found that intersection and, with redeployments and
stringent security measures, “the result was that the 2002 wave
period, from a volume standpoint, was one of the strongest we’ve
had,” Buckelew said. “It was a testament to the resilience of the
Fares were low, but the ships were full. The Star Princess made
a big splash at its debut in January as the first post-Panamax ship
to appear on the West Coast.
Still, times were tough. Some ambitious plans for 2002 were
scaled back and new positions went unfilled. “Given where we began
2002, we were quite happy with where we ended up,” Buckelew
Meanwhile, Carnival Corp. increased its bid for Princess several
times. But the P&O board remained loyal to RCCL, believing it
had a better chance of winning FTC approval, and the
behind-the-scenes lobbying was intense.
2003: Iraq War, New Parent
On Jan. 8, the board of P&O Princess formally backed the
richer Carnival Corp. offer, valued at $5.6 billion.
Before the deal closed, the Iraq war broke out, putting downward
pressure on both fares and travel once again.
On April 17, P&O Princess, happily as it turns out, became
part of Carnival Corp. A complicated “dual-listed” company was put
into place so that British P&O stockholders could continue to
hold on to what become Carnival Corp. plc stock.
Teams were formed with members from all Carnival brands to
search for “synergies” corporate-speak for cost savings. Carnival
Corp. promised shareholders $100 million in savings by the end of
2004, but that didn’t mean a move to Miami or wholesale layoffs at
Princess, as some feared. Rather, “best practices” and costs of
certain goods and operations are shared throughout the corporation,
Buckelew said: “We are left to do our own thing.”
In mid-2003, Princess started hiring additional shipboard staff
in preparation for three new ships in 2004. “We were building up a
pool of experienced crew members and manipulating contracts so we
could have seamless introductions,” Buckelew said.
In the end, “2002 and 2003 were relatively flat yield
performance,” Buckelew said. “The economy was floundering in both
those years and no good news came out of the markets.
“So 2003 was sort of so-so, but the industry was looking to 2004
as potentially the first year where there is no war and no major
international event targeted at American tourists.”
2004: So Far, So Good
“Coming into 2004, the economy turned around, the stock market
started going up and the killing around the world was at a lower
level,” Buckelew said. “The industry had a fantastic wave
Princess and the 11 other Carnival Corp. brands are “on
schedule” in the first quarter to meeting the $100 million in
savings, Ratcliffe said.
“This year, pricing is coming back,” he said. “The sense of
optimism is back.”
The 116,000-ton Diamond Princess the first cruise ship built at
the Mitsubishi shipyard in Nagasaki, Japan, in 14 years made its
debut in Los Angeles in March, followed this month by the
113,000-ton Caribbean Princess in Fort Lauderdale. The Sapphire
Princess will join its sister ship in Seattle on June 10.
Both the Diamond and Sapphire are scheduled for West Coast and
Pacific cruising for the foreseeable future the Diamond will
operate Mexican Riviera cruises out of Los Angeles and Alaska
itineraries from Seattle. The Sapphire will operate Alaska cruises
in the summer and some Mexico and Hawaii voyages before spending
the winter sailing between Sydney and Auckland. It will cruise in
Southeast Asia on its way back to Seattle for summer 2005.
“Until recently, we have not had a large enough fleet to
dedicate ships to the West Coast,” Buckelew said. “Now, clearly the
finest ships on the West Coast will be both the Diamond and
Ratcliffe maintains that Princess’ home region remains extremely
important to Princess. “We are still at our strongest on the West
Coast,” Ratcliffe said. “That’s our base, and the trend in the West
Coast market for local cruising is bigger than we ever thought it
would be. The travel agents support us enormously. We’ve always
been very close with travel agents.”
The Future: No Boundaries
The groundwork has been laid and Princess is
poised for even more growth.
“There are no boundaries on how far Princess can grow,” Buckelew
said. “We definitely plan on more ships; it’s just a matter of
The company’s new relationship with the Japanese shipyard gives
Princess another option when its primary European builder,
Fincantieri in Italy, is priced too high because of unfavorable
Ratcliffe and Arison are both pleased with the performance of
Mitsubishi, especially considering the major fire in 2002 on the
first ship under construction.
“Considering the fire, they came through remarkably,” Ratcliffe
said. “It was a risky decision but now we have a partnership. Our
purpose was setting up options outside the European currency. We
now have two great shipyards.”
Arison likes to build showy new ships for his brands when they
can show profitability and growing demand. “For the first time, we
have access to as much capacity as we can justify,” Ratcliffe said.
“With Carnival, there are no limits; only our abilities will
determine our future.”
More post-Panamax ships are likely, since “the big-ship cost
structure is lower” and Princess has proven they can successfully
operate in regions the world over. As destination ships, they
appeal to English-speaking markets in the U.K., Canada, South
Africa and Australia, Ratcliffe said. Plus, Princess is making
inroads in the Asia market a primary goal of Arison since it
remains the largest untapped cruise market.
But Princess is also growing in the industry’s biggest single
market, the Caribbean, by placing the Caribbean Princess there
year-round with plans for a sister ship due out in 2006.
“We had 35 percent of our capacity in the Caribbean and now it’s
40 percent, so it isn’t seismic,” Ratcliffe said. “Clearly, today
our number-one competitor is Royal Caribbean and Celebrity, so we
hope they’ve noticed that we’re here.”
The flashy new feature catching eyes on the Caribbean Princess
is the movie screen suspended over the pool deck; the screen will
be added to the line’s three Grand-class ships as well.
All the changes at Princess are being guided by a management
team Ratcliffe described as “steady” and “stable.”
Although he’s been with Princess for 27 years, Buckelew was a
key behind-the-scenes player until his promotion to president. He
might be a number-cruncher but he’s also at ease and well-spoken
during media interviews and in the ceremonial spotlight.
Dean Brown, a 25-year veteran who currently holds the position
of executive vice president of customer service and sales, will
become executive vice president of fleet operations in June, when
35-year Princess veteran Brian Langston-Carter retires.
Langston-Carter, who pioneered many Princess innovations, will
continue to work as a consultant for the line while he also pursues
an enviable life of travel and golf. Overall, Princess executives
exude a sense of optimism, even happiness, with the path the
company is taking.
“The whole company was energized by the demerger and
the whole company is energized again,” Ratcliffe said. “I think
Princess is better than ever now that we’re part of Carnival
24305 Town Center Drive
Santa Clarita, Calif. 91355
Fleet: 13 ships, 25,560 lower berths
Under construction: Sapphire Princess (June) and Caribbean Princess
Future changes: Royal Princess goes to P&O and Sea Princess
(now operating for P&O as Adonia) returns to Princess in
Destinations: All seven continents, from the Mexican Riviera,
Alaska and Hawaii to Antarctica, French Polynesia, India and South
Snapshot: Premium-level brand; super-big ships with intimate
spaces, flexible dining, children’s programs, and a high percentage
of balconies; two smaller ships permanently based in Tahiti and