Growth, Not Sale, on Menu

In Profile: Silversea Cruises.

By: Theresa Norton Masek

SAINT JEAN CAP FERRAT, France When Silversea Cruises Chairman Manfredi Lefebvre dines with Micky Arison or lunches with Crystal’s Gregg Michel, people start to wonder.

It’s no secret that the four-ship ultra-luxury line had a rough financial patch. The company more than doubled its capacity in 2001, only to face a massive restructuring that June and then the fallout from Sept. 11.

Today, Lefebvre maintains Silversea has come through the worst. In an exclusive interview at his villa in this wealthy Cote d’Azur enclave, he denied any desire to sell Silversea, one of the few remaining cruise lines not owned by a major conglomerate.

“If I wanted to do something with Crystal, do you think I would go have lunch on the Crystal ship?” he asked. “For me, this is still an enjoyable investment, and I believe in its future.”

Yet, he still won’t deny the possibility.

“I never say never because it’s stupid to say never,” Lefebvre said. “But we’re doing what we need to do in business, improving costs, improving the product and improving revenues.”

Over a three-course lunch on his terrace, Lefebvre, 50, insisted he is optimistic. Plans are proceeding for the line’s 10th anniversary next year and, despite some skeptics, he insists newbuild orders could be on the horizon. “We’re certainly thinking about it and we always talk to everybody,” Lefebvre said.

From all appearances, Lefebvre thoroughly enjoys running the ultra-luxury line, but then he may have saltwater running in his veins. His father, Antonio, is a professor of Italian maritime law. His family and another prominent maritime family, the Vlasovs, owned Sitmar Cruises until its sale to P&O in 1988.

A bear of a man, Lefebvre enjoys life, from fine food to the tree-trunk size Cohiba cigar he lights after lunch. The French might call him a viveur, a man who lives well and appreciates the best, although he takes simple delight in his five Scottie dogs and passes on wine at midday in favor of sparking water.

Swiss Banker

Also at lunch is Albert Peter, Silversea’s CEO since Lefebvre replaced his brother, Francesco, in 2001. At the time, Lefebvre showed President Bill Smith the door and brought in Peter, a Swiss banker who had engineered Silversea’s financial packages since 1998.

Lefebvre said he is confident Peter is on the right track, and some major management changes have been made in recent weeks. A new COO, Erling Frydenberg, was brought in, and one of Lefebvre’s protégés, the multilingual Barbara Muckermann, is now senior vice president of marketing and communications. In addition, Cliff Perry left Disney Cruise Line to become vice president of total guest satisfaction.

While Lefebvre’s takeover from his brother is a delicate topic - and one he has never discussed publicly - he does indicate that the company had little direction in the late 1990s. “My brother pulled out,” Lefebvre said. “After that, we gave financial focus to the company which was somewhat missing.”

They say the situation is much improved, but the company releases few records and both men decline to confirm figures that have surfaced in the past.

In 1998, for example, a Silversea press release said revenues were $117 million and were forecast to rise to $300 million. An article in a British trade journal last year reported that 2001 revenues were around $200 million.

Peter wouldn’t comment, but he did volunteer that bottom-line returns have fallen 10 to 15 percent while sales volume has exceeded last year’s. “2003 hasn’t been a top-notch year,” he allowed, but added, “We already have a very healthy stream of bookings for 2004 and the charter business is extremely strong.”

And this year would’ve been even worse if not for a healthy turnout from loyal European passengers. About 30 to 40 percent of Silversea’s clientele are from outside North America.

“We certainly appreciated the diversification during the tough times, but if 70 percent of your clients decide not to travel it has a very big impact on your company,” he said.

In July 2002, Silversea attempted to expand its reach with Personalized Voyages, which allows customized itineraries, and also offered Silver Sailings, select departures discounted by as much as 50 percent.

Peter said Personalized Voyages shouldn’t be considered a discount program, noting, “The prices are higher, but it allows complete flexibility.”

Fleet Renovations

To help the company survive the Sept. 11 downturn, Silversea pulled the Silver Wind from service in October 2001. It was renovated during a 20-month hiatus and returned to service June 1. (Silversea was not the only luxury line to pull a ship; Radisson Seven Seas withdrew the Song of Flower for a time too.)

Now, Silver Cloud is getting its own renovation. It is scheduled to return to service in April and, as the company’s first vessel, will be the flagship of the 10th anniversary festivities.

Lefebvre is anticipating a good 2004 because the turnaround already has begun, with Silversea reporting a record booking day July 21.

“I believe this business is due for a turnaround, and the general opinion is that 2005 will be a boom year,” Lefebvre said. “I think the world economy will turn around and the big political problems will be solved, one way or another. “And the world of Silversea cruisers is growing every year.”

And next?

“It’s a moment to take stock of all we’ve done to and how we achieved difficult tasks,” Lefebvre said. “We will set new goals.”

And, yes, fleet expansion is possible, especially as European shipyards are seeking orders - and probably are ready to deal.

As for observers’ doubts about Silversea’s financial strength, Lefebvre responded, “They said the same thing about Royal Caribbean.”

“There are many ways to finance a ship,” he said, noting that Radisson Seven Seas’ just sold Song of Flower, taking 200 luxury berths out of the market.

“It takes up to two and a half years from ordering to receive the ship,” Peter said. “If the time is right and the price is right, we’ll take a look at it.

The yards are eager and, if the currency situation improves. ... Generally speaking, we expect the U.S. dollar to strengthen. We’ve seen the U.S. market come out of recession faster than the European markets.”

That contention is also proven by the increase in bookings Silversea has experienced since March, Lefebvre said.

“Things have already turned,” he said. “I’m a pleased man, but in 2005, I believe I’ll be a very happy man.”