COVID-19 has hit cruising harder than any other travel segment, but Arnold Donald, president and CEO of Carnival Corporation & plc, says the situation will eventually get better. He sat down with TravelAge West for an exclusive interview that provides insight on what the future may bring.
In part one of this two-part series, Donald shares positive opportunities that have emerged due to the crisis and his thoughts on fleet reductions, staff changes and working with the Centers for Disease Control and Prevention (CDC). (Read part two of the interview here.)
How does this challenging time create a positive opportunity for cruising?
Some emotional positives have been the outpouring of support from guests for our crew and the brands that they love so much. Seeing the level of emotion, connection and commitment to brands and people is truly inspiring — especially at such a critical time.
In terms of looking ahead to when people are traveling again, this gives us an opportunity to take a deep dive. We started looking at all our operations and the sudden rush of having to deal with guests because of canceled itineraries. All of that totally taxed the systems we had in place. We were not geared up to handle anything near the billions of dollars of refunds and future cruise credits we had to issue.
We are looking at how our systems work. And then we are learning how to work differently and increase productivity and efficiency.
For the cruise industry, in particular, but for travel and tourism in general, connections with everyone get deeper when you are dealing with a mutual crisis. Those connections, levels of understanding, willingness to communicate and efforts to listen carefully to what the other side is dealing with are all going to pay dividends for decades to come.
How does the reorganization of individual brand executives and leaders affect the company’s future?
At times like these, changes happen. It is always bittersweet to have long-term employees and/or rising stars make a change that is right for them. When you are not sailing, you do not have revenue. You have got to get your burn rate down.
People are at different points in their careers. For some, they were thinking of retiring in a few years anyway, so accelerating that makes sense for them as individuals. The work they thought they were going to be doing is not there to be done.
For some rising stars, the right move is not to buy time for a year or so to wait for cruising to come back, but to continue to move up the trajectory now. There are the sort of changes that happen in an organization of 150,000 people.
The best thing for us is that we have a lot of talent at Carnival, and whenever there is a change, it creates an opportunity for someone else. We are excited about the recent changes we have announced, which point to a successful company and a successful industry.
What does the current fleet reduction ultimately mean for customers? Do you foresee any brand consolidation?
We will have to see over time about brand consolidation. Right now, I do not see much of that happening. Initially, fleet reduction will offer an opportunity for the industry to bring capacity back in pace with demand that is being generated at the time.
Now, the destinations are not all going to open at once. They are going to open in a staggered way, and so the reintroduction of sailing capacity will be staggered. There will be a natural constraint on the amount of capacity coming out of the pause.
We are going to be focused on making certain that we are not only looking at the short-term but also the long-term. Cash generation is the priority, and we have taken on a lot of debt. We have to service that debt. We want to pay it down and get our credit rating back to the pristine place that it was at before, and that is going to take a little time.
Cash generation is the priority, and we have taken on a lot of debt. We have to service that debt.
In considering a staggered restart, where do you think the West Coast fits into that?
I have no idea at this point. Right now, the news is reporting that some port cities, such as Los Angeles and Miami, have a surge of COVID-19 cases. We are going to have to be very cognizant of community spread and how extensive it is. Then the question becomes what is society’s tolerance for risk?
Chances are COVID-19 is going to be around for a while. So, it is hard today to say if I think LA or Miami will be first. It really depends on what is happening in those places.
And then, where are those ships going to go? The Bahamas just put in a restriction on Americans traveling to the Bahamas because of the surge here. So, it depends how the destination markets are behaving.
In the case of the West Coast, it would be Mexico. What is happening there? What are their protocols, and what restrictions are they putting in place?
What we do know is the world is getting smarter about how to mitigate the spread of this virus, and once those measures are better understood, they can be deployed everywhere — shoreside, cruise ships, hotels, you name it. That is where we are slowly marching toward as a world and as a society.
What we do know is the world is getting smarter about how to mitigate the spread of this virus, and once those measures are better understood, they can be deployed everywhere — shoreside, cruise ships, hotels, you name it.
How are newbuilds and refurbishments being affected? Will any be canceled, or will they just be delayed?
In our case, newbuilds are delayed. The shipyards went through what everybody else went through — shelter in place and stay at home order — so they lost production time. Therefore, newbuilds will be delayed, and that will fit in with the capacity needs. Here’s the reality, though: The reason you want newbuilds is because they are so much more efficient than existing fleet. How you regulate your capacity is through the timing of when you exit less efficient capacity.
But the newbuilds will come. For the cruise industry, it is a good thing because we have more efficient vessels where it is easier to earn a return. For guests, it is fantastic because they get all the newest features and experiences that help create lifelong memories and special moments.
Will there be any reconsideration of megaships versus smaller ones, or improved passenger space ratios moving forward?
To say there will be no changes would be crazy because you learn from any situation. So, there are going to be things we learn here, which will eventually show up in future designs.
The ships are cities at sea, and many large ships are very capable of handling social distancing in the public arenas. Smaller ships have less space to work with, but you have far fewer people, so you can still perhaps effect reasonable social distancing if that is required.
I do not see any of this predetermining optimum size for a future vessel. I think you work within the footprints to affect social behavior and follow public health requirements to do the right thing by society. There are many ways to manage all that.
What is the current process with CDC? Are government organizations receptive or hesitant to see cruising return?
You have to keep in mind that we are a global business. We go to 700 ports pre-COVID-19 around the world with 13 million people cruising annually. We deal with lots of other cities, governments and institutions. CDC is certainly among them. Historically, we have had a great relationship. Our top priorities have to do with compliance; environmental protection; and protecting the health, safety and well-being of our crew, shoreside personnel, guests and, of course, the places we go.
We have been in dialogue with CDC throughout, just like we were before COVID-19. We will continue to be. At this point in time, most of the conversations have been around the pause. While the ships are not sailing guests, we still have thousands of crew members on the ships, and that is after repatriating almost 80,000 crew members to their homes in a very difficult situation. It was a daunting task while borders were closed, and airlines were shut down. It has taken us months, but we have gotten it done.
There will be a point in time with CDC when we begin to talk about the resumption of sailing and what would be the proper protocol for that.
In some countries, you find folks who are very supportive, feel great about the cruise industry, know the cruise industry and have effectively dealt with viruses in the past. Of course, this virus is unique. Nothing has resulted in a global shutdown like this. This is still a bit of a stealth virus, and science is still figuring it out. With that in mind, there are many opinions.
But we will work in earnest with everyone, with the real intention being what is in the best interest of public health.
What do you foresee Carnival’s face covering and physical distancing policies to be?
It is too soon to tell. It will probably be different in different places because our policies are going to match whatever the policies are in the places we take people.
Regarding the specifics on social distancing and mask wearing, you see how these things have evolved like crazy over time because the science is figuring it all out. That stuff is all over the place.
What we must do is let the scientists and the medical experts mine new data, understand the virus — the epidemiology of it and how it transmits — and sort all of that out. What makes the most sense is what we are going to do.
What we must do is let the scientists and the medical experts mine new data, understand the virus — the epidemiology of it and how it transmits — and sort all of that out.
What are the greatest hurdles to still overcome before returning to service?
I think the biggest challenge is achieving an alignment on the science and medical aspects of COVID-19. We are getting there, and I do not think it is that far off. There are still controversies and different points of view, and the data will help prove that out one way or the other.
Much of society is already willing to live with a lot of risk — maybe too much in some cases. Once the science is clear and there is real alignment around that, then society will organize around it and behave in a way that is going to be holistically livable for everyone.
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