Viking River Cruises Builds Its Empire

Nov 26, 2012

If the biggest company in river cruising is a bellwether for the industry, its impressive growth over the last few years is only the beginning.

Fifteen-year-old Viking River Cruises is experiencing an explosion of growth, with new river vessels pouring into the market in unprecedented numbers and two ocean-going ships on order for 2014 and 2015, a major departure for a river cruise company. Financial analysts pointed out that the company has increased passenger capacity cruise days by approximately 50 percent between 2009 and 2012, with another increase of about 30 percent expected in 2013. Viking has 30 ships currently operating in Russia and Europe and on the Mekong and Yangtze rivers.

The company’s name is not just a brand; it reflects a history taken very seriously by founder, chairman and CEO Torstein Hagen, who is extremely proud of his Norse heritage. The ships that the Vikings built had features that were thought to be the stuff of legend until recent discoveries showed that their design was indeed centuries ahead of its time — amazingly fast, able to sail in shallow waters and powered by oar and sail. The Vikings themselves were daring, resourceful explorers and traders as well as warriors. Their advanced naval power helped them travel throughout Europe, Asia and the North Atlantic for around 300 years, with little regard for personal danger.

Norwegian-born Hagen is certainly their heir. At the spring inauguration of four revolutionary new river vessels this year, he disappeared after addressing attendees. It turned out that he had blood poisoning and, if he had waited another two hours before he checked into the hospital, they couldn’t have saved him. His comment on the matter: “It would have been four inaugurations and a funeral — that’s going out in style.”

Hagen’s history includes a degree in nuclear physics, an MBA and a strong background in finance — an unorthodox but brilliant combination of science, business and maritime travel. He started as a partner at the management consulting firm McKinsey & Company with Holland America Line in 1974, and served on the board until 1989. He joined cruise pioneer Warren Titus’ iconic Royal Viking Line first as a board member, then CEO.

He saw tremendous opportunity in Russia after the communist regime fell and developed strong relationships in the business community there. In 1997, he bought four river ships in the country and, by 2000, Viking River Cruises had acquired K-D River Cruises, the world’s oldest river cruise line. In 2001, the company set up headquarters in Woodland Hills, Calif., and since then — even with his personal hiatus in 2007 and 2008 — Viking has seen dramatic growth, climaxing in the expansion that began this year with the introduction of the new Longships. Six came into the market this year, and eight will be added next year, increasing the fleet expansion budget of $250 million to more than $400 million in investment.

Popular Innovation
Consumer demand has been so strong, according to vice president of sales Michele Saegesser, that Viking could have sold out four more Longships this year. Next year, the company will have a 40 percent market share on the rivers.

The main patent-pending design innovation in the 190-passenger Longships moves the interior corridor one meter to the side from the customary central location. This, and a pivoted stateroom floor plan, allowed the company to position 205-square-foot staterooms with verandas on one side of the vessel and 270-square-foot veranda suites with both French and step-out balconies on the other. Three-quarters of the staterooms on each ship have a veranda, French balcony or both, along with features such as heated bathroom floors, high-definition flat-screen televisions and luxurious bedding.

The imagination doesn’t stop there. Viking’s hybrid, energy-efficient propulsion system, introduced on the Viking Legend, not only saves money on fuel, but also reduces engine sound and vibration, enabling the company to place the most luxurious accommodations — two 445-square-foot Explorer Suites with separate living rooms, bedrooms, bathrooms and private wraparound verandas — at the stern. Other green measures on the new vessels include solar panels and an organic herb garden on the top deck. Designed by noted luxury experts Yran & Storbraaten, the Longships also have an all-weather indoor/outdoor Aquavit Terrace with retractable floor-to-ceiling glass doors.

With the popularity of its new ship design, Viking faces the issue of keeping its product consistent from one part of the world to another. In Russia, where it all started, the company’s four vessels have been completely stripped down and refurbished and, in 2013, passengers will find private verandas on all accommodations on the upper and middle decks, where they can choose from four suites, two junior suites and 60 veranda staterooms.

Viking enlarged the cabins by shifting the walls and changing three standard staterooms into two deluxe staterooms. And the popular two-room suites — each 405 square feet — have separate sleeping and sitting areas and are equipped with two Sony 26-inch flat-screen televisions, a walk-in closet and a full bathroom with two sinks and a separate bathtub and shower. All staterooms have hotel-style beds, flat-screen televisions, refrigerators, safes and elegant bath products.

Viking marked the transformation of the ships this year by renaming them Viking Rurik, Viking Helgi, Viking Ingvar and Viking Truvor. In addition, the line has introduced a number of itinerary updates, with the 13-day Waterways of the Czars cruising between Moscow and St. Petersburg and adding new excursions and services this year. Hagen’s daughter Karine, who has increasingly become the face of the cruise line, draws on 20 years as a resident of Russia to give prospective guests a taste of Viking’s insider access and private tours, many showcased on a new microsite at TheRealRussia.com. In one of the most charming video vignettes on the site, for instance, she introduces viewers to the more than 100 cats who live below the galleries of the Hermitage and keep the premises free of rats and mice.

In addition, Viking has included special performances by St. Petersburg’s Mariinsky Theatre, brought passengers to meet Red Army veterans at Moscow’s Military Museum and hosted them in actual homes in St. Petersburg’s kommunalkas (communal apartments).

In China, Viking is working in partnership with Century Cruises and the new Viking Emerald, which launched in 2011, was also designed by Yran and Storbraaten, with verandas for each room. With the plan freed from the restrictions of Europe’s locks and bridges, the 264-guest vessel has the largest suites in river cruising: the 840-square-foot Presidential Suites each have two flat-screen televisions, panoramic windows and a private wraparound balcony. The deluxe 269-square-foot staterooms with private balconies are also very well received by passengers. The 12-day Imperial Jewels of China itinerary from Shanghai to Beijing cruises the Yangtze River between Wuhan and Chongqing through the scenic Three Gorges and Lesser Gorges. Guests tour the Three Gorges Dam, visit Xian and the Terra-Cotta Warriors and, in Beijing, explore historic imperial treasures including the Forbidden City, the Great Wall and the Summer Palace, as well as walk through Tiananmen Square.

Focused on Quality
In addition to offering exceptional hardware and enrichment to passengers, Viking has earned the loyalty of agents. In 2010, the company announced that partners would be paid for everything they sell and there would be no non-commissionables — including port charges, which are enumerated up front.

“Others hide the port charges in the ocean line tradition,” Hagen said. “Our port charges are all included, and we can pay agents more than $1,000 commission on average per booking and still keep our pricing lower than our competitors’ because we don’t put in unnecessary frills. Things like swimming pools are not what our clientele is interested in, and that takes space away from staterooms — then you have to charge more.”

Hagen is similarly opposed to the trend toward multiple dining venues.

“Our new Aquavit Terrace is simply lighter food, not lesser food,” he said. “I was on a competitor’s cruise a couple of years ago and, during a 14-day cruise, there were two opportunities to dine in a specialty restaurant, but all it did was remind you of how inferior the food was in the dining room. If the quality of food isn’t good enough, you should improve it. We stick to quality, and we are the best value in the business.”

Hagen is not the only one to observe that his company is a tremendous success. In October, when Viking raised a $250 million bond for expansion, it was three times oversubscribed. Some of the bond money will go to Viking Ocean to help finance the two luxury ships on order, whose cost will be in the $700 to $800 million range, Hagen said.

The announcement of the seagoing ship orders provoked speculation that Hagen is bringing back the Royal Viking Line, but few details have been made public as yet. It is clear, however, that the Viking Ocean brand vessels will be 944-passenger ships, and Hagen said they will deliver an experience closer to the river cruise model (“the thinking man’s cruise,” according to Hagen) than the ocean model (“the drinking man’s cruise”). Nearly half of Viking’s customers have graduate degrees, and Hagen is clearly aiming for a similar market on the seas — emphasizing the destinations’ history and culture and skipping the onboard casinos.

Hagen believes Viking’s visibility and its “quantum leap” in design will benefit river cruising as a whole.

“We’ve spent more than all of the other companies combined in promoting river cruising,” he said, “and it is still in its infancy.”