Norwegian Cruise Line riding wave of success

In five years, CEO has transformed company’s image

Miami HeraldJuly 1, 2013 

Travel Cruise Ship Breakaway

Norwegian Cruise Line CEO and President Kevin Sheehan talks during christening ceremonies for his new ship, Norwegian Breakaway, in New York, Wednesday, May 8, 2013. The ship is themed on New York City, with a colorful mural on the exterior hull design by pop artist Peter Max featuring the city skyline and the Statue of Liberty.

RICHARD DREW — AP

On a night in late April, Norwegian Cruise Line President and CEO Kevin Sheehan celebrated the delivery of his company’s new 4,028-passenger ship in Germany with a low-key, stress-free cocktail party. What a difference three years had made.

During an inaugural cruise last month aboard the Manhattan-based Norwegian Breakaway, Sheehan recalled the much different scene in 2010 as the cruise line’s previous ship, Epic, was getting ready to debut in France.

“The night before I took delivery of the Epic, I was chasing a thousand Frenchmen all over the ship trying to get them to work,” he said.

The contrasting experiences are symbolic of the transition Norwegian Cruise Line – previously referred to as NCL – has undergone in the past few years. Since taking the helm in 2008, Sheehan has resolved long-standing problems, instituted a new corporate climate, placed a fresh focus on travel agent ties, taken the company public and launched a new class of ships that he hopes will further elevate the line’s reputation. After this year’s Breakaway, sister ship Getaway will arrive in Miami in January.

His tenure has coincided with the economic recession, which pummeled travel-related companies, and more recently a stretch of bad publicity for the cruise industry that started with the fatal Costa Concordia shipwreck last January in Italy and continued this year with fires aboard competitors’ cruise ships.

“There’s been obviously some negative press about the industry, but Norwegian, pun intended, seems to be sailing right through,” said Brad Tolkin, co-chairman/CEO of cruise distributor World Travel Holdings.

Norwegian went public in January with shares priced at $19, but the stock price hit $30 by mid-February and has hovered between $30 and $32. On Monday, it closed at $30.95. Competitors Carnival and Royal Caribbean Cruises, by contrast, have seen their stock prices drop by about 11 percent and 7 percent, respectively, since mid-January.

“It’s significantly outperformed its peer group, not only since the IPO but also year to date,” said Harry Curtis, senior leisure analyst at Nomura Equity Research.

Norwegian – a tiny player in a market dominated by giants Carnival and Royal Caribbean – has done it all while posting increased adjusted earnings before interest, taxes, depreciation and amortization for 19 quarters in a row and consistently improving customer satisfaction surveys for the past 40 months.

The early years of Sheehan’s tenure were complicated by decisions made before his time: Norwegian was taking a serious financial hit from its operations in Hawaii, where three U.S.-flagged ships with American crews were earning a reputation for poor service and leaving passengers and travel agents with a bad impression. The company had redeployed two of the ships when Sheehan took the CEO job, but he had an image problem to clean up and the existing ship to improve. The line was also embroiled in a costly dispute with STX Europe ASA, the shipyard in France that built the Epic and was under contract to build a second giant ship in the same mold. Sheehan canceled the order for the second ship and moved on – right into the recession in 2009.

In 2010, the company announced the order of two new ships that would be named the Breakaway and Getaway for a total of about $1.7 billion. It also unveiled plans – which would be put on hold for two years until the market improved – to go public.

Norwegian has done away with the unpopular Epic elements (a boxy exterior and puzzling staterooms which put bathroom sinks in the main room) and added new features including the Waterfront, an area of outdoor seating for restaurants and bars, and 678 Ocean Place, the ship’s hub on decks six through eight. Venues were placed to create the best flow, and passengers can check restaurant and entertainment availability on touch screens throughout the ship – and make reservations right there.

While refashioning the onboard experience, Sheehan and his team have also worked to communicate the company’s core goals to all of its nearly 20,000 employees: travel agent advocacy, guest experience, brand communication and employee engagement.

‘We’re trying to upscale it’

But no one is resting on recent successes. Sheehan’s latest long-term plan is a tall order: to lead the higher-priced “premium” category that includes Holland America Line and Celebrity Cruises rather than the mainstream, which is dominated by Carnival Cruise Lines and Royal Caribbean International. “As we’re growing our business, we’re trying to upscale it,” Sheehan said.

Part of the job is getting those potential passengers, who might have been turned off by earlier Norwegian experiences, to try the line again. “Of course, we’re trying to be out in front of the market a lot, so somebody from a Holland or Princess might say, ‘I keep hearing about this Norwegian Cruise Line. Let me try it,’ ” Sheehan said. “They may like us. Bringing them in – it’s a journey.”

Expanding its route

The company must decide if and when it will venture farther than its current route map, which includes the Caribbean, Bahamas, Mediterranean, Baltic, Mexican Riviera, Pacific Coast, Panama Canal, Alaska, Bermuda, Hawaii, New England and Canada. Unlike its larger competitors, Norwegian has not yet tested the waters in Asia and Australia.

One thing is certain: Sheehan will be around; earlier this month, he extended his contract (with a nearly 30 percent raise to earn a base salary of $1.55 million) for at least another three years with the option to stretch to five. “I would like to see this through,” Sheehan said. “As long as I’m having fun.”

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