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Cruising with Holland America Line Tourism, corporate identity and corporate history

Ferry de Goey Faculty of History and Arts Erasmus University Rotterdam The Netherlands [email protected]

Paper for the EBHA Conference 2005 in Frankfurt am Main, Germany (September 1 - 3, 2005)

Session 2 C: Images of Transport

Do not quote without permission. © Ferry de Goey (2005) 2

“The reason for our success is that we meet and exceed the expectations of our guests every day; we create dr eams for them every day. There is no better value.” (Micky Arison, Chairman and CEO Carnival Corporation, 2004)

If you remember Captain Stubing, cruise director Julie McCoy, bartender Isaac Washington, and yeoman-purser “Gopher” Smith of the 1970s television series The Love Boat, you probably have the right age to take a cruise.1 You shall not be alone; in 2005, about 11.1 million people will join you on a cruise. Economic research documents the tremendous growth of tourism in general and particularly the cruise industry after the 1960s. Worldwide employment in tourism in 2001 was 207 million jobs or 8 percent of all jobs. About 11 percent (or 3.3 trillion US Dollars) of global GDP is contributed by the tourist industry and some 698 million tourists generated this economic result. While tourism used to be located in Europe and the USA (in 1950 the top 15 tourist attractions were all located in Europe and the USA), today tourism is a global industry with multinational enterprises.2 Tourism is an exceptionally dynamic industry with businesses constantly inventing new attractions. Several general and specific factors affect consumer demand for leisure products. General factors include: demographic developments; the increase in per capita income; the rise in paid holidays; availability of accommodations; transport technology; mass media spreading news and pictures from distant ‘exotic’ places and creating new ‘myths’3; the international political climate; a tourist infrastructure (e.g. travel agencies, tour operators); economic prosperity and the business cycle. Specific factors include the development of tourist attractions, international impediments on travel (visa, passports, and health regulations), and language skills. The United Nations Statistical Commission officially adopted the following definition of tourism in 1993: “Tourism comprises the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and

1 This ABC television series, aired between 1977 and 1986, most surely promoted cruises in the 1970s and 1980s in North-America. 2 United Nations Environmental Programme (UNEP), Industry as a partner for sustainable development: Tourism (Paris 2002) 12-13. 3 For example the movie The Sound of Music (1965) starring Julie Andrews and Christopher Plummer, stimulated tourism to Austria. The blockbuster Pirates of the Caribbean: the curse of the Black Pearl (2003) created a new interest in the Caribbean as destination for cruises. Richard Voase, ‘Introduction: Tourism in Western Europe: a Context of Change’, in Richard Voase (ed.), Tour ism in Western Europe. A collection of Case Histories (Wallingford 2002) 10-11. 3 other purposes”. This definition demonstrates the methodological problems of sorting out business travel and pure leisure activities, but that need not concern us here.4

Figure 1: The relation between shipping, tourism and the cruise industry

SHIPPPING TOURISM

FREIGHT PASSENGERS MARITIME OTHER TOURISM TOURISM

CRUISES

OCEAN COAST RIVER MARINE

Cruises are part of the leisure industry and the shipping industry at the same time and that makes them hard to define (see figure 1). A cruise is transportation and destination at the same time and therefore a definition would be: a ship making a roundtrip with paying costumers, calling at different ports at scheduled intervals, offering entertainment on board and ashore. The cruise industry consists of several niches, the most important are: ocean or deep-sea cruises, coastal cruises, river cruises and marine (underwater) cruises. In the remainder of this paper, the focus is on deep-sea or ocean cruises. This is the largest and fastest growing segment of the cruise industry in the last three decades. The cruise market is a small part of the global tourist industry, but its growth since the early 1980s is spectacular. Annual average growth of worldwide tourism

4 Tourism derived its name from the early-modern Grand Tour of the British upper class visiting Europe. See Fred Inglis, The delicious history of the holiday (London and New York, 2000) 14; Jeremy Black, France and the Grand Tour (Basingstoke 2003); Jeremy Black, Italy and the Grand Tour (Basingstoke 2003); Lynne Withey, Grand tours and Cook’s Tours. A history of leisure travel 1750-1915 (New York, 1997) The phrase Grand Tour first appeared in 1760, while the verb ‘tourist’ did not appear until 1800 (Richard Lassel, Voyage of Italy ; Christopher Hibbert, The Grand Tour [London 1987] 18). Continental European travellers showed a similar interest in popular destinations as the British: the big cities, spa resorts, historic places and pilgrimages to neighbouring countries. See Hermann Bausinger, Klaus Beyrer, Gottfried Korff (hrsg.) Reisekultur. Von der Pilgerfahrt zum modernen Tourismus (München 1991). 4 in the past few years was 4.5 percent. Over the past two decades, the cruise industry grew by 8 to 10 percent on average each year, making it one of the fastest growing industries in the world. The number of ocean cruisers grew from roughly 500,000 in 1970, to about 1.9 million passengers in 1980 and 8 million in 2000. If this trend continues, that number is expected to reach 12 million passengers by the end of 2010.5 This study examines the growth of the cruise industry in general and more particular Carnival Cruise Lines (CCL) and its wholly owned subsidiary Holland America Line (HAL). At present, CCL is by far the largest cruise operator in the world. How did CCL become such a large cruise operator? What explains the success of CLL? Why did CCL acquire HAL in 1989? Why are brand names and images important in the cruise industry? The cruise industry remains largely unknown to business historians and no recent scholarly work exists on cruises.6 In the first section, we will look at the history of the cruise industry until 2005. Next, we discuss the history of HAL until the take-over by CCL in 1989. Section 3 studies the development of CCL and its rise to dominance in the cruise industry. In the final section, we analyse the portfolio marketing strategy of CCL and its use of brand names.

1. A history of cruising in the Western world

The verb ‘cruising’ originally referred to exploring and was part of the life of adventurers, scientists and discoverers.7 In the second half of the nineteenth century, steamers sailed to the North Pole or the tropics to survey coastlines or the fauna and flora of then unknown parts of the world. Scientific journals published reports stimulating debates on matters long forgotten.8 This

5 G. P. Wild (International) Limited, Implications of Fleet Changes for Cruise Market Prospects to 2010 (August 2001); Zafar U. Ahmed et al., Country-of-origin and brand effects on consumers’ evaluations of cruise lines’, International Marketing Revi ew 19:2/3 (2002) 285. 6 There are several specialised journals and these contain contributions on the history of tourism and leisure. An overview of the literature provides M. Thea Sinclair and M.J. Stabler, ‘New Perspectives on the Tourism Industry’, in M. Thea Sinclair and M.J. Stabler, The Tour ism Indu str y. An International Analysis (Wallingford 1991) 1-15. 7 In the navy cruising meant patrolling the sea lanes. According to Christian Schäfer, the verb ‘cruising’ first appeared in 1884: the Pleasure Cruising Yacht Company, but that is most certainly wrong. Christian Schäfer, Kreuzf ahrten. Die touristische Eroberung der Ozeane (Erlangen-Nürnberg, 1998) 47 (note 31). 8 E.g. Owen Stanley, ‘Notes of a Cruise in the Eastern Archipelago in 1841’, Journal of the Royal Geographi cal Society of London 12 (1842) 262-265; Mr. Mickie, ‘China; Notes of a Cruise in the Gulf of Pe-che-li and Leo-tung in 1859’, Proceedings of the Royal Geographical Society of London 4:2 (1859- 1860) 58-63. 5 sort of cruising probably inspired shipping companies to offer a similar kind of ‘experience’ to tourists. Today’s modern cruise, although highly organised, still appeals to the general feeling of adventure and exploring ‘the unknown’. In the 1960s, HAL placed advertisements for ‘Discovery’, ‘Adventure’ and ‘Mystery’ cruises.9 According to Bill Cormack, the real appeal of the cruise is the feeling of being away, while always staying at home. Ships might visits exotic resorts in tropic countries, once on board you immediately felt at home because everybody spoke your language and shared your values and customs. “A day ashore was a titillating experience, a venture into the unknown, but even in the depths of the kasbah, there was always the consolation that, a mere taxi drive away, England, home and beauty, lay alongside the quay or at worst, a ride away”.10 Cruising seems like an invention of the 1980s and 1990s, but in fact, it has a very long history. The era of ‘modern cruising’ started in the second half of the nineteenth century with the appearance of steamships. Between 1840 and 1890, several experimental cruises took place, until demand was sufficient to offer cruises on a regular basis from the 1890s and the first purpose- built cruise ships entered service. The First World War temporarily halted further development of cruises, but from the 1920s until the Second World War, cruising was very popular, especially in America. After the 1950s, North America became the most important cruising market and liner- shipping companies offered cruises during at least a part of the year. Cruising became really big business from the 1980s onwards and this growth continues.

Ancient forerunners (before c. 1840) Travel and tourism are probably as old as recorded human history, although some scholars dismiss the idea of holidays in ancient times.11 However, graffiti on the foot of Sphinx at Gizeh attest to the arrival of tourist as early as 1261 BC.12 On reflection, modern tourism does not differ much from ancient tourism, except for the scale following the ‘democratisation of tourism’ after the 1850s. “The tourist movement in the time of the Roman Empire bore very close semblance to

9 R.H. Krans, ‘ “Leaving New York February 6Th”. Het cruisebedrijf van de Holland Amerika Lijn in de tijd van de passagiersvaart’, Rotterdams Jaarboekj e 1997 (Rotterdam 1998) 356 and 360. 10 Bill Cormack, A history of holidays 1812-1990 (London, 1998) 82. 11 According to Fred Inglis, consumers began taking vacations and holidays ‘from some time early in the second half of the eighteenth century’. Inglis, The deli c i ous histo r y, 1, 14-15. See also: Hartmut Berghoff, ‘From Privilege to Commodity? Modern Tourism and the Rise of the Consumer Society’, in H. Berghoff et al., (eds.) The Ma king of Modern Tourism, 1600- 2000 (Basingstoke 2002) 159-180. Antoni Maczak, Travel in early modern Europe (Cambridge, 1995), discusses early-modern travel. 12 Maxine Feifer, Tour i s m in history. From Imperial Rome to the Pr esent (New York 1985) 22-23. 6 that in modern times”, according to Arthur Norvall.13 Maxine Feifer adds, “Imperial Roman tourism had nearly all of the trappings of its late-twentieth century counterpart”.14 There is no apparent reason why Arabian caliphs, Indian princesses and Chinese Emperors did not take holidays, as their Western counterparts did. During the Roman Empire, thousands of Romans crossed the Alps to tour the Empire and visit places of historic interest. Many upper class Romans escaped to the countryside during the hot summertime and stayed at popular bathing resorts (e.g. ‘bikini beach’ Baiae, near Naples).15 There are strong hints that Egyptian Pharaoh’s and Roman Emperors used galleys to cruise on rivers to relax, enjoy music, eat and dance.16 For the Romans, Greece and particularly Egypt represented all there was to know about the history of the world and this made them popular holiday destinations. In Egypt, Romans rented a cabin cruiser made of acanthi wood planks and powered by papyrus sails, to travel inland up the Nile. During the cruise, several stops allowed passengers to visit remnants of Egyptian history: the shrine of Ptah in Memphis, the pyramids and Sphinx at Gizeh, and finally the Valley of Kings in Thebes. In the year AD 130, the Roman emperor Hadrian (ruling from AD 117 to AD 138), a keen traveller, visited the legendary ‘speaking statue’ of Pharaoh Amenhotep III in Thebes, whose head had broken from the torso during the great earthquake of 27 BC.17 An interesting development in the history of cruise ships took place in the seventeenth century, when rich Dutch merchants used ‘Pleizirvaartuigen’ (‘pleasure ships’) or ‘Speeljachten’ (‘fun yachts’) for leisure activities.18 These sailing ships were small but rather luxurious and well suited for short trips on rivers and lakes. During his exile in the Netherlands, King Charles II of England (ruled from 1660 – 1685) noticed these ships and on his return to England in 1660, the Mayor of Amsterdam donated such a ship. The idea got on in England and the British ‘yachtomanie’ further spread the use of these ships.19

13 Arthur J. Norvall, The Tourist Industry. A National and International survey (London 1936) 25. 14 Feifer, Tour ism in history, 8. 15 Norvall, The Tourist Industry, 20-24. 16 Schäfer, Kreuzfahrten, 25. 17 Feifer, Tour ism in history, 6-7. The statue did not speak, but it apparently did the next day. 18 There were actually two types of yachts: Statenjachten and Speeljachten or Pleizirjachten. The first type was used by officials of the States General and the trading companies for transport between Dutch cities. The second type was used for pleasure only. Werner Jaeger, Die Nieder ländische Jacht im 17e Jahrhundert (Verlag für Regionalgeschichte, 2000?). 19 Schäfer, Kreuzfahrten, 26. 7

Speeljacht (17th C.) Speeljacht (right) VOC Chamber of Middelburg.

The first phase: experiments (c. 1840-1890) In the nineteenth century, steamships launched a new phase in the history of cruising. Steamships offered faster travel, more safety and better comfort than sailing ships. Most important of all, they allowed sailing according to a fixed schedule. These characteristics made steamships especially suited for the cruise industry.20 However, the first commercial steam shipping companies established in the 1830s and 1840s, responded to the growing demand for cheap transatlantic passenger services.21 Between 1840 and 1914 about 50-60 million emigrants left Europe to settle in America, Africa of Australia.22 Initially steamships held accommodations for a small number of cabin passengers and very large numbers of emigrants (called: steerage).23 Principal companies operating from British ports such as London and Liverpool, included Cunard Line (1838), the

20 The transition from sail to steam is discussed in Robert D. Foulke, ‘Life in the dying world of sail, 1870- 1910’, The Journal of British Studies 3:1 (Nov. 1963) 105-136. The first Atlantic crossing of a steamship happened in 1819 (The Savannah), although during the trip she used her steam engine for only 85 hours. Robert Gardiner (ed.) The Advent of Steam. The Merchant Steamship before 1900 (London, 1993) 45. In the early days, ships used their steam engine only at the start and end of their voyage. 21 The HAL’s original name is: Nederlandsch Amerikaansche Stoomvaart Maatschappij (NASM). As of 1896, Holland America Line was added to accommodate foreigners. Official company histories include: G.M de Boer, De Holland-Amerika Lijn 1973-1923 (Rotterdam 1923); A.D. Wentholt, Brug over den oceaan. Een eeuw geschiedenis van de Holland Amerika Lijn (Rotterdam 1973). Other company histories: G.J. de Boer, 125 Jaar Holland-Amerika Lijn, 1873-1998 (Alkmaar 1998); William H. Miller, Going Dutch. The Holland America Line Story (London 1998); H.A. Dalkman and A.J. Schoonderbeek, One Hundred and Twenty-Five Years of Holland America Line (Durham 1998). 22 J.R. McNeill & William H. McNeill, The Human Web. A bird’s-eye view of world history (New York 2003) 260-261. It is estimated that about one third of the emigrants returned to Europe after a few years. 23 In shipping history a general distinction is made between liner shipping and tramp shipping. Liner shipping follows a fixed time schedule and route, and while tramp shipping has neither. There are also crossovers between both categories. Passenger transport was on liner services. 8

Liverpool & Philadelphia Steam Ship Company (1850, better known as the Inman Line), theOceanic Steam Navigation Company: also known as the White Star Line (1869).24 Originally, most emigrants came from the British Isles, but after the 1850s, the number of emigrants from continental Europe increased.25 This geographical shift stimulated the liner shipping industry on the Continent and led to the establishment of several major shipping companies. In Germany, these included HAPAG (a.k.a. as Hamburg Amerika Line, 1847)26 and Norddeutscher Lloyd (1857). In France, the major line was Compagnie Générale Maritime (1855), in Belgium it was the Red Star Line (1871)27 and in the Netherlands Holland America Line. In the pre-Titanic era, passenger transport on the North Atlantic almost completely stopped during the winter months because the demand declined and the crossing was considered to dangerous. Most ships were simply laid up in ports until the springtime. However, high building costs and other expenses (e.g. insurance, port dues), pressed ship owners to find extra income and they began promoting short ‘excursions’. Another important factor that influenced the development of the cruise industry was American immigration policy. The emigrant business suffered a severe blow following the introduction of laws (e.g. the 1921 US immigration law with quotas) that reduced the number of emigrants, forcing shipping companies to develop new markets. These included cabin passengers, pilgrims, students, and cruisers.28

24 Originally named the British and North American Royal Mail Steam Packet Company. On Cunard, see F.E. Hyde, Cunard and the North Atlantic, 1840- 1973. A history of shipping and financial management (London, 1973). Other interesting publications on shipping include Gordon Boyce, Information, mediation and institutional development. The rise of large-scale enterprise in Br itish shipping 1870-1919 (Manchester/New York, 1995); David J. Starkey and Gelina Harlaftis (eds.) Global markets: the internationalization of the sea transpor t industries since 1850 (St. John’s Newfoundland, 1998); Lewis R. Fischer and Helge W. Nordvik (eds.) Shipping and Trade, 1750-1950: Essays in International Maritime Economic History (Pontefract, 1990); Tsunehiko Yui and Keiichiro Nakagawa (eds.) Business history of shipping. Strategy and structur e (Tokyo, 1985); Lewis R. Fischer and Gerald E. Panting (eds.) Cha nge and adaptation in Maritime History. The North Atlantic Fleets in the Nineteenth Centur y (St. John’s, New Foundland, 1985). 25 About 13-16 million came from Ireland and Britain. McNeill & McNeill, The Human Web, 260-261. 26 Hans Jürgen Witthöft, HAPAG Hambur g Amerika Linie (Herford 1973). Full name: Hamburg- Amerikanischen Packetfahrt-Actien-Gesellschaft. 27 Clement Acton Griscom, founder of International Navi gation Company of Philadelphia (1871), owned the Red Star Line, a subsidiary registered in Belgium in 1872 and operating from Antwerp. In 1939, the HAL acquired the Red Star Line. 28 The 1921 law limited the number of visas to 200,000 Europeans annually. Actual numbers were higher. The number of immigrants in the US in 1911-1920 was 5.7 million in total, of which 4.3 million from Europe. In 1921-1930, the number dropped to 4.1 million (total) and 2.5 million from Europe (Statistical Yearbooks of the I mmig r ation and Nat u r alization Service). The HAPAG steamer Deutschland (1902) 9

Steamships first appeared on rivers and lakes and their owners probably organised the first river cruises, although no records exists of these ventures. Deep-sea cruises started almost immediately after the introduction of screws for propulsion and iron hulls on steamships crossing the Atlantic Ocean.29 The following synopsis of developments demonstrates a number of experiments in the early phase of the cruise industry. Several companies claimed to have organised the first ocean cruise, but for our purpose, the precise date is not important. A dummy advertisement in the Shetland Journal for a cruise to the Orkney and Shetland Islands appeared in 1835, written by Arthur Anderson (1792-1868), managing director of British Peninsular and Oriental Steam Navigation Company (P&O, 1840).30 The German firm Rob M. Sloman & Co., owned by the Hamburg ship owner Robert Miles Sloman (1812-1900), placed an ad in a German newspaper in 1845.31 “Admission will be strictly confined to persons of unblemished repute and of good education, those possessing a scientific education receiving preference”.32 The cruise apparently never sailed for reasons unknown. P&O offered a ‘land and sea tour’ in 1842, calling at Malta, Smyrna, Constantinople, Beirut, Jaffa and Alexandria. This was part of the regular service of P&O from London to the Middle East and does not classify as a deliberately organised cruise. However, occasionally, P&O send one of its steamers for a round trip from London to the Black Sea, starting in 1844 with the Tagus.33 In the 1880s, P&O chartered its Ceylon to the Polytechnic Touring Association (or The

already received 78 percent of its revenues from first class passengers, 14 percent from second-class passengers and only 8 percent from emigrants. Schäfer, Kreuzfahr ten, 42. 29 Gardiner, The Advent of Steam, 16-19. 30 David Howarth and Stephen Howarth, The story of P&O. The Peninsular and Oriental St eam Navigation Company (London 1986) 47-56. 31 According to Philip Dawson the advertisement appeared in the Leipziger Illustrierte Zeitung. Philip Dawson, Cr uise ships. An evolution in design (London 2000) 9. The company started in 1793 with sailing ships and made the transition to steam in the mid-nineteenth century. In 1836, a regular service between Hamburg and New York commenced and from 1850 steamships took over the service (Helena Sloman, 1850). The company still exits today and deploys freighters. Sloman and his nephew, Edward Carr, founded the Union Line in 1886, as a holding company for a Hamburg-New York passenger service. Arnold Kludas, Die Geschichte der deutschen passagierschiffart (Hamburg 1986) Band I: Die pionierjahre von 1850 bis 1890, 12-17; Ernst Hieke, Rob. M. Sloman Jr., err ichtet 1793, Veroffentlichungen der Wirtschaftsgeschichtlichen Forschungsstelle e.V., Hamburg, 30 (Hamburg: Verlag Hanseatischer Merkur, 1968). 32 Roger Cartwright and Clive Harvey, Cr uise Britannia. The stor y of the British cruise ship (Brimscombe Port 2004) 10-11. 33 Dawson, Cruise ships, 10. The novelist William Makepeace Thackeray got a free ticket and records the cruise in his Diary of a Voyage from Cornhill to Grand Cairo (1846). 10

Ocean Yachting Company?) for cruises.34 By the time of the Crimean War (1854-1856), P&O gave up its cruises to the Mediterranean until 1904. Thomas Cook, founder of Thomas Cook & Son in 1841, chartered the steamer President Christi in 1875 for cruises to the North Pole.35 His example prompted other travel agents to offer cruises to Norwegian Fjords and the Mediterranean. The North Company of Aberdeen (founded about 1790 as The Leith & Clyde Shipping Company), organised a cruise in 1886 with 90 passengers on board of the St. Rogvald to the fjords of Bergen and other places of interest along the Norwegian coast.36 The Orient Line simply copied the idea and offered cruises from 1889. P&O later acquired both companies. These first attempts at cruises popularised the idea and stimulated initial demand, but the results became apparent only after the 1890s.

The second phase: year round cruises and purpose-built cruise ships (1880-1920) Hamburg Amerika Line, under the directorship of the famous Albert Ballin (1857-1918), dispatched its ship Auguste Victoria on a ‘Große Orient-Exkursion’ (Grand Orient Excursion) in January 1891.37 This excursion lasted two months and attracted 241 passengers that paid up to 2,700 Mark for luxury cabins on the main deck. Clearly, this cruise was for wealthy people only. Ports of call included Gibraltar, Genoa, Alexandria, Jaffa, Beirut, Constantinople, and Malta. Cruises from American ports started almost at the same time. The side-wheel steam paddler Quaker City departed from New York to the Mediterranean in 1868 for a cruise.38 In February 1895, the Red Star Liner Friesland sailed for a cruise to the Holy Land, carrying 430 passengers: 230 males and 200 females. According to J. Maxtone-Graham, they were ‘a congenial mix of Victorian travellers with the professions heavily represented’ (e.g. clergymen, lawyers, physicians).39

34 W.H. Mitchel and L.A. Sawyer, Cr uising ships (London 1967) 7-8. 35 Schäfer, Kreuzfahrten, 47; Dawson, Cruise ships, 15-20; P.N. Davies, ‘British Shipping and World Trade: Rise and Decline 1820-1939’, Tsunehiko Yui and Keiichiro Nakagawa (eds.), Business history of shipping. Strategy and structur e (Tokyo, 1985) 39-86. 36 Dawson, Cruise ships, 10; Alistair Wm. McRobb, ‘1987, Centenary of the first cruise ship’, Fairplay Cruise Review (London n.d [1986]) 5-9. 37 Kludas, Die Geschichte der deutschen passagierschiffart I, 196-199; Arnold Kludas, Die Geschichte der deutschen passagierschiffart (Hamburg 1986) Band II: Expansion auf allen Meeren 1890 bis 1900, 48-65; Witthöft, HAPAG, 37. 38 Graham Stallard, ‘Introduction: entering the second century’, Fairpl ay Cruise Review (London 1987) 1- 5. 39 John Maxtone-Graham, Liners to the sun (New York 1985) 104. 11

HAPAG Meteor HAPAG Prinzessin Victoria Luise

Following the success of the Auguste Victoria, Ballin ordered the construction of the first dedicated cruise vessel the Prinzessin Victoria Luise (1901), followed in 1904 by the Meteor, and organised cruises to various destinations including round-the-world cruises.40 Soon the company was able to offer cruises during the whole year: Scandinavia during the summer, the West Indies in the winter and the Mediterranean in the autumn and spring.41 This seasonal and regional alteration remains a feature of the cruise industry until the present day, like the combination of sailing, copious meals in evening dress and excursions on land. At first, the shipping companies simply chartered their ships to tour operators like the British Thomas Cook & Son and Bartlett & Catrow, or the Americans Frank C. Clark and Raymond & Whitcomb (Boston).42 These companies managed the bookings, advertisements, and entertainment on board and ashore. The shipping companies remained responsible for the technical side of the ship and supplied the necessary crew.

By 1900, most large European shipping companies organised cruises during a part of the year and some even the year round. Liner passenger ships were not immediately suited for cruises, partly because there were too many different classes on board the ship (often 3 or 4 classes) and cruisers did not want to mingle with ordinary passengers or emigrants. Therefore, shipping companies refitted their ships during the cruise season. For this, they needed new passenger ships, but the

40 The small yacht carried 180 passengers and 161 crew members. Maxtone-Graham, Liners to the sun, 107; Kludas, Die Geschichte der deutschen passagierschiffart II, 56-65; Witthöft, HAPAG, 47. 41 Schäfer, Kreuzfahrten, 48; Arnold Kludas, Die Geschichte der deutschen passagierschiffart (Hamburg 1986) Band IV: Vernichtung und Wiedergeburt 1914-1930, 198-230 42 Hugh De Santis, ‘The Democratization of Travel: The Travel Agent in American History’, Journal of American Culture, 1:1 (Spring 1978). 12 expensive interior design and construction demanded huge sums of capital. On the Atlantic route, fierce competition kept prizes down and reduced company revenues. The cutthroat competition eventually led to cartel agreements between the major European shipping companies eliminating price competition. In 1892, HAL, Norddeutscher Lloyd, Hamburg Amerika Line and Red Star Line joined in a cartel agreement on passenger services (the Nordatlatischer Dampfer-Linien Verband).43 A few years later, in 1908, British companies joined the cartel.44 The cartel agreement eliminated price competition, but instead introduced competition on the quality of services offered. This fostered a constant upgrading of passenger ships offering more space, speed and luxury (e.g. smoking rooms, libraries, theatre and cinema, swimming pools).

The third phase: a developing international cruise market (1920-1940) Cruising gained importance in the 1920s and 1930s, but remained ancillary to the core business of passenger transport until the 1950s. After 1920, the number of emigrants declined sharply following the enactment of stringent American immigration laws. These urged shipping companies to develop new markets and they began organising cruises on a regular basis. To compete with the Grand Hotels (e.g. the Grand Hotel at Brighton, 1862), passenger ships emulated the style and lavish decoration of these hotels that earned them their reputation as ‘floating hotels’.45 The rivalry between the major shipping companies peaked during the 1920s and 1930s, when nationalistic sentiments and prestige thrived. The ‘battle’ between the French Normandy and the British Queen Mary for the fastest Atlantic crossing and the possession of the Blue Ribbon is well known.46 For a short time, air ships or zeppelins introduced a new competitor for Atlantic crossings, but after the catastrophe with the Hindenburg (1937), this threat evaporated. Some shipping companies already sold combined sea-air tickets, while others offered air trips as part of the cruise and took a small airplane on board their ship! During the interwar years, luxury cruises increasingly appealed to wealthy tourists, wanting to escape the horrors of mass tourism on land. Already before the First World War, tourism assumed large proportions. An estimated 350,000 to 450,000 tourist visited Swiss annually, while about 150,000 Americans travelled to Europe before 1914. France attracted about

43 Clement Acton Griscom, founder of International Navi gation Company of Philadelphia (1871), owned the Red Star Line, a subsidiary registered in Belgium in 1872 and operating from Antwerp. 44 In the shipping business cartels are called ‘conferences’. Davies, ‘British Shipping’, 39-86. 45 On ‘Grand Hotels’: Inglis, The delici ous history of the hol iday , 1, 59-61. 46 Arnold Kludas, Das Blaue Band des Nordatlantiks. Die Mythos eines legendäre Wettbewerbs (Hamburg 1999). 13

300,000 tourists in 1913 and 1.9 million in 1929. The majority of these visitors came, perhaps surprisingly, from Great Britain.47 Americans discovered cruise ships as an easy way to evade the ban on alcohol consumption during the Prohibition (1920-1933) and the ‘booze cruise’ became very popular. The ‘booze cruise’ offered European companies a chance to gain experience in organising cruises for large groups. Once the sole privilege of the wealthy, the cruise quickly became a commodity in the 1920s and 1930s. According to Mitchel and Sawyer “[…] practically every shipping company with liner tonnage to spare entered the cruising market at competitive fares so much so that the figure of 18,200 passengers embarked or disembarked at Britain’s chief passenger port, Southampton in 1928 exploded to 70,000 in 1936”.48 Before the 1940s, Germany and Great Britain had developed important cruise markets. The ‘tourist graze’ continued until the economic depression of the 1930s (see table 1).

Table 1: Number of tourist in selected countries (1925-1934) 1925 1929 1933 1934 Austria 1,204,196 1,831,561 796,266 602,573 Canada 9,452,379 16,008,479 9,705,484 France 1,911,107 931,505 Germany 465,550 851,414 Great Britain 328,431 408,713 312.437 Italy 1,340,000 1,221,000 USA 90,544 (1926) 99,128 70,918 Source: Arthur J. Norvall, The Tourist Industry. A National and International survey (London 1936) 52-104.

The fourth phase: the rise of the North American cruise market (1950-1980) The Second World War had a devastating effect on the shipping industry. World tonnage in 1939 amounted to 61 million tons; during the war, about 32 million ton was lost.49 The German and British cruise markets virtually collapsed, while the North American market continued to grow. In the 1950s, European shipping companies ordered new passenger ships to replace their lost ships. A huge demand from Americans to see the remains of the European battlefield and to visit family members and friends after so many years, explains the post-war demand for passenger services

47 Norvall, The Tourist Industry, 45-46, 63-64. 48 W.H. Mitchel and L.A. Sawyer, Cr uising ships (London 1967) 21. 49 S.G. Sturmey, British shippi ng and world competition (London 1962) 83-86; Lars U. Scholl, ‘Shipping Business in Germany in the Nineteenth and Twentieth Centuries’, in Tsunehiko Yui and Keiichiro Nakagawa (eds.), Business his tory of shipping. Strate gy a nd structure (Tokyo 1985) 185-214. 14 and the building boom in shipping. This turned out to be only a temporarily demand that reached its highest number in 1957: 798,130 passengers. In 1958, the era of Boeing’s Jumbo Jet 707 began and already in the same year, more passengers crossed the Atlantic by air than by sea (air: 1.01 million). The Boeing 747 (1969) was the final blow to the passenger shipping services. Some ship owners understood the changing times better and sooner than others did. Greek ship owners for instance (e.g. Chandris and Epirotiki), used the after war period to increase their share in the cruise market by offering family cruises in the Mediterranean.50 Others, like Cunard, P&O and Hamburg America Line, continued their regular passenger service, besides offering cruises, until in 1968, a meagre 7 percent market share remained for shipping companies.51 By 1966, Cunard lost ₤ 15 million annually, but continued to construction of the Queen Elizabeth 2 that entered service in 1969. From the start, the QE 2 spend half her time as regular passenger ship on the North Atlantic, while making cruises in the remaining part of the year.52 In order to survive the old ocean liners urgently needed to adapt their strategy and the growing market for tourism offered many opportunities, but not all companies made the transition successfully. Some companies tried their luck in the cruise business but miserly failed, such as the Dutch company Rotterdamse Lloyd. Its flagship Willem Ruys (launched in 1947) entered a round-the-world service in 1956 after the independence of Indonesia halted all Dutch shipping to the former colony. The service was not profitable and the company sold the ship to the Italian company Lauro Lines in 1964 that renamed it to Achille Lauro to enter the cruise market on the Mediterranean.53 At first, the old ocean liners simply refitted and refurbished their remaining passenger ships, but then ordered purpose-built cruise ships. Each decade saw the launching of larger and more luxurious vessels. A first generation cruise ship of the 1970s would measure between 10,000 and 20,000 GRT (e.g., Cunard Adventurer, 14,155 GRT). The Tropicale, built in 1981 for Carnival Cruise Lines, already measured 22,919 GRT and could carry 1,400 passengers.

50 In 1989, the Chandris Group founded Celebrity Cruises. The company was taken over in 1997 by Royal Caribbean Cruises. 51 Schäfer, Kreuzfahrten, 66-67. 52 W.H. Miller, The cr uise ships (London 1988) 12-20. 53 The ship became world famous after the hijacking in 1985 by Palestinians terrorists and the killing of an American passenger. It continued service until a major fire in 1995 sank the ship of the coast of South Africa 15

The fifth phase: cruising is big business (1980s-2005) From its early days, cruising became associated with (very) wealthy, elderly people that could afford luxury. In 1979, Cunard sold a sixteen-day cruise for ₤ 595, while today luxury cruises cost between ₤ 5,000 and ₤ 10,000.54 It is even possible to stay on board permanently by buying a whole suite with balcony.55 However, in recent years, economies of scale demanded larger and more expensive cruise ships forcing tour operators to tap into new market segments, including the large group of less wealthy and younger tourist, most of them first-time cruisers. Competition between companies forced cruise operators to lower their prices. The average price in 2003 was £ 1,052, but the pricing of cruises is extremely complicated and the possibilities are overwhelming. In contrast to air traffic, cruises are predominately booked trough travel agents (about 80 percent), although this number may well decline in the future. New market segments, like younger cruisers require a new type of ship and level of service, a more informal dress code, and different types of restaurants (e.g. more buffet type). Already, about 30 percent of the costumers are below 40 years of age and although the average age of cruisers is still about 50 years, the image of the cruise as being primarily for elderly people is becoming out of date.56 This will attract new entrepreneurs interested in the cruise industry that is already highly segmented (see table 2). In response to the rapidly growing demand, cruise companies ordered new ships that can accommodate more passengers and present more entertainment onboard. A third-generation cruise vessel offered accommodation for well over two thousand passengers (e.g., Majesty of the Seas built in 1992, measuring 73,937 GRT). In 1998, CCL Destiny broke the 100,000-ton limit (twice the size of the Titanic) and the latest CCL ship, Liberty measures 110,000 GRT and can carry 2,974 passengers. In 2004, the Queen Mary 2, owned by CCL subsidiary Cunard Line, was the largest cruise vessel. She measures about 150,000 GRT, is capable of carrying 2,620

54 Kirsty Scott and Patrick Barkham, ‘Cruises head for a sea change in clientele’, The Guar dian (May 19, 2004). 55 The MS ResidenSea World has 110 private residents, costing about $ 2,000,000 USD (and annual maintenance of $ 60,000 to $ 240,000 USD). The ship is a floating village with a maximum capacity of 285 passengers and a crew of 252! http://www.ship-technology.com/projects/world/ 56 G.P. Wild (International) Ltd., Maritime Tour ism to the year 2000 (Haywards Heath 1995) 47. Age Percent 25-40 29 40-59 36 60 plus 35 Mean 50

16 passengers, and has a crew of about 1,500: less then two passengers for every crewmember.57 Not to be outdone, rival Royal Caribbean Cruises ordered two 160,000 GRT ships from the Swedisch shipyard Kwærner Masa-Yards, to be delivered in 2006 and 2007. Because of the growing size of cruise ships, the guest-to space ratio declined offering less space per passenger in public rooms and on deck. Veteran cruisers increasingly avoid the newly build cruise ships and are more attracted to the classic cruise ships (sixties and seventies style), because they seem to offer a genuine cruise experience.58 Other cruise operators opted to upgrade their product by ordering smaller, but more luxuriously ships, catered to a very specific market segment.

Table 2: Market positioning of deep-sea cruise lines in 2005.59 Class Founded Company name Current owner Luxury plus 1995 (?) ResidenSea ResidenSea Ltd. (USA) Luxury 1988 Crystal Nippon Yusen Kaisha (Japan) 1840 Cunard CCL (1984) Radisson 7 Radisson Seven Seas Cruises (USA) 1992 Seas 1987 Seabourn CCL 2001 SeaDream SeaDream Yacht Club (Norway) 1992 Silversea Lefebvre family and V-Ships (France) Premium 1989 Celebrity Royal Caribbean Cruises 1873 HAL CCL 1840 P&O Cruises CCL 2002 Oceania Oceania Cruises Inc. (USA) Major 1972 Carnival CCL 1948 Costa CCL 1987 MSC Mediterranean Shipping Company (Switzerland) 1966 NCL Star Cruises/Genting Group (Malaysia) 1965 Princess (P&O) CCL 1996 Aida CCL 1969 Royal Royal Caribbean Cruises Caribbean Budget 2005 easyCruise easyGroup (UK) Niche 1998 Disney1 Disney Inc. (USA) 1992 Orient Star Cruises/Genting Group (Malaysia) 1995 Royal Royal Olympia Cruises Olympia2

57 Simon Schama, ‘Slowly does it…’, The Guardian (August 12, 2004). 58 Passenger reviews of cruises can be found on the Internet: http://www.cruisereviews.com/ 59 For a complete picture see ‘Cruise ships 2005’, Ships Monthly 40:3 (March 2005) 25-45. This overview counts 80 different cruise lines, although some are owned by other companies. 17

Source: Christian Schäfer, Kreuzfahrten. Die touristische Eroberung der Ozeane (Erlangen- Nürnberg, 1998) 209: Expanded and adapted by company websites on the Internet. 1 Original owner of the cruise ships was Premier Cruise Line (USA), founded in 1983 by Greyhound Bus Company (USA). 2 Royal Olympics history dates back to 1850, when the Greek ship owner Anastassios 'Tassos' Potamianos (1820-1902) began a shipping company: Epirotiki Lines. In 1954 the company started offering cruises in the Mediterranean.

Figure 2: Number of cruisers, 1970-2010 (millions) (2005 and 2010: estimates)

14

12

12 11, 1 10, 5

9, 5 10 8, 6 8 8, 4

8 6, 9 6, 6 5, 9 5, 6 6 5, 1 4, 9 4, 5 4 3, 6 4 2, 8

2

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0 1970 1980 1985 1988 1989 1990 1991 1992 1993 1994 1995 1999 2000 2001 2002 2003 2004 2005 2010

Source: G.P. Wild (International) Ltd., Maritime Tourism to the year 2000 (Haywards Heath 1995) 13; Christian Schäfer, Kreuzfahrten. Die touristische Eroberung der Ozeane (Erlangen- Nürnberg, 1998) 311.

Besides upgrading, the cruise industry will experience downgrading as well. In May 2005, self- styled ‘serial entrepreneur’ Stelios Haji-Ioannou, founder of the easyGroup of businesses, started easyCruise. This venture offers short, cheap cruises in the Mediterranean for “independently minded travelers in their 20’s, 30’s and 40’s”.60 Service on board the all orange painted converted ferry is minimal, offering only a coffee shop, a cocktail bar and an American style sports bar. Onboard expenses are not included and there is no swimming pool. Cruisers can board and get off at any port of call (e.g. St. Tropez, Cannes, Nice, Monaco, or Genoa). In contrast to existing

60 http://www.easycruise.com/faqs/AboutUs.asp (April 2005). 18 cruises, the ships will stay in port during the whole night, thus offering cruisers the change to experience the city’s leisure industry. In the early morning, the ships sail to the next port of call on the itinerary. By slightly altering the basic concept of cruises and offering low prices, easyCruise will surely attract costumers that are not interested in existing cruises. Whether easyCruise will be successful depends on its ability to balance operating costs and revenues from consumption on board, which is normally the highest source of income for cruise operators. By 2010, Haji-Ioannou hopes to have about five or seven cruise ships. According to Bill Gibbons, director of the Passenger Shipping Association, the idea of offering cheap cruises to young people will be successful: “I can see it growing to become a substantial niche player in the cruise industry”.61 The American market is by far the largest and covers about 75 to 80 percent of all cruises, although in recent years Europe is a fast growing and highly profitable market as well. This explains the current increase in the number of cruise ships calling at European ports. In 1998, most passengers taking a cruise were North Americans: 5.43 million. Important European markets in 1998 included Germany (c. 306,000), Italy (230,000) and France (190,000).62 In 2003, over 1 million UK residents boarded a cruise ship to spend their holidays (see table 3).63

Table 3: Global demand for cruises by region (1980-2001) (millions) Passengers by area 1980 1985 1989 1995 1997 1999 2001 North America 1.43 2.15 3.29 4.40 5.05 5.89 6.80 Europe 0.39 0.43 0.53 1.00 1.30 2.00 Rest 0.14 0.19 0.20 0.30 0.46 0.85 Total 1.96 2.77 4.02 5.70 6.81 8.74 8.40 Sources: Christian Schäfer, Kreuzfahrten. Die touris tische Eroberung der Ozeane (Erlangen- Nürnberg, 1998) 315; United Nations Environment Programme (UNEP), Industry as a partner for sustainable development: Tourism (Paris 2002); Business Research & Economic Advisers, The Contribution of the North American Cruise Industry to the U.S Economy in 2002 (Exton, PA; 2003).

Primary destinations of cruises are the Caribbean region (44.5 percent), the Mediterranean (12.7 percent), Europe (8.1 percent), Alaska (7.9 percent), and Panama Canal region (4 percent). South East Asia is becoming an interesting destination as well. Cruising is ‘big business’: in two

61 Frank Clark, ‘Stelios makes a splash with no-frills Med cruises’, The Guardian (April 1, 2005). 62 Peter Wild and John Dearing, ‘Development of and prospect for cruising in Europe’, Maritime Policy & Management 27:4 (2000) 315-333. 63 Kirsty Scott and Patrick Barkham, ‘Cruises head for a sea change in clientele’, The Guar dian (May 19, 2004). 19 decades the number of passengers increased by 430 percent and is expected to grow further Following the terrorist attacks on New York in September 2001, the demand for cruises declined but it recovered quickly in the following years (see figure 2). The economic benefits of the cruise industry in the USA alone are substantial. “A study conducted in 2001 by the Business Research and Economic Advisors (BREA) concluded that in 2000, total economic benefit by the cruise industry and cruise-related activities was approximately USD 17.9 billion. Of this, the cruise industry contributed USD 9.4 billion in direct spending for the products and services of United States companies”.64 Indirect effects are large, because these involve other sectors, such as banking, insurance, airlines, travel agents, food and beverage suppliers, and shipbuilding. In 2002, the direct and indirect economic contribution of the US cruise industry reached 20.4 billion US dollars, according to a report of the BREA. The cruise industry generates almost 280,000 jobs in America.65 Five large companies dominated the cruise industry in the 1990s: Carnival Cruises, Royal Caribbean, P&O Cruises, Norwegian Cruises, and Star Cruises. Following the take over of Norwegian Cruises by Star Cruises in March 2000 and the merger between Carnival Cruises and P&O on April 17, 2003, only three large companies remain. Carnival’s market share in 2004 was about 45 percent; Royal Caribbean holds 21 percent and Star Cruises 10 percent.66 Most large cruise operators are member of the International Council of Cruise Lines (ICCL).67 The sixteen ICCL members handle 95 percent of the North American cruise market and about 80 percent of worldwide cruises.68

64 UNEP, Indust r y as a partner, 12-13. 65 Business Research & Economic Advisers (BREA), The contribution of the North American Cruise Industry to the U.S. Economy in 2002 (Exton, PA, 2003) 4. 66 http://www.starcruises.com/News/2000/index.html (Press release of Star Cruises Ltd. March 17, 2000). Mary T. Coleman, David W. Meyer, David T. Scheffman, ‘Economic Analyses of Mergers at the FTC: The Cruise Ships Mergers Investigation’, Review of Industrial Organization 23:2 (September 2003) 121-156; Allan R. Miller; William F. Grazer, ‘The North American cruise market and Australian tourism’, Journal of Vacation Marketing 8:3 (June 2002) 221-235. 67 ICCL members are Carnival Cruise Lines; Celebrity Cruises ; Costa Cruise Lines, N.V. ; Crystal Cruises ; Cunard Line Limited; Disney Cruise Line; Holland America Line; Norwegian Cruise Line; Orient Lines; Princess Cruises; Radisson Seven Seas Cruises; Regal Cruises; Royal Caribbean International; Royal Olympic Cruises; Seabourn Cruise Line; Windstar Cruises. 68 UNEP, Indust r y as a partner, 43. 20

2. The HAL: from liner shipping to cruises (1873-1989)

HAL largest shipping business was freight, but the passenger service received most attention.69 Official company histories of HAL stress the importance of regular passengers, but on closer examination, it seems HAL already developed into a major cruise company before 1940. In 1934, HAL carried 11,596 cruisers and 11,495 regular passengers on the Rotterdam-New York service. After 1938, the number of regular passengers increased in response to the growing political threat in Europe and we can only speculate on the development of cruises had the Second World War not occurred (see figure 3).

Figure 3: HAL passengers: liner service and cruises (1873-1971) (%)

100%

80%

60%

40%

20%

0% 1873 1883 1893 1903 1913 1923 1933 1949 1959 1969 Li ne Crui se short Cr ui s e l ong Source: A.D. Wentholt, HAL Statistische gegevens en aanvullende aantekeningen op het boek (deel I: Statistische gegevens) (Rotterdam 1973)

The cruise history of HAL is best divided in four periods: experiments (1873-1920), gaining experience (1920-1940), transition to cruises (1950-1970), cruise company (1970-1989). From

69 Paul van de Laar en Ferry de Goey, ‘Scheepsfinanciering: een comparatief perspectief (1870-1970)’, Tijdschrift voor Zeegeschiedenis 14 (1995) 23-62. 21

1989, the HAL is a wholly owned subsidiary of CCL. Figure 3 depicts the growing importance of cruises for HAL between 1873 and 1971; particularly during the interwar period, it was a major source of income for the company and probably saved if from bankruptcy. However, it all started in 1871 with a small partnership.

The partnership of Plate, Reuchlin & Co. (1871) received sufficient financial support from local businesses and bankers (e.g. Mees & Zoonen) to start a liner service from Rotterdam to New York.70 The partnership chartered a steamship (Ariadne) to carry freight and passengers, mainly steerage, to the USA. The success of this mission led to the purchase of two steamers in 1872. In October 1872, the steamer Rotterdam (I) sailed to New York soon followed by the Maas, renamed Maasdam (I).71 This small-scale business was important in demonstrating the viability of the whole idea of a regular passenger service to the larger community of Dutch investors and on 18 April 1873, the partnership transformed itself in a corporation with limited liability (Naamloze Vennootschap). Between 1873 and 1898, HAL carried about 90,000 regular passengers and 400,000 emigrants across the Atlantic. This would give HAL a market share of about 4.3 percent.72 Besides a passenger service, HAL developed a large freight service. The number of passengers carried by HAL between 1873 and 1920 steadily increased, although demand was irregular (see figure 4). About 80-70 percent of all passengers were emigrants, but after 1900, the number of cabin passengers increased. Early in the twentieth century, HAL management decided not to compete on speed but instead on service. However, this required first class ships and thus large investments. The weak financial position of HAL at the turn of the century led to foreign influence, first through its shipbuilders (Harland & Wolff in Glasgow) and later the International Mercantile Marine Company (IMMCo). IMMCo was an American shipping company set up by the banker J.P. Morgan to break British dominance on the North Atlantic.73 IMMCo bought

70 Ferry de Goey, ‘Jhr. Otto Reuchlin 1842-1925’, in J. Visser (red.) Rotter damse ondernemers (Rotterdam 2002) 198-202; Andrea Driesse, ‘Familie Plate’, in J. Visser (red.) Rot te r damse ondernemers (Rotterdam 2002) 190-195. 71 After 1877, all passenger ships were given names with ‘dam’ suffixes and all cargo ships ended in ‘dijk’ (dike). To avoid confusing the names of ships with the same name are followed by a number. 72 Company sources mention a share of 10 percent. 73 Thomas R. Navin and Marian V. Sears, ‘A study in merger: formation of the International Mercantile Marine Company’, Business History Review 28 (1954) 291-328; J.J. Safford, ‘The United States Merchant Marine in Foreign Trade’, in Tsunehiko Yui and Keiichiro Nakagawa (eds.), Business hist ory of shipping. Strategy and structure (Tokyo 1985) 91-1120. 22 several European shipping companies and shipyards, including Harland & Wolff.74 In the end, the attempt by IMMCo to gain control of the passenger and freight shipping on the North Atlantic failed and HAL was able to regain independence from IMMCo during the First World War. Before 1914, HAL only experimented with cruises, because HAL management considered their ships unsuited for cruises. HAL was a typical slow starter and latecomer in the cruise market, because at that time the other major liners already incorporated cruises in their business.75 The first HAL cruise, typically promoted as an ‘excursion’, took place in 1895: a trip from Rotterdam to Copenhagen to celebrate the opening of the Kaiser Wilhelm canal. Thereafter, HAL declined further requests from tour operators, until new ships entered service. In 1914, a second cruise aboard the Rotterdam (IV), organised by Frank Clark, departed from New York for the Mediterranean and the Holy Land; these were becoming popular destinations for the wealthy.76 The First World War temporarily halted any further development of cruises.

Figure 4: Number of passengers carried by HAL (1873-1971)

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0 1873 1883 1893 1903 1913 1923 1933 1949 1959 1969

74 Other purchases included International Navigation Company of New Jersey and its subsidiary the Red Star Line, the Atlantic Transport Line, the Dominion Line, White Star Line and the Leyland Line. The total fleet comprised about 133 ships. 75 The early history of cruises by the HAL up to 1971 is documented by Krans, ‘Leaving New York February 6Th’, 316-371. 76 Withey, Grand tours. 23

Source: Source: A.D. Wentholt, HAL Statistische gegevens en aanvullende aantekeningen op het boek (deel I: Statistische gegevens) (Rotterdam 1973)

In the 1920s and 1930s, cruises became very important for HAL. The American tourist company Raymond & Whitcomb (Boston) chartered the Rotterdam (IV) in 1923 for a cruise to the Mediterranean. From 1924, HAL assumed responsibility for organising its Mediterranean cruises through their New York booking office, but relied on experienced tour operators to organise excursions on land (e.g. American Express Company). The first HAL cruise sailing from New York to the Caribbean occurred in 1926, again following the success of other companies. The trusted Frank Tourist Company organised the cruise. HAL continued to offer short and cheap cruises in the Caribbean during the economic crisis of the 1930s and these became very popular with American tourists (see figure 5).77 The income from cruises probably saved HAL from liquidation in the early 1930s, but it did not prevent a major restructuring of the company.

The popular Statendam Advertisement for a luxury (III) Brochure depicting the route of ‘1930 Luxury cruise (1929). cruise of the SS Rotterdam (IV)’

American cruisers avoided Europe after 1936, because of the dangerous political situation (e.g. the Spanish Civil War, 1936-1939) and preferred their ‘American Mediterranean’ instead. The Statendam (III), entering service in 1929 and the Nieuw Amsterdam (II), launched in 1938, enjoyed great popularity with American cruisers. In this period, HAL earned its reputation as the ‘spotless fleet’ and succeeded in becoming one of the most important European cruise companies operating from New York. Between 1934 and 1939, the regular passenger service transported

77 Krans, ‘Leaving New York February 6Th’, 347. 24

133,881 customers, while in the same period 91,542 cruisers boarded HAL ships in New York. Attempts to develop a cruise market in the Netherlands failed completely. Besides short excursions to Scandinavia and Portugal and Morocco, interest in cruising was and remained low. The outbreak of the Second World War in 1939 prevented a further development of cruises, because most ships of the HAL were in Allied service or destroyed in May 1940. Between 1950 and 1970, HAL gradually transformed itself from a liner shipping company in a full time cruise company. However, from the outside, the passenger service still looked like the core business of the company and certainly many locals felt that way. The passenger service leaving from Rotterdam, gave the impression of a going liner shipping company, while most cruises began in New York, out of sight for local people. Without the income from cruises, HAL could never have survived, but we lack financial sources to proof this.78 Although the newly build ships were well suited for passenger transport, their main service became cruising, particularly after the 1960s.

Figure 5: Number of cruises: long (> 30 days) and short (< 30 days) (1920-1971)

35000

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0 1920 1923 1926 1929 1932 1935 1938 1947 1950 1953 1956 1959 1962 1965 1968 1971

Cr ui ses shor t Cr ui ses l ong

Source: A.D. Wentholt, HAL Statistische gegevens en aanvullende aantekeningen op het boek (deel I: Statistische gegevens) (Rotterdam 1973)

78 The annual reports provide only general information on income from passenger services. 25

These new ships reflect the growing importance of tourism and cruises. The smaller twin sister ships Ryndam (II) (1951) and Maasdam (IV) (1952) held two classes only, of which 90 per cent went to the tourist class.79 In addition, for the first time in the history of Atlantic passenger service, tourists occupied the better decks (Promenade, Main, A and B), while the first class was located on Boat Deck. During the construction of the Statendam (IV), launched in 1957, and the flagship Rotterdam (V) entering service in 1959, their potential contribution to cruises was very important. The interior design and panelling appealed to American tourists. The Rotterdam (V) contained several features that made her attractive for cruisers, including ‘trick stairways’. During the passenger service, the closed stairway allowed passengers from each class to move horizontally from the bow to the stern, while during cruises the tourist used the stairway to enter other decks and enjoy all restaurants.

Ryndam and Maasdam: ‘a new concept in travel’ Fun on board. (1950s)

Increasing competition from airlines forced HAL to reconsider its strategy. Between 1961 and 1965, the number of cruisers grew from 14,997 to 21,846, compensating for the loss of transatlantic passengers. In the booming post-war American cruise market, HAL held a share of 20 percent in 1965. From 1965, HAL deployed the Statendam (IV) solely to cruises and its flagship Rotterdam (V) in 1969, following a major overhaul. For the first time in its history, the fleet of ships deployed in cruising exceeded those in regular passenger service in 1967. HAL continued to diversify its business and invested in towage, warehousing, construction, air

79 Miller, The cruise ships, 105. These ships started as freighters, but during their construction management decided to include passengers. The Ryndam and Maasdam became the first combi-ships: combining passenger transport and freight. 26 transport, and tourist related businesses in 1960s (including travel agencies, hotels, and tour operators). It implemented a multi divisional structure, of which the tourist division was the largest (about 80 percent of company revenues). However, the 1967 annual report of HAL showed a loss of 19 million guilders and a complete restructuring of the company was inevitable. In the early 1970s, HAL, on the advice of the consultant firm McKinsey, decided to de-invest in liner shipping completely and become a full time cruise company. HAL cancelled all regular passenger services on the Atlantic in September 1971, relocated the company seat to New York and sold the freight division in 1975. HAL became a cruise operator based in the USA, organising trips to the Caribbean and Alaska. The decision to become a cruise company led to a major renewal of the fleet in the 1970s and 1980s. In 1973, the purpose-built cruise ship Prinsendam (II) entered service, followed by the Nieuw Amsterdam (III) (1983), the Noordam (III) (1984) and Westerdam (II) (1988).80 Until the takeover by CCL, these ships formed the core of the cruise fleet of HAL. As part of the makeover, HAL introduced a new company logo (two blue and one black in the middle) and new colours on the hull (midnight blue) and the funnel (orange). To counter rising wages in the Netherlands, HAL recruited Indonesian staff in the lower ranks. To strengthen its position in the cruise industry in America, HAL acquired the tourist company Westours (Seattle) in 1977. HAL and Westours merged in 1983 to form Holland America Westours, later renamed Holland America Line-Westours Inc., and A.K. ‘Kirk’ Lanterman, formerly of Westours, became President and CEO. Profits increased from 11.6 million US Dollar in 1984, to 25 million in 1985 and 44 million in 1986.81 In 1987, HAL acquired Windstar Sail Cruises that owned luxury sailing ships for cruises in the Mediterranean, Caribbean and French Polynesia. This acquisition was followed, in 1988, by the takeover of Home Lines, a small Italian-Greek-Swiss company.82 Shortly thereafter, Ted Arison of Carnival Cruise Lines (CCL), approached Nico van der Vorm, chairman of HAL. On 17 January 1989, CCL bought the cruise division of HAL for 625 million US Dollar and HAL became a whole-owned subsidiary of CCL.83 CCL obtained the sole right to use the name ‘Holland America Line’.

80 The Wes te r dam (II) (originally named Homeric) formed part of the Home Lines fleet (see below). 81 A.C. Gischler, De Holland-Amerika Lijn in zwaar weer (Zutphen 2003) 219. 82 Eugen Eugenides founded Home Lines in 1946. She sailed from New York to South America, but later she ran a seven-day cruise line from New York to Nassau. Peter C. Kohler, ‘The ship of tomorrow’, Ships Monthly 40:5 (May 2005) 14-18. 83 From the receipts of the sale of the cruise division, the former owners continued as a pure investing company: HAL Holding. Shares are owned by the HAL Trust, registered in the Netherlands Antilles. HAL 27

3. The rise to dominance of Carnival Cruise Lines (CCL).

The growing demand for cruises in the 1950s offered an attractive market for existing tour operators not necessarily acquainted with maritime passenger transport. Therefore, the cruise industry in its early days numbered a mixture of old liner-shipping companies and newly established tour operators. One of these newcomers is the founder of Carnival Cruise Lines (CCL), Ted Arison (1924-1999), an Israeli-born son of a ship owner.84 After serving in the British Army during the Second World War and earning a degree in engineering, Arison took over the family business of M. Dizengoff & Co., ship owners and agents, after his father died. In the early 1950s, he sold the family business and started his own shipping firm using Flags of Convenience (FOC).85 After the Korean War Arison sold the company and migrated to the USA in 1954 to earn a living working in the air cargo industry. In 1966, he sold this new company, worth about 10 million US Dollar, to retire in Miami, but he soon gave up this idea to manage a new company owned by the Norwegian ship owner Knut Ulstein Kloster.86 Kloster founded the Norwegian Caribbean Lines (NCL)87 and began operating a cruise line from Miami with just one ship, the motor ship Sunward, a newly build passenger and automobile ferry.88 Initially, the Sunward carried sun-starved English tourists from Southampton to Lissabon and Gibraltar. However, after General Franco closed the border between Gibraltar and Spain and the British economy worsened, allowing passengers only £ 50 travelling money89,

Holding owns a number of subsidiaries including HAL Investments BV (Rotterdam, Netherlands) and HAL Investments Inc. (Palo Alto, USA). HAL Investments BV currently owns shares in some Dutch maritime enterprises, all based in Rotterdam: Anthony Veder (shipping company); VOPAK (tank storage) and International Container Services (ICS) (container terminal). http://www.halinvestments.nl/index2.html 84 Laurence Miller, ‘From the “Golden Fleet” to the “Fun Ships”: A history of Carnival Cruise Lines’, Fairplay Cr uise Review (London n.d [1986]) 17-23. 85 The major oil companies introduced Flags of Convenience in the 1920s to reduce taxes. They became very popular since the 1950s, when shipping companies began registering their ships in Third World countries: Liberia, Panama, Bahamas, and Honduras. These ‘flags’ are used to lower operating costs (mainly taxes and labour costs). Frank Broeze, The globalis ation of the oceans. Containerisati on from the 1950s to the present (St John’s 2002) 217- 230; S.G. Sturmey, British shipping and world competition (London 1962) 212-213. 86 Kloster founded a shipping company in Oslo, Norway in 1924: Kloster Rederi A/S. Dawson, Cruise ships, 79-85. 87 After 1973: Norwegian Cruise Lines, since 2000 owned by Star Cruises (Malaysia). 88 Roger Cartwright and Clive Harvey, Cr uise B r itannia. The stor y of the British cruise ship (Brimscombe Port 2004) 39. 89 Cartwright and Harvey, Cr uise Britannia, 27. 28

Kloster tried his luck in Miami and teamed up with Arison.90 The Sunward, promoted as ‘an air- conditioned floating palace of fun in an incomparable Norwegian tradition’, made its maiden voyage from Miami in December 1966, which marked the start of the cruise industry in Florida. NCL offered package deals to tourists including airfares and cruises.91 NCL pioneered in introducing one-class cruises to the Caribbean at very low prices and offering short cruises (three or four days) including beach holidays on a private island. On board passengers could enjoy themselves watching original Broadway musicals.92 Before 1972, NCL added three other cruise ships to its fleet making it the first modern cruise company.93 The success of NCL stimulated other companies to enter the cruise business. Again, outsiders, namely Norwegian entrepreneurs, founded Royal Caribbean Cruise Lines (RCCL) in 1969.94 In 1972, Kloster and Arison parted and Arison started his own cruise company Carnival Cruise Lines (1974), after the acquisition of the Mardi Gras (originally named Empress of Canada).95 A shipping accident on the maiden voyage of the Mar di G r as and the economic recession of the early 1970s almost liquidated the young company, but Arison managed to survive. In the following years, CCL expanded its fleet with refurbished second hand ships: Carnivale (1976) and Festivale (1978), and the newly build Tropicale, entering service in 1982. In the second half of the 1980s, more vessels followed (e.g. Holiday [1985], Jubilee [1986] and Celebration [1986]). CCL introduced the concept of ‘fun ships’, including casinos and discothèques, to attract younger and middle-class cruisers. CCL finalised the ‘democratisation of cruises’.96 According to Laurence Miller, Carnival’s early success is based on several factors, including: aggressive marketing, early and good use of air/sea fares, a growing reputation for quality at the lower end of

90 http://www.norhouse.com/influence.asp?art_id=IN-032201 91 Dawson, Cruise ships, 83. 92 Schäfer, Kreuzfahrten, 210-211. 93 NCL continued operations on its own and acquired the France in 1979, once the largest and fastest Ocean liner and the pride of France was out of service since 1974. NCL renamed the ship Norway and converted it for cruises only. Schäfer, Kr eu zf ah r ten, 211. 94 Scandinavian ship owners, particularly Norwegians, ran a service from the Caribbean to the Gulf ports in the USA in charter for the United Fruit Company. They were quite familiar with this area and its attractions for tourists. This perhaps explains their early interest in the cruise industry in the 1950s. ‘Norwegian enterprise’, Ships Monthly 40:4 (May 2005) 43-46. 95 On the history of Carnival: Schäfer, Kreuzf ahrten, 213-216; Carnival Cruise Lines, Annual Reports (1997-2003); Dawson, Cruise ships, 115-123. 96 “Carnival gelang damit die endgültige Demokratisierung des Kreuzfahrtproduktes insbesondere in der Karibik”. Schäfer, Kreuzf ahrten, 214. 29 the market, careful cultivation of a youth image to attract younger costumers, a competent and dedicated staff that kept Carnival out of the negative press.97 In 1987, CCL made a public offering of 20 percent of its shares. It used the earnings to expand the business by building new ships and to acquire existing upmarket cruise lines. It made an unsuccessful bid for Royal Caribbean Cruises, its main competitor. Instead, CCL acquired Holland America Line in 1989, including its subsidiaries Windstar Cruises and Holland America Tours. Ted Arison retired as Chairman of Carnival Cruise Lines in 1990, but continued as a special consultant for the company. His contribution to modern tourism and cruising earned him the Hall of Fame Award of the Caribbean Tourism Organisation and one year later, the World Congress of the American Society of Travel Agents inducted him to the Society’s Hall of Fame. The Florida Tourism Hall of Fame posthumously inducted Ted Arison in 1999. After his dead in 1999, his son Micky Arison took over the family business.

Table 5: Financial results Carnival Corporation (1995-2003) 1995 1996 1997 1998 1999 2000 2001 2002 2003 Revenues 1,998 2,213 2,447 3,009 3,497 3,779 4,536 4,368 6,718 (million US Dollar) Net income 451 566 666 836 1,027 965 926 1,016 1,194 (million US Dollar) Total Assets 4,105 5,102 5,427 7,179 8,286 9,831 11,56 12,33 24,491 (million US Dollar) 4 5 Passengers carried 1,543 1,764 1, 2,045 2,366 2,669 3,385 3,549 5,037 (x 1000) 945 Source: Carnival Corporation, Annual Report (1997, 1998, 1999, 2000, 2001, 2002, 2003)

In the 1990s, CCL continued to expand and acquired other cruise lines: Seabourn Cruise Line (1992); Costa Cruises (1997) and Cunard Line (1998). In November 2001, Royal Caribbean Cruises and P&O Cruises announced a friendly merger, but one month later CCL made a hostile bid for P&O by offering a higher share prize. The American Federal Trade Commission (FTC) shortly investigated both proposed mergers but in the end declined to forbid the take over of P&O by CCL, despite its market dominance.98 On April 17, 2003, Carnival Corporation and P&O Princess Cruises plc combined, creating a global vacation leader with 13 brands encompassing 66 ships (17 vessels scheduled for delivery in 2006), more than 100,000 lower berths and about

97 Miller, ‘From the “Golden Fleet” to the “Fun Ships”: A history of Carnival Cruise Lines’, 21. 98 Coleman, Meyer, Scheffman, ‘Economic Analyses’ 127. 30

65,000 employees, making it the largest leisure travel company in the world. The financial results of Carnival Corporation as documented in table 5, display a strong increase in revenues, net income, assets and passengers carried. Profits were high thanks to the use of cheap Flags of Convenience. According to Debra Burke, Carnival earned $ 2 billion dollar between 1995 and 1998 and paid less than one percent in income taxes in Panama.99

4. Marketing cruises: the role of brand names.

Marketing is the most important way to add value for firms and the availability of brand names is essential in certain markets.100 Well known global brands include Coca Cola, Kellogg’s, Marlboro, Nike, Benetton, Ford, Ferrari, BMW, Canon, Sony, and Boeing. On a national level, there are also many brand names (e.g. Venz or De Ruiter chocolate chips, a real treat in the Netherlands).101 Brand names offer advantages to costumers and companies. According to Geoff Jones, “Brands inform the consumer about a product, provide a guarantee of continuing standards of quality, and enhance consumer choice”.102 This pre-purchase advice of brand names and trademarks to costumers is especially important when the services sold are ‘experiences’ such as cruises, rather than tangible goods.103 However, brands offer more then just a product or service: consumers gain respect and status amongst the peer group, friends or colleagues. Brands thus communicate images and identities across different cultures, although brands do not necessarily have the same meaning in different countries and this can change in time.104 Companies with brand names usually find it easier to enter and conquer new markets, because television, radio and newspapers familiarise brands, even if these products are not on the

99 Debra D. Burke, ‘Cruise lines and consumers: Troubled waters’, American Business Law Journal 37:4 (2000) 692. 100 Celia Lury, Brands. The logos of the gl obal economy (London/New York 2004). 101 On the history of marketing: Richard S. Tedlow, New and improved. The story of Mass Marketi ng in America (London 1990); Richard S. Tedlow and Geoffrey G. Jones (eds.) The Rise and Fall of Mass Marketing (London 1993). 102 Geoffrey Jones, ‘Brands and marketing’, in Geoffrey Jones and Nicholas J. Morgan (eds.) Adding Value. Brands and Marketing in Food and Drink (London 1994) 3; Mira Wilkins, ‘When and why brand names in food and drink?’, in Geoffrey Jones and Nicholas J. Morgan (eds.) Adding Value. Brands and Marketing in Food and Drink (London 1994) 15-41. 103 J. Dunning, ‘Multinational Enterprises and the Growth of Services: Some Conceptual and Theoretical Issues’, The Service Industries Journal 9:1 (January 1989) 12. 104 Marc Casson, ‘Brands. Economic ideology and consumer society’,in Geoffrey Jones and Nicholas J. Morgan (eds.) Adding Value. Br ands and Marketing in Food and Dr ink (London 1994) 41-58. 31 market. This creates a demand prior to the introduction of branded products. Consumers tend to display a high level of loyalty to ‘their’ brand names, and only very rarely opt to raise their ‘voice’ or ‘exit’, companies also can charge higher prices.105 However, according to W. Weilbacher, the whole idea of consumer loyalty to brands is ‘one of the most insidious myths’ in marketing. Brands are not perceived as being unique, but instead they are interchangeable and consumers select from a set of similar brands at one time. Brand loyalty is therefore no static process.106 To become a brand name, firms must invest large sums of money in developing a quality product and maintain a guaranteed level of quality over a long period. This explains why most brand names and companies owning these names often have a long and rich company history: it adds to the success of the brand name.

According to Victor T.C. Middleton, branding is increasingly important in the tourist industry, while price and product are becoming less important. “As markets mature, however, the focus of competition is finally switching to branding and images […]”.107 One reason for this is the growing dependence on so-called repeat customers and thus the importance of communicating brand names to assure continued quality and value for money. Another reason is, to paraphrase C. Lury, the possibility of brand names to ‘reach over the shoulder of travel agents straight to the consumer’.108 Since they sell most cruises, this is an important quality of brands. Branding is particularly important for goods and services where the quality is variable and hard to determine for new costumers. ‘Experiences’, such as cruises, have characteristics other than ‘pure products’. These characteristics include: • a high level of human involvement leads to variances; • the consumption and production must happen on the spot and usually at the same time; • the service is intangible;

105 See the classic book by A.O. Hirschman, Exit, Voice and Loyalty: responses to decline in firms, organizations, and states (Cambridge, Mass., 1970). A well-known case is the introduction of Coca Cola flavors: New Coke, Diet Coke, Cherry Coke and Light Coke in the mid-1980s. Consumer protested fiercely and just 90 days after the introduction of these new products forced the company to produce ‘Classic Coke’. Roger Enrico and Jesse Kornbluth, The other guy blinked. How Pepsi won the cola wars (Toronto 1986) (At the time Enrico was CEO at Pepsi Cola). 106 William W. Weilbacher, Brand ma rketing. Building Winning Brand Strategies That Deliver Value and Customer Satisfaction (Chicago 1993) 90-110. His observation may not be relevant, however, because it is based on pure retail products (coffee, toothpaste) and not intangible products as holidays or cruises. 107 Victor T.C. Middleton, Marketing in Travel and Tourism (Jordan Hill, 2001, 3rd edition) 422. 108 Lury, Brands, 46. 32

• the service is location bound: the cruise is to a certain destination and has pre-arranged stops in it programme. Once on the ship it is hardly possible to change your mind: for the remainder of the cruise you are stuck on board the vessel. Cruisers are likely to spend some time in reviewing the available cruise lines, their programmes and to compare prices and services. As the cruise market is becoming extremely segmented, brand names assume more importance, because they reduce transaction costs (particularly search costs) for consumers.109 The growth of the cruise market as shown in the preceding sections, led to the introduction of new products and increasing market segmentation occurred.110 In principle, market segmentation follows any number of consumer preferences related to age, gender, socio- economic position, family structure, and life style. In the near future ethnicity may become an important segmentation.111 A combination of these preferences produces clusters or segments; the more variables combined the smaller the segments tend to be.112 For instance, the cruise lines organisation CLIA distinguishes six large segments.113 • Restless baby boomers (17%): costs may be an impediment to trying other vacations (large percentage of first time cruisers: 59). • Enthusiastic baby boomers (15%): convinced and excited about cruises (first time cruisers: 46%). • Luxury seekers (18%): can effort money for deluxe accommodations and pampering (first time cruisers: 30%). • Consummate shoppers (20%): look for best value for money (first time cruisers: 20%). • Explorers (18%): well-educated and well-travelled, curious about unknown destinations (first time cruisers: 20%). • Ship buffs (11%): most senior segment, cruise extensively (first time cruisers: 13%). These large segments can easily be divided in numerous smaller ones, such as: non-smokers and families with young children. Cruise lines are increasingly interested in attracted a new clientele

109 Jones, ‘Brands and marketing’, 2. 110 Wild, Maritime Tour ism, 21. 111 Victor Teye and Denis Leclerc, ‘The white caucasian and ethnic minority cruise markets: Some motivational perspectives’, Journal of Vacation Marketing 9:3 (June 2003) 227-243. 112 Kevin Meethan, Tourism in Global Society. Place, Culture, Consumption (Basingstoke 2001) 72-73. 113 Allan R. Miller; William F. Grazer, ‘The North American cruise market and Australian tourism’, Journal of Vacation Marketing 8:3 (June 2002) 229; Teye and Leclerc, ‘The white caucasian’, 231-232. 33 from the business community and schools by offering conference and educational facilities.114 Market segmentation will continue to grow, as more tourists prefer to go on a cruise. However, hyper-segmentation will have adverse effects on the cruise industry, because operating a cruise ships requires a certain scale. Market segmentation may lose its importance all together, because consumers will become indifferent to segments and purchase products from different segments.115 National cultural differences led cruise operators first to focus on their compatriots. These cultural differences still exists: the British will favour Cunard and P&O, the Germans Aida Cruises, the Italians Costa Cruises and the Scandinavians Norwegian Cruise Lines. However, these national preferences are becoming less important and a strategy for expansion would require companies not to stress their national identity, because the size of the home market is usually limited.116 Segmentation not only follows nationality, but also price (service level), destination, date of departure and length of the cruise. To expand their business, operators started to offer cruises at lower prices because this is particularly attractive for first time cruisers and younger people. Demographic changes, the increase in the number of elderly people, facing the cruise industry will affect company strategy. In the year 2000, already one in four Europeans is over 55 years of age, and this percentage will increase further until 2020-2030. “The importance of attracting younger groups as first-time cruisers, regardless of social category, cannot be under-estimated because it is they who will repeat the experience in later life”.117 For this purpose, Carnival introduced their ‘fun ships’ and Disney Cruises launched the idea of ‘themes’ in the cruise world, as they had done previously in their attraction parks (Disney World). Other cruise operators started to build ‘private islands’ for their guests. There are several popular destinations for cruises and these tend to attract different costumers. Overcrowding require companies to develop new destinations in the future (e.g. Central America, Africa, and South East Asia). In the 1980s and 1990s, cruise operators started to offer (very) short cruises: a weekend or a few days. These turned out to be a huge success in the USA: in 1993, already 36 percent of all cruises in the USA lasted 2 to 5 days and just 0.3 percent

114 Burke, ‘Cruise lines and consumers’, 698-717. 115 Weilbacher, Br and marketing , 34. 116 Löfgren is less optimistic, but he does not discuss cruises in his study on the history of holidays. Orvar Löfgren, On Holiday. A Histor y o f Vacationing (Berkely 1999). “One factor, however, hampers standardization and large-scale integration, and that is national habits. Despite the very impressive international mergers in this industry, national boundaries are still strikingly important. But on the whole tourists want to stay with their compatriots, and there is surprisingly little mixing of nations” (196). 117 Wild, Maritime Tour ism, 19. 34 exceeded 18 days.118 In the near future age is likely to become an important segment. Renaissance Cruises, operating mainly in the South Pacific, already initiated an ‘adult only policy’ on board her ships, while Saga Cruises operate an ‘over-50s cruise’. P&O soon followed by dedicating their ship Ocean Village for adults-only.119 Cruise operators can choose to concentrate on one or several niches, but this limits possibilities for growth as more market segmentation occurs. High building costs of new vessels push for economies of scale. Mixing different niches on one vessel is another possibility, much like first class, second class and steerage on passenger ships, but certain costumers may choose to ‘exit’. A final option, chosen by CCL, is to separate segments on different ships.120

Figure 3: Brand names and company logos of Carnival Corporation

Carnival Corporation, officially established in 1993, is a portfolio of brand names in the cruise industry. All brands have their own distinct company logo and company colours (see figure 3). The acquisition of P&O in 2003 added several new brand names to the portfolio: Princess Cruises in North America; P&O Cruises, Ocean Village and Swan Hellenic in the UK; AIDA and

118 Wild, Maritime Tourism , 21; Miller and Grazer, ‘The North American cruise market’, 228. 119 Cartwright and Harvey, Cruise Britannia, 46. 120 Most newly build ships are segmented by price or destination. Adapting vessels to accommodate different segments on one ship is mainly done on older vessels. Wild, Maritime Tourism, 20. 35

A’ROSA in Germany; and P&O Cruises in Australia. In a recent interview, Chairman and CEO Mickey Arison, explained the business model that is driving Carnival Corporation. “Separate organizations are in the best interest of the overall profitability of the group, and in the viability of each brand. Wherever we have reasonable scale, we let each brand stand on its own. The value of each company is more than its name. Each brand needs its own unique history and unique future in order to be successful. Each company has its own true culture, which the customer expects to find”.121

Table 6: Portfolio of Carnival Corporation (2003). Brand Stars Primary Number of Accommodation Number of Ships on name market cruise ships (lower berths) passengers order carried in 2002 1 Aida 4 Germany 3 3,730 76,000 2 A’rosa 3 Germany 11 1,500 28,000 3 Carnival 3 North 18 38,348 2,482,000 4 Cruise America Lines 4 Costa 2 Europe 8 10,754 462,000 3 Cruises 5 Cunard 5 United 2 2,458 72,000 2 Line Kingdom/U SA 6 Holland 5 North 11 14,494 481,000 3 America America Line 7 Ocean 3 United 1 1,610 NA Village Kingdom 8 P&O 5 United 42 7,730 154,000 Cruises Kingdom 9 P & O 5 Australia 12 1,200 81,000 Cruises Australia 10 Princess 4 North 10 17,910 850,000 5 Cruises America 11 Seabourn 4 North 3 624 22,000 Cruise America Lines 12 Swan 4 United 1 676 8,000 Hellenic Kingdom 13 Windstar 1 North 3 604 30,000 America Total 66 101,728 4,726,000 17 Source: Carnival Corporation, Promotional flyer (2003).

121 http://www.cruiseindustrynews.com/ Winter 03-04: ‘Global Strategy’ (Thursday, 14 October 2004). 36

(1) A’ROSA operates three river cruise vessels, with one additional river cruise vessel slated to be delivered in 2004. (2) Pacific Princess operates on a split deployment between Princess Cruises and P&O Cruises Australia.

Marketing theorists call this a portfolio marketing strategy. A successful portfolio marketing strategy requires: • a collection of distinctive brand names; • each brand must target a different market segment; • all brands are able to generate income for the parent company. The current portfolio of Carnival Corporation allows the company to offer cruises at different prices and quality levels, a marketing strategy identical to General Motors’ ‘a car for every purse’ strategy in the 1920s.122 This marketing strategy by Carnival is important because in the cruise industry competition is on price, capacity, product, and service differentiation at the same time.123 Each brand name in the portfolio has its own appeal to groups of passengers (see table 6) and they have their own specialisation to offer (e.g. Swan Hellenic for educational and cultural cruises in the Mediterranean, Costa offers river cruises, Windstar offers luxury sailing cruises). The fast growing European market has led Carnival to offer more ‘informal cruises’ for younger people (e.g. Ocean Village, A’rosa). Carnival also pioneered a non-smoking cruise ship: Paradise.

The brand name HAL: heritage, images, culture, dreams and sentiments According to David A. Aaker a corporate brand ‘represents a corporation and reflects its heritage, values, culture, people, and strategy’.124 How does this apply to HAL? What image offers HAL to its costumers? How important is the company history for the brand name? Mickey Arison: “We started with the best brand with the broadest demographics and built from there”.125 As part of the take-over of the cruise division from HAL, CCL obtained the exclusive right to use the name ‘Holland America Line’. To strengthen the brand name, CCL reinstated the old company symbol and colours. This sign depicts Henry Hudson’s sailing ship Halve Maen in front of the Nieuw Amsterdam (III). Obviously, this policy intended to strengthen the image of Holland America Line as an old, trustworthy, and historical company in the cruise industry. The

122 Tedlow, New and improved, 112-182. 123 Coleman, Meyer and Scheffman, ‘Economic Analyses’,140. 124 David A. Aaker, Br and Port f olio Strategy. Cr eating Relevance, Diff erentation, Ener gy, Leverage, and Clarity (New York 2004) 16. 125 http://www.cruiseindustrynews.com/ Winter 03-04: ‘Global Strategy’ (Thursday, 14 October 2004). 37 current slogan, ‘A tradition of excellence’, should reinforce the associated feelings and emotions of the company sign.126

1970s logo Current ‘old’ logo, with traditional blue colours

Although North America is no classic maritime nation, the cruise industry would certainly not have become so big without American tourists. The only maritime experience most Americans had was the vessel that brought them from Europe to America. However, already in the 1880s a large group of Americans regularly travelled to Europe to visit relatives, for business, or just for pleasure (see table 1). This continued well into the twentieth century. Americans tourists travelled to Europe on the grand ocean liners and emulated the idea of a Grand Tour. This experience had a lasting effect on the image of passenger ships and it stimulated the growth of cruise market on the American East coast in the 1950s and 1960s.127 For Americans, the passenger ships reminded them of holidays, trips to their place of birth or their relatives and the Classical Old World. Americans appear to be more sensitive to historical artefacts and the long shipping history of HAL is an important element in the marketing of the company. The current slogan of HAL is “Tradition honoured in a Shipboard Lifestyle”. In contrast, Europeans had a different image of passenger ships and this explains why cruises are still rather unfamiliar in Europe. Europeans associate passenger ships with colonial times, given that the function of these ships was to establish connections between remote parts of the empire and the mother country. The end of colonial times also meant the end of regular passenger transport by ships and Europeans turned to airlines for long distance travel. While Americans discovered cruises in the 1950s as a fun way to spend your holiday and good value for money, Europeans regarded cruises mainly as entertainment for elderly, wealthy people. This image of cruises is slowly changing in Europe, because the younger generation never travelled on passenger ships and do not associate them with colonial times anymore. These different images and attitudes affected the development of the cruise industry in the USA and Europe. HAL

126 On the importance of company logo’s: Lury, Brands, 74-98. 127 Wild, Maritime Tourism, 44. 38 therefore rightly relocated its head office from Rotterdam to the USA, after it had decided to focus on cruises. In the 1920s and 1930s, HAL earned its reputation as ‘the spotless fleet’. This reputation stemmed from mainly the quality of service on board, further improved following the introduction of the hotel management system in the 1960s. It made their ships very popular by their American costumers, although compared to modern cruise ships they had little entertainment to offer. Because HAL started organising cruises before 1940, the company created essential knowledge and experience of the cruise industry. Therefore, the transition from passenger services to cruises was a very gradual one. The high level of service, the good record on safety and the Dutch image of HAL reinforced each other in the early phase of the cruise industry and made ‘Holland America Line’ a quality brand name. Maintaining a Dutch image is extremely important and adds to the success of HAL. New cruise ships still have familiar Dutch names: a tradition started in the late nineteenth century (e.g. Rotterdam, Nieuw Amsterdam, Maasdam, Noordam). The captain and the senior crew are Dutch speaking and famous Dutch artists inspire the artwork (e.g. Rembrand, Van Gogh, Jan Steen), artefacts (e.g. porcelain from Delft) and decoration on board.128

Ian Cairnie painting 17th century The finished painting in the Atrium of the Rotterdam (VI): Amsterdam on board the Explorers Lounge of the typical Dutch? Rotterdam (VI) Rotterdam (VI)

128 Wild, Maritime Tourism, 51. The Nieuw Amsterdam, launched in 1983, displayed art reflecting the history of the Dutch West Indian Company, including charts, paintings, costumes, china, archival records confirming the purchase of Manhattan, and even statues of Henry Hudson and Queen Beatrix, a mounted figurehead from an early sailing ship. The Noordam (1983) showcased art related to the Dutch East Indies. Miller, The cruise ships, 110. 39

Marketing theorists call this the country-of-origin (CO) effect on consumer choices. The CO- effect influences consumer’s perceptions on risks, quality, service and value for money.129 The Dutch image of cruisers is not necessarily true to life. Apparently, older cruisers still associate the Netherlands with windmills, dikes, tulips and cheese, although the younger generation may prefer other images (e.g. coffee shops). The image, CO-effect and branding strategy all interact and influence consumer choices. Over the years consumer loyalty enters the equation and this explains why returning cruisers show a strong preference for the same company and even the same ship!130 After the take over of Westours, HAL offered a complete cruise package to its costumers: air ticket, cruise, and excursions on shore. Westours turned out to be a major asset, because normally a cruise operator earns no income from excursions on land and is only interested in customer expenses on board. The long-standing history and reputation of HAL gave the company a competitive advantage in the fast growing cruise market of the 1970s and 1980s. It also made HAL a potential target for a take-over and in retrospect the acquisition by CCL in 1989 seems only logical although it surprised most experts at the time. The acquisition gave CCL a market segment (upper class) and destination (Alaska) not targeted before by CCL, including the marketing expertise and the reputation of HAL. The diversification made CCL a world leader in the cruise industry and from this position CCL expanded further. In the past decade, Carnival Corporation invested in 12 new cruise ships for HAL to upgrade the brand to a five star or premium class as part of its portfolio marketing strategy.131 The portfolio marketing strategy, of which HAL is just one, proved very successful for CCL, making it the largest cruise operator in the world. Arison explains: “We are now a truly global company with very good resources and understanding of what is happening nearly everywhere - whether in the U.K., Germany, Italy, Argentina, or Asia. We have product, knowledge, and distribution in all the key markets - except for Asia, which we will eventually

129 Zafar U. Ahmed et al., ‘Country-of-origin and brand effects on consumers’ evaluations of cruise lines’, International Marketing Review 19:2/3 (2002) 279-303. 130 Zafar U. Ahmed et al., ‘Country-of-origin’, 279-303. Almost 40 percent of cruisers are first timers and a large part will never cruise again or infrequently, while others will continue to cruise. Coleman, Meyer and Scheffman, ‘Economic Analyses’, 130. 131 Statendam (V) (1993), Maasdam (V) (1993), Rijndam (III) (1994), Veendam (IV) (1996), Rotterdam (VI) (1997), Volendam (III) (1999), Zaandam (III) (1999), Zuider dam (II) (2002), Oosterdam (I) (2003), Westerdam (III) (2004) and Noordam (IV) (scheduled for 2006). The decision to build the Queen Mary 2 for its brand Cunard Line, marketed as ‘the first ocean liner since the 1950s’, fits Carnival’s strategy to appeal to different segments in the cruise market. 40 address. As we go forward, we will study which of our brands will work there. Asia is targeted for the near future”.132 In the near future, other companies will follow this strategy and competition is thus likely to grow. In fact, Star Cruises Ltd., owned by the Malaysian Genting Group, already owns several brands: Star Cruises, Norwegian Cruise Line, NCL America, Orient Lines and Cruise Ferries brands. The recent merger between Carnival and P&O by CCL added another range of brand names to its already large portfolio, but the possibilities for further growth by acquisitions are almost exhausted. Environmental issues, fear of terrorism, economic and demographic problems limit further expansion. Health safety on board is rapidly becoming a major concern for cruise lines as is testified by the increasing number of outbreaks of contagious stomach viruses (the Norwalk virus) on board cruise ships in recent years. The increasing size of cruise ships further limits the number of ports capable of receiving these ships and this will affect future destinations.

132 http://www.cruiseindustrynews.com/ Winter 03-04: ‘Global Strategy’ (Thursday, 14 October 2004).