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Turbulent times and golden opportunities

For those feeling storm-tossed by today’s economy, Don Sull believes there’s much to learn from Carnival Cruise Lines, a company that ...

By Don Sull . 01 March 2010

For those feeling storm-tossed by today’s economy, Don Sull believes there’s much to learn from Carnival Cruise Lines, a company that discovered that turbulence often has an upside.


Turbulent times and golden opportunitiesThe Mardi Gras began her maiden voyage in March 1972 with 500 passengers. As the pilot navigated out of Miami, the ship’s stern ran aground on a sandbar. For most involved, the grounding was harmless. During the 24 hours the Mardi Gras was stranded, tourists rubbernecked from the beach, while passengers quaffed a “Mardi Gras on the Rocks”, a drink improvised by a creative bartender. For Ted Arison, the founder of the fledgling cruise line, the maiden voyage was a disaster.

He had survived worse. Arison was born in 1924 in an agricultural settlement near Haifa founded by Romanian Jewish emigrants. While vacationing in Yugoslavia in late August 1939, his father, Meir, who ran a shipping company, feared the imminent outbreak of war. Meir found only one flight back to Haifa, departing the next day from Rome and fully booked. He instructed his firm’s Italian agent to pay whatever it took to secure five seats and packed his family into a taxi for a 600-mile cab ride. Within days, Hitler had invaded Poland.

After escaping the Nazis, Arison returned to fight them. In 1940, the 16-year-old left the engineering programme at the American University of Beirut to enlist in a battalion of Jewish volunteers from Palestine who fought alongside the British Army in Italy and Germany.

After a series of business ventures in Israel and New York, in 1966, Arison entered a joint venture to found Norwegian Caribbean Line, the pioneer in Caribbean passenger cruises. After that partnership soured, Arison founded Carnival with a single rusted vessel infested with rodents and cockroaches. When Carnival entered the market in 1972, half a dozen established lines already offered cruises to the Caribbean out of Miami and industry leaders Norwegian and Royal Caribbean controlled seven state-of-the-art ships. Competitors derided Carnival as the “Kmart of the Caribbean” and predicted the fledgling line’s bankruptcy, since the Mardi Gras often sailed with half her berths vacant.

Arison saw her as half full. In the midst of a recession in 1974, he bought control of Carnival for a token dollar (and assumed the company’s debt of $5 million). Subsequent decades proved turbulent in the cruise-line industry. The competitive landscape churned constantly, with 88 firms entering the US market and 77 exiting between 1966 and 2008. Mergers and acquisitions further complicated the picture. Innovations in ship design transformed the cruising experience. Royal Caribbean’s Oasis of the Seas, for example, spans 16 decks and features an outdoor amphitheatre, a zip line, two rock-climbing walls and seven distinct neighbourhoods. By 2008, passenger cruise ships offered 10 times more space than that of ships launched in the early 1970s.

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