The CEO of Carnival explains how the company made a comeback after PR disasters and financial disappointment (CCL)

Rick Wilking/Reuters

When Carnival Corporation CEO Arnold Donald became the company’s chief executive in July 2013, the company was dealing with the aftermath of two PR disasters and financial underperformance.
By the end of 2018, Carnival had more than doubled its annual earnings and increased its share price by 70%. The company says that it set a record for full-year adjusted earnings and revenues in 2018.
Donald has prioritized engaging with the media and improving communication within the company and with its customers.

When Carnival Corporation CEO Arnold Donald became the company’s chief executive in July 2013, the company was dealing with the aftermath of two PR disasters and financial underperformance. By the end of 2018, Carnival had more than doubled its annual earnings, increased its share price by 70%. The company says that it set a record for full-year adjusted earnings and revenues in 2018.

In 2012, the Costa Concordia hit a rock and capsized off the coast of Italy, killing 32 people. And four months before Donald became CEO, the Carnival Triumph had to be towed to land after an engine fire that temporarily disabled the ship’s air conditioning, toilets, and freshwater system.

When he began his tenure as CEO, Donald saw negative media coverage as the first challenge he had to address. From his perspective, the media would mischaracterize negative events on Carnival ships and place too much emphasis on them, like the Triumph incident and norovirus outbreaks. And some incidents, like suicides, would receive more attention if they occurred on a cruise ship than if they occurred on land, Donald said.

"We’d had a lot of negative media attention and the media was generally negative on cruise. Any little thing happened, they kind of, in our opinion, blew it way out of proportion," he said.

Donald said he decided he needed to become more accessible to the media and more effectively explain Carnival’s perspective. The company began hosting tours of cruise ships for members of the media, and Donald made himself available for interviews. Since 2013, Arnold said he has become happier with the media’s reporting on Carnival, he said.

Listening to employees and customers is key

The second challenge Donald faced was improving Carnival’s financial performance. To address declining earnings and returns on invested capital, Donald sought to improve communication inside the company and with its customers. He set out on a "listening tour" to hear from employees, customers, investors, politicians, and even potential customers who had never taken a cruise.

"If you listen to the world, it will reveal itself to you," Donald said. "In business, if you listen to your customers or guests, they will tell you what it takes to exceed their expectations. If you listen to your employees, they will tell you how to deliver whatever that guest or customer wants in a manner where it’s sustainable for the company."

Donald learned that the company’s 10 brands (the company now has nine) were not working together, so he asked his executives what success would like for their families, the brands or departments they oversaw, and the company as a whole in five years, then had them share the answers with each other. Increased collaboration among the company’s brands has led to cost reductions for items like arugula and air travel, both of which were purchased by each brand without any coordination before Donald’s tenure.

"We were one of the largest purchasers of air travel in the world. You never would have known because we were buying it separately in nine, ten different groups," he said.

Donald also gained more insight into what Carnival’s customers wanted, like different kinds of food and an easier process for boarding and leaving the company’s ships. The latter led Carnival to develop Ocean Medallion, a small, circular device that passengers can wear that serves a variety of functions, like ordering food and drinks, opening cabin doors, and keeping track of family members. (The device debuted in 2017, and is currently available on select ships from Carnival’s Princess Cruises brand.)

Donald initially had concerns about some aspects of the device, like whether customers would find it invasive (the device shows the wearer’s location to ship employees when they’re delivering food or drinks, for example), but he said his concerns have proven to be unfounded. Customer feedback on ships that use Ocean Medallion has "gone through the roof," Donald said.

Finding new customers is a priority

Today, Donald is focused on what he sees as the biggest challenge for Carnival and the entire cruise industry: convincing more people to take cruises.

The total number of cabins on all of the world’s cruise ships amounts to less than 2% of the world’s hotel rooms, Donald said. In 2017, the total number of global cruise passengers was 26.6 million. In 2014, an average of 4.8 million people stayed in US hotels each night.

"The cruise industry is tiny," Donald said.

A limited amount of ship-building capacity puts a ceiling on how much the cruise industry can grow each year, but Donald hopes to create more demand than Carnival can meet.

"The challenge is creating demand in excess of supply to be able to narrow the gap," Donald said.

Carnival relies on a variety of channels to reach potential customers, including social-media posts from passengers, travel agents, traditional advertising, cold calling, and TV shows it has created for major networks, such as ABC’s "Ocean Treks" and NBC’s "The Voyager."

The ultimate goal, according to Donald, is to have every potential customer encounter a "positive feeling" about the cruise industry multiple times each day.

"We’re always looking for how to get the story out," he said.

Have you worked on a cruise ship? Do you have a story to share? Email this reporter at mmatousek@businessinsider.com.

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Source: Business Insider – mmatousek@businessinsider.com (Mark Matousek)