Luxury cruising, like its big ship midscale counterpart, is undergoing a massive building boom along with a refinement in onboard and land activities.
Luxury cruise lines are experimenting with tweaking the balance between old-world elegance and a more hands-on, experience-based vacation.
Azamara Club Cruises CEO Larry Pimentel told Skift that his company’s focus has shifted to focus on crafting unique experiences on land. So unique that other cruise lines, and even tour operators, don’t have the same access.
“There’s a world of difference between what we do and old-world luxury, which is always about what’s on board,” said Pimentel. “Today’s consumer wants to dig in, and they really want to enjoy the localized culture through experiences.”
Pimentel, who previously served as CEO of Cunard Line and SeaDream Yacht Club, has shifted the line’s focus toward land product. With inclusive evening events, dubbed Azamazing Evenings, and bespoke land excursions, Pimentel has helped Azamara tap into a more diverse market of luxury travelers.
Skift spoke to Pimentel about what luxury cruisers wants, how Asian luxury differs from Western luxury and how technology lets his small brand reach a global audience.
Skift: So often I talk to people from cruise lines and all they do is talk about the onboard product, but more and more people go on a cruise mostly is actually to experience things that are on land. Azamara’s approach seems very wise in cultivating these experiences that are unique to the brand.
Larry Pimentel: They’re also experiences for all age groups and, in particular, millennials. I will tell you, we have done an extensive research at the corporate level with Boston Consulting Group and came to the conclusion, in looking at the research. It was crystal clear that experiential travel for upmarket luxury clients is absolutely where it’s at. It is about enrichment, and it’s about exclusivity. We sought out to create exclusive experiences that were enriching, and for us, there’s a world of difference between what we do and old-world luxury, which is always about what’s on board. Rosenthal plates, Bulgari products, that’s passe. Today’s consumer wants to dig in, and they really want to enjoy the localized culture through experiences. That’s what we specialize in. That’s what’s made us successful.
Skift: Is it that these consumers have been there and done that? Or is it that as a new generation of luxury traveler matures, their values and expectations are different?
Pimentel: Old world luxury has an appeal to a smaller and smaller group of people. Not that it’s bad, but it’s different. It wasn’t as enriching, and I think values, what people look for on travel is changing and changing radically. I think a lot of the millennials who may have been able to travel with their parents, with their grandparents, may have done it in different way. They’re looking for a more engaged experiences. This is hands-on. This is I’ve done it, I’ve seen it. I’ve been a part of it. It’s about personal luxury that enriches.
Skift: A few months back was you guys dipped your toes into the virtual reality thing. Are these same travelers also sort of technologically advanced?
Pimentel: We’re so small it’s a line that you could blink and miss us. As a percentage of the business, we are really tiny. While the line is tiny, the experiences are not. I felt very strongly about that after hearing the staff here, a lot of our millennial staff. We got ahold of the Oculus Rift device. We got ahold of some programmers who were young and enthusiastic. We went out and filmed a couple of destinations, and now we’re using this in consumer trade shows.
We used it last weekend in London. We had lineups of people, forget the age group. It was all ages. They loved putting the device on, they loved looking around as the ship was in Colombia or in one place or another. They loved looking around. It allowed us not to verbalize it, but to allow them to see it, to feel it. Just putting a headset on people are looking at it is a hoot by itself. Because you can see them kind of reaching out or something is coming close to them. We are using 3DI very aggressively in the field, in sales. We’re using it for consumers, at consumer shows.
Skift: Because you guys are so small does the world of tech allow you to be more tactical and target who you want to target with your marketing? Instead of putting a bunch of money up for a huge sales staff and traditional marketing, maybe these channels allow you to sort of reach a different kind of consumer?
Pimentel: Well, it does reach a different kind of consumer, and I will tell you that most luxury lines go after luxury guests in traditional methods. They haven’t changed much in decades. I mean, the number of lines that are not in the digital, social media space, as in not all, shocked me. And some whose engagement is there, I would say is modest at best. In our case, I thought, this is a way of reaching audiences and while we are tiny, digital makes us all the same size. We’re on Twitter with the same size as anybody on Twitter. We’re on Instagram. We can post photos that we’re capturing, and consider the fact that on any one year, these ships are in sixty to seventy countries, boy, are we capturing a lot of live photos.
There’s the other thing, the notion of localized authenticity. I can tell you my observation is that guests love the fact that it’s local, that it’s authentic, that the crew is capturing it, and it’s not always the refined professional shot. Nor does it have to be. It is revealing the experience, and it is getting us clients.
Skift: Are you still finding that travel agents are a real good source of getting people to sail on your cruise line?
Pimentel: The travel agents are still significant, as percentages of all cruise lines’ business in general. They’re declining as a percentage, but in part that’s because there’s more ships to book because technology itself allows people to get on the web. They shop at 2:00 a.m. or 2:00 p.m. on any day including Hanukkah or Christmas. They fact of the matter is that the market is being driven by the consumer, and the consumer wants to be able to access on the web.
It’s shocking to me that most cruise lines in the luxury ship sector don’t even have an online booking engine. If you look at them, the vast majority have nothing online. We’re one of the only ones.
Do I think that agents do in engagement within social or in ability to use the methods and tools of technology? No and candidly I think that they’re behind. There are more and more different options and ways of getting to people.
Skift: There’s also the river cruise market, which is sort of known for being more land-based. How do you see Azamara fitting in when compared to these river cruise lines which just keep building new ships?
Pimentel: That’s also a good question. We are the deep-water version of a river boat. River boats have flat bottoms, as you know. They are designed to go into river areas. They don’t operate, for the most part, twelve months out of the year. They’re parked generally during the winter. There are exceptions to that, but the vast majority of the fleet are down. They do a very, very credible job of delivering Europe for example, within the Danube or within the Rhine, within the different waterways. They are delivering localized cultural experience, and, as you know, the sector has exploded. I will say, while the sector has exploded, supply and demand always come into play. Too much supply and you end up with not enough demand and pricing seems to come into play. I’ve seen passenger river boats that now have, in many areas, so many river boats in the same area that the rate integrity is being challenged.
The oceans are far broader bodies of water. There are many, many, many more places to go. I think there’s a place for river, without any doubt. I think the sector will continue to grow. I think there is a place for ocean, and to the comments I made at the beginning, when you start adding the total number of cruisers, it’s really small. Especially when you look at a place like China. It’s so big, so immense, so emerging, that, frankly, they’ll make significant inroads into both sectors, but both sectors will coexist and, I think, quite well.
Skift: Speaking of China, how do you view its emergence as a key cruise market?
Pimentel: One of the things about China that’s so fascinating is obviously is just the size of the nation. When you have one point four billion people, you have a lot of the Earth’s population, and you’re getting an emerging middle class. Asian exploration is absolutely fantastic, and the Chinese are just starting to explore the vastness of their own country. It won’t stop at their own country.
In fact, the average age of a cruiser in general is forty nine years of age. China has the most under forty cruisers in the entire world. They’re very young. They’re very tech-savvy. They’re tuned in to the internet as much as they can be with the restrictions of their government. At the moment, they’re doing short sailings, meaning they’re doing three to five day. A lot of it started out as gambling junkets. However, they’re attracted to other Asian areas. There is a proliferation of ports, new ports opening up, new places to go. I think what you will see, is you’re seeing a lot of ships shift there in the next three to four years. That will mean that the Pacific as a whole will open up more. That the largest ships which are gigantic and beautiful will be making more stops in Australia, will be making more stops in New Zealand. Points in between Hong Kong and Singapore.
The client themselves is a young client, and oftentimes, you’ll see the extended client, meaning that you will see mom and dad, their child, their child’s spouse and one child. They have the one-child policy. Now if you deal with volume as a whole, in 2014 China had roughly 700,000 guests on a ship.
China is growing at such a pace that the reality is if we took the pace of growth that happened in the United States and we applied it to China, which appears to be growing faster, and we asked ourselves how big could China be? China is growing at a pace that in another seven or eight years, it could exceed the United States which is the largest producing passenger shipping country in the world. Yet the volumes now have source origination business in different areas of the world. The Americas will be a great source. Europe will be a great source. ASEAN, South Oceana with both Australia and New Zealand will be a big part of it. You can begin to see that this industry is absolutely going global in a big way. Not just in deployment but in source origination of guests. That is a major fundamental change. Major from a decade ago.
Skift: Do you think that in sort of itineraries and ports and destinations being developed in Asia for the Chinese cruiser, do you think that North American cruisers and European cruisers will be more interested in participating in an Asia cruise as well?
Pimentel: I think there is evidence that there is more and more cruising in Asia by North Americans. I also think there’s evidence that suggests that for the most part, in the mass market, Americans do not care necessarily to vacation with the Asian mass market. There is certain things that are a cultural divide that are real, but I think what you’re going to find is you’re going to find that there are companies and ships that deal with certain types of cultures and do it really well. Royal Caribbean International, thus the name, is an international product. They have products designed for Asians. They have product designed for Europeans, for North Americans, for Australians. The company’s big enough. It’s the single largest shipping company when you look at it, but I think there will be more happening in Asia for North Americas.
You’re going to see a lot of new ships, and that’s going to lead to one thing. I’m going to pull out my crystal ball. We’re going to get at a point, and I don’t think it’s in the too distant future. It might be in 2018, where there’s too much capacity, and one thing about the ultra luxury products is ultra luxury and too much do not fit together. It’s about scarcity. When you put too much in the market, it means that the luxury companies will be offering extraordinary values to consumers. The good news is the consumers will be the recipient. But will the companies be able to right side their business practices to make enough money to make it work?
The luxury cruise lines have never been on a par with the mass market lines on a return on invested capital, operating income basis, a PNL basis, any metric you want to use, the luxury market is more challenged, and that’s because they’re small. Creating awareness is often a very, very difficult challenge. Which, by the way, the internet helps you do and social media helps you do. I think the products, however, that the luxury cruise lines have to a line are fantastic as it related to the onboard product, but frequently not beyond.
Skift: It was always something that I was thinking about regarding Norwegian Cruise Line and its luxury Haven ship-within-a-ship product. People could choose this, but for a similar amount of money, you could go and be on a smaller ship and have a totally different set of experiences. There’s just such a demand for luxury that, in some cases, people will still go and have a more traditional experience, right?
Pimentel: Well, you just hit on a big thing. You see, as a consumer, do they want to evaluate architecture or do they want to see the destination? That’s an interesting thing, and what I’ve to the conclusion with is that some people want to see both. Some people have never gotten across. You mentioned earlier to me that you talked to a lot of cruise executives who often talk about their onboard experience and what they’re doing on board. I would say that most of the soundtrack, probably 95 percent, is all about the ship.
With China opening up, the number of people racing there, the amount of ships, the predictions that can be made from that mass movement are completely fascinating. Shipping is interesting from a business standpoint of view with geopolitics laid on it. We can go to area like the Black Sea, have our ships pull out, and have Mr. Putin walk in. The fortunate things about us is we float. We can move away. The hotels can’t. Geopolitics is playing a very big role in what is happening and where we’re placing ships to a greater degree than most people would even remotely understand. Even the geopolitics in Asia, between China and Japan, are sometimes very strange.