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One of the world’s fastest growing cruise lines is steadily building its presence in North America, and wants to make sure U.S. consumers know they can take a European-style cruise without flying to Europe.
MSC Cruises, known for its strength in Europe and South America, began a push into North American markets when it sent the MSC Divina to the Caribbean in late 2013.
Since then, it has invested in a private island in the Caribbean and brought another ship, the MSC Opera, to homeport in Cuba. It’ll also operate the MSC Armonia out of Havana later this year.
MSC Cruises’ plans for the future, however, are even more ambitious. MSC Cruises will operate a private island in Abu Dhabi this year, looking to provide a wider range of vacation options in the Middle East. It also has 11 more ships in its pipeline, which will bring its fleet up to 23 ships by 2026.
Rick Sasso, a longtime cruise industry veteran and president of MSC Cruises USA, thinks that European-tinged service and amenities provide a refreshing alternative to the generic megaships of the company’s North American competitors.
Sasso sat down with Skift to discuss the company’s growth strategy in the Caribbean, the cruise line’s new focus on private island destinations, and why China represents unlimited opportunity for the cruise industry.
Skift: MSC Cruises ramped up its presence in North America a few years ago. Why expand when your success has mainly taken place in Europe, and how has the process of courting the American cruiser gone?
Sasso: Well, it was always in the strategic plan that North America would become a more significant piece of our globalization, but we’ve been very patient about that because it’s been 12 years since we started to really deploy ships here on a seasonal basis, smaller ships, because we were the king of the mountain and still are the king of the mountain in other parts of the world like in Europe and in South America. You always need to make sure that whatever changes you make, you always protect your main asset.
North America was always on this strategic plan. Now that we have 12 ships in the water, the youngest fleet in the industry, 11 ships under construction, it’s very easy now to increase that tempo.
Even the basin alone in North America will have five ships in the region by the end of next year. Why is that significant? It’s significant because North America is the strongest cruise market in the world. North America also has foreseeably the more stable economy in the world, so it makes sense that the popularity of our brand, now that it’s reached this dynamic, that North America has to now get more assets. It can’t just be this treading water.
Skift: You’ve also been ramping up marketing of your cruises in the U.S. How do you approach reaching the U.S. consumer?
Sasso: I saw one of our MSC commercials last night while I was in my hotel room. When you reach a certain size and in a certain market, you become a certain size. You can market more in those markets. If you were a European, you would have seen TV commercials ten years ago.
You would’ve seen billboards tens years ago. Now, in North America with the size that we’re growing into, you can spend more marketing dollars to get brand awareness. The TV execution, which has been very exceptionally received, the music, the visuals, the tempo, what it shows, who we are, it’s branding us very well. Our website visits, I think, went up 72 percent the first day that the commercials were running. This is all about building brand awareness and giving people a visual look at who we are because right now they only have a perception.
Skift: You’ve been in the cruise industry for about 40 years. How do you look at pricing and competition between lines right now on a global basis?
Sasso: Strategically the industry has finally gotten, let’s say, a little smarter. Most of us have adopted added value strategy versus price discount strategy. You’ll see a combination of that now, but I think we’ve all come to realize that cruises are worth more than we sell them for, customers only have a relevant point of what we tell them. If I tell you $499, that’s your relevant point, but if I tell you $799 and you’re getting drinks and you’re getting a WiFi and you’re getting stuff, that’s another relevant point. We’d rather tell them that one.
I think the industry in the last year has come full circle where added value has become more of a predominant pricing strategy. In markets that are not mature, pricing doesn’t seem to be a concern because we haven’t abused a customer. We haven’t educated them to discounts. Cruise, it’s a thousand bucks. You go. In this market for the last 40 years, it was like cruise today is a thousand, tomorrow is $799 and maybe next week is less. We’ve kind of conditioned the consumer to be a little more, let’s say, educated. We need to get away for that in the pricing model, and the added value does that.
Skift: Has your business in Europe been affected by security concerns, are North American travelers being less willing to book European vacations?
Sasso: I think that’s characterized for the industry at large, not just MSC, but I think North Americans do hesitate a little bit when there’s an event, a geopolitical event, and then they get over it when the news starts to subside. Typically it’s four to six months after an event. It’s almost as if it didn’t happen.
Cruising is still the safest type of travel, safer than riding a bike, safer than taking public transportation, safer than flying, safer than going to a hotel resort. Cruising needs to boast about its safety a little bit more when these things happen.
The bookings are starting to come back for North Americans going to Europe. MSC is fortunate that we also have such an infrastructure in Europe, and they’re not as affected, even though it happened there. The irony of that is kind of strange, but the knowledge of geography of a North American is a little different than a European.
Skift: What about the burgeoning cruise market in China? How does MSC see it fit into Asia?
Sasso: People [in Asia] are becoming acclimated to cruising like happened here 40 years ago, and we took eight percent increase in capacity for 30 years straight in supply. You’re going to start seeing that in emerging markets. If the emerging market has somewhat of a stable economy, a population that lives pretty close to the access to cruise ships, a desire to have an affordable vacation, that’s cruising, and that’s what China represents and Australia and almost the whole Asian area.
That will continue to grow for the next 10 years almost predictably. Even with interruptions of economic stresses maybe that are going on in China, the growth is still coming. There’s 1.5 billion people. Even if you only tap a small piece of them, we fill these ships up and can’t send them there fast enough. That market is not a short-term trend. It’s a long-term opportunity.
Skift: MSC just announced it’ll open another private island in Abu Dhabi. How do you approach improving the land-based portion of the cruise vacation?
Sasso: If you take the one in the Caribbean, this Ocean Cay Marine Reserve, we’ve known from research, and we’ve used out islands before, and we’ve had to lease them from other out island operators, that the guest satisfaction of experiencing an out island is off the charts. Cruisers always write that out island experience was the best part of the cruise.
It’s a [large] investment, but it’s strategically correct and we’re doing it with all the knowledge we’ve had for the last 10 or 20 years. We get a chance to do it the right way and not have to just Mickey Mouse it.
Regarding Abu Dhabi, it’s an international market because it is a market that is, I think, on maybe some people’s bucket list. It has this uniqueness to it. The Emirates has been getting a lot of attention the last 10 or 15, 20 years with Dubai and what’s going on there and people see this enormous investment of this destination. Abu Dhabi and Bahrain, even Doha now, Qatar, the port of Doha.
I think it’s really become more about people saying, “Let me put that on my list, if I’ve been to South America, if I’ve been to see the pyramids in Egypt, I need to now see this part of the world that’s [easier to] access by cruise ship better than any other way.” That’s the way to do it. I think we’re in the driver’s seat. I think that’s an advantage that the cruise industry has.