How Virgin can really shake up the cruise industry

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First, a bias reveal: I have long been a fan of Richard Branson and the Virgin brand. Although we have never met, I have great admiration for the way he does business and the manner in which he takes responsibility for sharing some of his financial success. I also think Virgin has generally been unwilling to accept the fact that new travel products must be designed with tradition in mind. Branson is willing to break the mold.

I remember my first flight on Virgin Australia out of Los Angeles. As we were seated, a total of five crew members walked, one by one, up to each guest seated in business class, personally introduced themselves, shared a bit of their background, talked for a moment or two about our travel plans and then each, in a slightly different way, explained that, “I want this to be the very best flight you’ve ever taken. Please let me know if there is anything at all that we can do to assure that happens.”

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After that process was complete, the second officer came around and did the same. Before takeoff, passengers in our cabin were convinced that they were going to be traveling with a flight crew that truly cared about their comfort.

So when Virgin announced in June 2015 that it was, at long last, entering the cruise business, I sat up and took notice. This could be among the biggest thrill rides that those who write about the industry are going to ever experience. All the rules are out the window. Or so it seemed.

Virgin always manages to position itself as the upstart, the underdog, the David up against a galaxy of Goliaths.

There was evil British Airways to be fought in epic battles on its home turf, a domestic battle pitting the upstart against American, Delta and United and record labels to be challenged.

Now, Virgin is taking on the cruise Goliaths on their home turf, announcing that its first ship will be placed in, of all places, Miami, aka the lion’s den.

To lead his new army, Branson tapped the estimable talents of Tom McAlpin, who helped launch Disney Cruise Line and served as CEO of the World, a luxury condo ship. Each of those, in different ways, was a highly successful product that was unconventional on a number of levels.

I will always remember my first evening on the Disney Magic. It was the captain’s cocktail party, and he walked down a huge stairway to greet the waiting passengers. This was only unusual because the captain linked arms as he descended with his date for the evening, Snow White.

A few hours later, I was with my family in the gift shop when the calm was broken by a huge chipmunk running through the premises, chased by Captain Hook.

Later, on the World, I observed a ship that normally sailed at under 50% capacity. On my sailing, it was about one-third full. Every stateroom and apartment was cleaned each day by a smiling staff. There were times aboard that ship when I felt I was the only guest. And no one cared, because the World is always sold out and fully invested. Again, not exactly your typical cruise product.

So Branson and McAlpin — what would they produce? How off the charts would the Virgin Cruises product be?

It was very clear from the beginning that this would not be what I call “a teaser launch,” offering morsels of design hype every few weeks. Virgin has clearly taken the position that secrecy has its virtues. You can read things into the plans but the overall approach was, I think, best summarized by an interview Branson gave to the Miami Herald in which he said he didn’t much like cruising, so he would try to design an experience that he could personally enjoy.

“A lot of the things I’ve heard is that you get onto cruise ships and you’ve got these massive rooms, big buffets and you feel a little bit like you’re cattle or sheep being herded on or off,” he said. “We think we can create something that is really fun.”

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Virgin Cruises did something unusual soon after its launch announcement, implying that it had no specific plans and would be starting with “a blank page.” It immediately set up a website and asked travelers how it should establish a cruise line that might really appeal to those dedicated to the fun ethic and might have been put off by traditional, big-ship cruising.
So all we knew, for 18 months, was that Virgin Cruises was collecting feedback, and this feedback was coming at them from people they didn’t know, rather than the usual run of industry consultants.

Last month, McAlpin hosted a press event at the Faena Hotel in Miami Beach, where new details would be provided to a travel media eager for specifics.

In his typically over-the-top manner, Branson made his appearance onstage dressed as a somewhat loopy cabana boy, serving dancers some cocktails. When that was over, the more serious non-news was announced.

Fincantieri, the Italian shipyard, would be cutting steel for the first of three 2,700-passenger ships in February. The first would be delivered in 2020, with the next two arriving in subsequent years. But we already knew this. So what was the purpose of the press conference?

Ah, but then things took a turn as Branson took on the Goliaths in Miami Beach. “The name ‘cruise’ is pretty awful, so I don’t like that,” he proclaimed from under his wide-brimmed summer hat and shades. He then announced that Virgin would shake up the cruise industry, and it would start by removing the word “cruise” from its moniker, renaming the company Virgin Voyages. It now falls to Virgin to delineate the differences between a cruise and a voyage.

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There are a few things I will be looking for as the product is finally defined:

  • I expect that itineraries will not be set in stone, that captains will be able to make some at-sea choices as to where to dock or anchor, lending elements of surprise to every itinerary.
  • Look for a fair number of private-island stops where Virgin land parties will top anything else in the Caribbean.
  • Look for a younger demographic with lots of options rather than prebooked arrangements.
  • The ships should have youth-oriented stores, coffee bars and music lounges tied in to the Virgin Records brand.
  • They should be the most high-tech ships at sea, with major refinements in WiFi hot spots, meals that can be ordered on iPads and an onboard app that will enable guests to completely control their on-board reservations and service experience.
  • It would not surprise me to see major onboard partnerships with firms like Apple, Uber or Airbnb.
  • Look for entirely new approaches to food and drink, not appealing strictly to millennials but more to Gen-Xers who feel that the cruise experience is too much like a vacation for their parents. Instead of huge dining halls, I see smaller venues, craft beers, organic onboard gardens, authentic street foods in a stroll-and-graze environment and serious ethnic cuisine.
  • I am looking for design-your-own shore excursions that tend to avoid the same old Caribbean port tours while emphasizing “Wow! I never thought I’d try this” experiences like skydiving, hang gliding and snorkeling off private islands.
  • I am not expecting an all-inclusive onboard experience, as I believe Virgin wants to be price-competitive while trying to exceed the onboard spend statistics of its rivals. By giving adult fun-seekers attractive onshore options geared toward the active traveler, it might occupy a unique niche.

Of course, if Virgin really wants to think outside the box, it might consider becoming the first line to require that bookings be made with the assistance of a travel consultant, endearing it to the industry, possibly ensuring full ships and saving considerable cost for in-house reservations staffing. But I doubt even Virgin Voyages will think that far outside the box.

Virgin Cruises tasked with offering distinctive experience on smaller ships

Virgin Cruise Concept Drawing.

Virgin Cruises’ decision to order ships that are smaller than those commissioned recently by its future competitors has prompted questions about whether it will have enough room to fashion a distinctive onboard experience.

The line, part of Richard Branson’s Virgin Group business empire, in June ordered three ships from the Fincantieri shipyard for delivery after 2020, when it plans to launch weekly Caribbean cruises.

The ships will each be about 110,000 gross tons and carry 2,860 passengers at double capacity, Branson revealed at an appearance in Miami last month along with Virgin executives.

That capacity is far less than recent orders, for example, for as much as 6,000 passengers for Carnival Corp.’s Aida Cruises brand in Germany, 5,400 for Royal Caribbean International, 4,500 for MSC Cruises, 4,200 for Norwegian Cruise Line and 3,954 for Carnival Cruise Line.

All those lines sail at least one ship from Miami, the homeport where Branson said Virgin will launch its line.

When it comes to setting prices, larger ships provide economies of scale that can help reduce fares while still generating profits.

“Virgin is in a very difficult position to differentiate themselves from everybody else. The key for their success is how they differentiate their onboard product.” — Art Rodney, Crystal Cruises founder

Tom McAlpin, president and CEO of Virgin Cruises, said that while pricing has not been disclosed, it will likely be above the cheapest fares advertised for seven-day itineraries.

“We’re not going to be a budget brand,” McAlpin said in an interview. “What Virgin has done in the past has been to give you a better experience at the same price point.”

To do that, it helps to have a generous amount of public space to work with. Virgin has not disclosed its onboard activities or designs yet but has emphasized that it will stand apart from the pack.

A key measure for new ships is the space ratio, which divides gross tonnage into the number of passengers carried. The higher the ratio, the more room for larger cabins and public spaces.

Mark Conroy, who helped design several ships as president of Regent Seven Seas Cruises in the 1990s, said the key question is how big the cabins will be on Virgin Cruises.

“There is only so much square footage, particularly outside space, that needs to be divided between technical space, public spaces and staterooms,” Conroy said. “The technical space is pretty standardized, so then it becomes a balancing act between public space and suites and cabins. The larger you make the suites/cabins, the less space you have for public room.”

Art Rodney, one of the founders of Crystal Cruises, said that at 38.5, the Virgin ship’s space ratio is “no better than and in some cases worse than other large ships,” such as the MSC Divina or Royal Princess, both of which have space ratios of 40.

“Virgin is in a very difficult position to differentiate themselves from everybody else,” Rodney said. “The key for their success is how they differentiate their onboard product.”

McAlpin agreed, saying the “different programmatic elements” will set Virgin apart.

He said the ships are still in the design phase and urged potential passengers to weigh in on Virgin’s website to say what they would want to see and do on a Virgin vessel.

But McAlpin also said that if the ship is smaller than its competitors, that will make it different too.

“If everyone out there is building ships of one size and you have a different size, it does provide a level of differentiation,” he said.

McAlpin cited consumer research as the main factor in deciding how big to build. He said those surveyed expressed concerns about being on a mega ship with thousands of fellow passengers.

“We believe a slightly smaller ship gives us a good platform,” McAlpin said. “It’s big enough to provide us with a variety of experiences but small enough to provide a more intimate atmosphere.”

Virgin Cruises seeks dismissal of Veitch lawsuit

Virgin Cruises has asked a federal court to dismiss a lawsuit filed in March that alleges it misappropriated the basics of its cruise strategy from Colin Veitch, a former cruise line CEO turned consultant.

In a motion filed June 1, Virgin argues that any agreement between Veitch’s consulting firm and Virgin Management USA falls short of a working partnership that could form the basis of a lawsuit.

In addition, the response says communications between the two parties indicated that a preliminary agreement on how income would be allocated between the partners was subject to later revision. In filing suit, Veitch said that Virgin unilaterally revised the financial terms of the partnership once it realize the potential for profits. At that point, the partnership fell apart, the lawsuit said.

Virgin also asks that the Veitch lawsuit be dismissed because it names a number of Virgin entities as defendants but fails to say what misconduct is attributable to each defendant.

Virgin, which is associated with Richard Branson’s Virgin Group, said in December it will enter the cruise business by building two new “world-class cruise ships.”

The Veitch lawsuit contends that the business outlined by Virgin was based on a plan for “ultra ships” that he presented to Virgin in 2011.

Veitch was Norwegian Cruise Line’s CEO from 2000 to 2008.