CORPORATE CASE STUDY: PR helps Carnival's cruise conquest sail smoothly

By encouraging each brand it owns to speak for itself, Carnival has charted a successful course despite having to deal with health scares, hostile takeovers, and a litany of other crises.

By encouraging each brand it owns to speak for itself, Carnival has charted a successful course despite having to deal with health scares, hostile takeovers, and a litany of other crises.

Last year was dismal for most tourism businesses, but Cruise Lines International Association reported third-quarter passenger increases of 17% (compared to the same quarter in 2001), and a 97.9% average occupancy level. The sector has averaged 8.4% annual growth since 1981, surpassing its capacity growth of 7.6%. Miami-based Carnival Corporation owns Carnival Cruise Lines (CCL), Holland America, Windstar, Costa, Seabourn, and Cunard. It netted $1.02 billion in 2002, and carried more than 3.5 million passengers aboard 45 ships. It is the world's largest and most profitable operator, and is set to become even larger in a few months, when it is expected to complete its acquisition of P&O Princess, the British-owned operator of 20 ships. Carnival appears to be just another big, impersonal company grown by acquisition. But a closer look at CCL reveals a family atmosphere with impressive employee loyalty. CCL was born when Ted Arison convinced American International Travel Service (AITS) to bankroll a second-hand ship in 1972. By 1974, Carnival was nearly bankrupt. Arison bought it from AITS for $1, and assumed more than $5 million in debt. He hired Bob Dickinson (CCL's current president) away from AITS, and turned things around. In 1979, Arison built a new ship, which hadn't been done in a decade. By 1981, his son Micky (currently chairman and CEO of Carnival Corporation) was president of CCL, and hired Al Wolfe Associates - a firm that employed Tim Gallagher, now VP of PR for Carnival Corporation and CCL - as agency of record. CCL went public in 1987, and bought Holland America with earnings from the $400 million IPO. Coincidentally, Wolfe died that year, and Gallagher was brought in-house. He brought two of his coworkers with him, one of whom, Jennifer de la Cruz, is now CCL's PR director. Of the nearly 4,000 CCL and corporate employees (this number does not include the thousands more working under the other brands), 323 have been with the company for more than 15 years. The corporate holding company was formed in 1990, and much of its success is attributed to brand autonomy. "Cruises are vacation experiences," says Gallagher. "You maintain unique vacation experiences by maintaining the corporate culture that created the brand. If the same group of people creates the experience with different brands, it becomes homogenous." Therefore, each brand handles its own PR, but CCL's team is also responsible for corporate PR. This approach has served the company well in times of turmoil and aggressive growth alike. Conquering crises Corporate usually stays out of brand issues, so when passengers fell ill aboard Holland America's Amsterdam in November (and later aboard Carnival ships), each brand handled its own PR. The media first reported the outbreaks as a "mystery" that might be specific to cruise ships. Some even mentioned terrorism. Illness wasn't limited to Carnival-owned ships, but because it first happened aboard a Holland America vessel, that brand took the brunt of the bad press. The Centers for Disease Control began a proactive media outreach to explain that the sickness was Norwalk-Like Virus, a common gastrointestinal bug that afflicts millions of Americans a year, and media coverage became more balanced. "I called Bob [Dickinson] early on to tell him we would have to do a press conference," says Gallagher. "He said, 'What time do you want me?' because he too knew that regardless of what we thought about Norwalk-Like Virus or about the story being overblown, we aren't the ones who get to decide what makes a story. If you don't tell your story, somebody else is going to tell it for you, and nine times out of 10, it's going to be inaccurate." Stewart Newman Associates, retained by CCL, helped manage the situation. "I'm not sure it deserved that kind of play," says VP Andy Newman. "You just have to deal with it. We brought a videographer and a still photographer on board the Fascination in order to chronicle the disinfecting process so we could provide images. It seemed to help. It was one of the dominating stories." Gallagher says there wasn't "mass panic" on board. Passengers were immediately given letters explaining Norwalk-Like Virus, and outlining precautions and procedures. Similar letters are still circulated. Carnival offered airfare reimbursement and cancellation without penalty on three cruises. Less than 4% opted out of the first cruise, less than 1% of the second, and fewer still from the third. The company navigated another crisis in August 2000 when the US Attorney's office charged it with violating oily waste regulations. After heavy initial coverage, the story died until last April, when Carnival pled guilty to six counts on six different ships. It was fined $9 million, and ordered to give an additional $9 million to South Florida environmental projects. When the charges were revealed, Gallagher hired the Lukaszewski Group, which advised him to prepare a statement, but not to issue a press release. "I thought, 'Boy, I hope this works,' and it did," Gallagher says. "Certainly, you don't want to put out anything that the government is going to take issue with." The government issued a detailed release after the plea, but Carnival remained brief and to the point. "We acknowledged the act and apologized for it," Gallagher says. "We pled guilty. What else were we supposed to say?" The road to expansion December 2001 marked the beginning of Carnival's struggle to win P&O Princess, which rebuffed it in favor of Royal Caribbean. "We wanted a friendly deal, but once they announced their Royal Caribbean deal, there wasn't a choice," Gallagher says. "We had to go hostile or let it slip out of our hands." London firm Financial Dynamics was hired to handle the financial press and manage legal requirements and protocol. APCO's Brussels office helped with EU clearance. Carnival would not disclose its PR budget, but Gallagher says efforts to win P&O made 2002 and 2003 corporate budgets "very large." "There has never been a successful hostile takeover in the UK," Gallagher says. "We were the big, bad Americans trying a hostile takeover of an established British company led by Lord Sterling, a high-profile business icon. We were going after UK shareholders, and our chances were very, very slim. We had to have UK financial PR specialists and British bankers. It wouldn't have been possible to do it from here." Carnival launched its first ship to operate out of England, the Legend, during the takeover attempt. Local agency Saltmarsh Partnership enlisted English actress Judi Dench as the ship's godmother, and helped garner publicity in P&O's backyard. But a christening mishap began when Dench couldn't get the first bottle of champagne to break. Things seemed to go from bad to worse when the second bottle finally broke, only to soak her in champagne. But the potential calamity turned into a break for Carnival when reports and images of Dench's gracious good humor ran all over the world. "Because things didn't go as planned, it got more play," Newman says. Things didn't go as Royal Caribbean anticipated either. Last October, P&O paid a $62 million break fee to pursue a deal with Carnival. The relationship had finally turned friendly, but a deal couldn't go ahead until January 1, 2003, without P&O owing Royal Caribbean an additional half-a-billion dollars. The proposed acquisition would give Carnival approximately 75% of P&O. To benefit its shareholders, P&O insists on being a "dual-listed company" (DLC), meaning that UK shares stay on the London exchange, while US shares trade on the NYSE. Many P&O shareholders would otherwise be forced to sell their stocks after the acquisition. DLC structuring is not common in the US, and the SEC needs a 60-day review. Carnival anticipates shareholder meetings in March, and closing the deal in April. A maritime-leisure conquest made possible by sailing under many different flags, but letting the brands - and not necessarily the media - speak for themselves. And the policy seems to work equally well in times of sickness and in health. ----- PR contacts Vice president of public relations Tim Gallagher Director of public relations Jennifer de la Cruz Public relations supervisor Aly Bello-Cabreriza Public relations supervisor Vance Gulliksen Public relations coordinator Irene Lui Administrative assistant Laurie Mahle

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