Royal Caribbean: Potential Disaster to an Opportunity

Over the years Royal Caribbean International (RCL) had developed into one of the world’s largest cruise businesses. Russia was never a huge market compared with other parts of the world, but it was significant as the Russians were known for an average higher daily spend on ships than many others.  

To put some context to this story, Natalya, RCL’s EMEA (Europe, the Middle East and Africa) Head of Sales for International Representatives (IR) was responsible for the Russian market among others in EMEA, was tasked to rethink RCL’s coverage strategy for Russia. She decided to select five preferred sales representatives (PSRs) to represent RCL. With the hard work of the PSRs, RCL saw an 8 percent growth in passenger numbers in 2016 and 18 percent growth in 2017. 

The US Embassy in Moscow announced in August 2017 that it would temporarily stop issuing all non-immigrant visas in Russia and severely curtail visa operations as it slashed its staff to comply with the latest salvo in Washington’s diplomatic standoff with Moscow. This affected around 2,000 RCL’s Russian customers who often took cruises in the Caribbean. 

RCL did not see an immediate decline in passenger numbers, as most of the bookings and visa applications were made months in advance. In fact, they were seeing a steep increase in Russian passengers in 2018 with advanced bookings. However, it became clearer within a couple of months that the Caribbean market (served out of Miami) would be decimated. 

To get a sense of the scale of this problem is to understand its impact not just on RCL but also on the PSRs. Over the years RCL has steadily increased its passenger numbers and by 2018 had reached second place in cruise market share at approximately 8 percent, behind the dominant Mediterranean shipment company (MSC) with 50 percent. Losing and not replacing 2,000 customers per annum would set RCL back many years. This decline would seriously and immediately hit the revenue and profitability of the newly developing PSR community and allow MSC to extend its already dominant market share. 

Natalya realized that the only option was to explore ways of changing their Russian customers’ behaviour and ask them to consider completely new holiday destinations with RCL. This required a creative and quite radical rethink that would affect all aspects of the ‘supply chain’. This supply chain included RCL corporate, RCL marketing, her EMEA vice president, the ship’s hotel directors, the PSRs, and even the ports at which ships docked. She would essentially have to create a ‘new product’ for the Russian market. 

Typically, a sales team would start with the questions: what do we have that we could sell to the Russian market (first box thinking)? However, Natalya, working collaboratively with the OSRs, started with the question: what value do Russian consumers want from a cruise? She linked this to the value that the ship’s hotel directors wanted to create for themselves, then finally used this approach to sell more passenger numbers working in close collaboration with the partners. Natalya used third perspective thinking in developing her strategy. This was driven by an authentic passion and desire to provide her PSRs with a sound economic model to thrive in what is a very competitive and fickle marketplace. 

Some research that Natalya carried out found that Russians often lack the ability to speak English. English is the spoken language of all the crew on board, along with all the menus, food, services, and others bring in English, but often reflect other nationalities’ preferences but not theirs, there were no Russian food options, no menus available in Russian or Russian translators. Understandably Russian passengers felt somewhat less connected with the cruise experience as they felt the on-board services were more tailored for other nationalities. Collaborating with the ships’ captains, more creative ideas were added such as a New Year celebration on board at Moscow time, Russian evenings with Russian music, vodka bar with caviar. 

Another solution that needed to be addressed was to select new destinations for the Russian Market; not forgetting that the net ticket spends from Russian passengers is 12.5 percent higher than the company average. Natalya initially targeted two new destinations: The Middle East and Asia. In Asia, RCL operated its ship Spectrum between Shanghai and Japan to care for the Chinese market. Natalya saw an opportunity based on the consumer demand from Russia (remember this was a new and emerging market) for extra demand for this route if the ship could dock in Russia. 

With the help from the PSRs and the local Vladivostok authorities, Natalya implemented an aggressive marketing and sales campaign. It was essential that the PSRs and their supporting travel agents were sold on the idea, so fifty travel agents and their families from all over Russia were invited to join the ship at Shanghai to experience what they were selling. A digital campaign involved paid ads on Instagram, Facebook, Google, and Yandex, with nine videos that were used to break the stereotype thinking in Russia about cruises. There was also an unprecedented level of media coverage that was generated for the Vladivostok initiative, including the main Russian TV channel. 

The tangible results were incredibly impressive – passenger numbers for Asia-Pacific increased by 53 percent in 2019 and an incredible 282 percent in 2020. The cruise (Shanghai-Vladivostok-Shanghai) already had 200-300 passengers confirmed for 2020 and the demand was growing 

The intangible results were equally impressive -through this initiative, Natalya has built relationships with RCL’s centralized revenue department, which were incredibly supportive of this new venture. RCL has now been invited to have talks with the Hong Kong Tourism Board to broaden their activities in the region and Singapore Airlines has signed up to be a partner of RCL

Natalya had exhibited the four mindsets and values throughout this process of dealing with this setback. Authenticity was made very clear by Natalya, being Russian herself, she had a passion about the Russian consumers which was completely genuine. Her enthusiasm and passion for the Russian market helped influence the hotel directors, port authorities, revenue teams to want to work with her to serve the market. Client-centricity was displayed by Natalya, she did not just focus on what RCL could sell to the PSRs but used a consumer-backed approach to determine how RCL could serve a new Russian Market.

There is nothing like a crisis to get the creative thinking process flowing. The Russian menus, translators, waiters, etc were just the beginning of Proactive Creativity being shown, by developing a new approach for the Russian market – particularly the idea that Vladivostok could be added to the Shanghai route. And finally, Natalya showed that she had the perseverance and drive to create something new, bringing the partners with her, hotel directors to back her plan, negotiating with the PSRs to take the financial risk for the Spectrum so that it could dock at Vladivostok – this all demonstrates the behaviours of being Tactfully Audacious.