More Modern Holland America

Launching its new $225 million initiative, Signature of Exellence, Holland America Line (HAL) promises to reinvent itself in a more modern form.

The initiative will focus on five areas: dining, accommodations, service, activities, and destinations.

"Signature of Excellence is an opportunity to market new ideas," said Stein Kruse, recently promoted to president and COO from senior vice president of fleet operations. "By enhancing the product, we are also enhancing the brand," he continued, adding that HAL is also set to unfold its most aggressive marketing campaign ever, starting early next year. "We will be very bold, very focused, and very evocative," he added.

According to Kruse, the new initiative resulted from senior management's decision to reassess the brand and the product. "We challenged ourselves to evaluate and assess every aspect of our operations," Kruse explained. "We also did sessions with past, current and prospective passengers, testing their perception of HAL.

"The goal is to provide passengers with an extraordinary experience and tremendous value," Kruse added.

The enhancements, in some cases construction, will begin in late 2003 and are scheduled to be fully completed on all HAL ships within 24 months. All shipboard work will occur during regularly scheduled drydocks. The changes will also be incorporated in the two new ships under construction at Fincantieri.

Enhancements include:

Dining: The Pinnacle Grill, featuring Pacific Northwest cuisine will be featured on all the ships, while the main dining room will offer two more dining times and more personalized service. The Lido will serve breakfast, lunch and dinner, including made-to­ order dinner entrees and table-side service. A new interactive culinary arts program will be offered in specially designed culinary art theaters onboard.

Accommodations: Staterooms will be fitted with extra thick mattresses, 100 percent Egyptian cotton bed linens, extra fluffy towels and terry bathrobes. New amenities will include massage showerheads, lighted make-up mirrors and hair dryers. Passengers will also be welcomed with a complimentary fruit basket and a stainless-steel ice bucket and service tray for use with in-cabin beverages. All cabins will also have fully­ stocked mini-bars, VCRs or DVD players and personalized stationery.

Service: HAL's already high service level will be further enhanced with early embarkation - 11:30 - and leisurely disembarkation in addition to a state-of-the-art spa experience. While HAL has previously had a no­ gratuities required policy, it now will add what it calls nominal and optional gratuities to the passengers' onboard charge accounts as well as automatic service charges on bar bills. HAL said it wants to simplify the sometimes confusing tipping system onboard ships.

Activities: New offerings include the culinary arts theater, exploration and enrichment programs, including an expanded lecture series, and an upgraded HAL Kids Center.

Destinations: More diverse and enhanced shore excursions will be offered, including exclusive experiences such as private tours of Caribbean estates, to big game photo safaris in Africa, or private helicopter tours in Hong Kong. HAL's out-island Half Moon Cay, will feature new activities such as horseback riding, wave runners, and a Kids Aqua Park.

Core Market

HAL has also identified its core market to consist of 50 million Americans - so-called "sight and culture seekers," those who seek to learn and experience destinations, but in premium-style - and so-called "relaxers," who are looking for hassle-free vacations.

"We are enhancing our product and targeting our marketing to tie into the primary motivators and aspirators of these two groups," Kruse said. "They are young, old, and middle-aged."

HAL will also accommodate families, especially during holiday and vacation seasons, but will not go after the market segment it defined as party seekers.

These four groups are identified as the main groups that make up a market of 100 million Americans who have the means to take premium cruises.

Growth and Deployment

In 2003, HAL is boosting its passenger capacity by 11 percent, followed by 10 percent in 2004, and nine percent in 2006, for an aggregate growth of 19 percent from 2003 to 2006. The company is not introducing any new ships in 2005.

Going forward, Kruse expects HAL to continue to grow, but not at a linear rate based on the last few years. "Our growth will be driven by our financial returns," he said. "Our target market is smaller than the overall cruise market."

Nor does Kruse necessarily expect bigger ships in HAL's fleet. "If it was up to me," he noted, "I believe premium ships have some maximum size, although I am not sure exactly what that is. We are also restricted by the Panama Canal to a maximum width of 32.4 meters.

"Premium is about space," he continued. ''It is also about speed so we can go to destinations off the beaten path and stay longer in port. Most of our ships can cruise at 23, 24 or 25 knots. For bigger ships, that would mean a huge increase in fuel costs.

"The bottom line is to be financially successful where we are, with solid yields. Just building bigger ships and gaining a better cost structure is no guarantee for better yields," he added. "We believe in our ability to raise prices when market conditions improve."

With slightly smaller ships, sailing slightly faster, and with Dutch flag, HAL has a somewhat higher cost structure so it needs to command premium pricing, but must in return deliver a premium product, according to Kruse.

Since the company's acquisition by Carnival Corporation in 1989, it has remained what executives like to call a "crown jewel" in the Carnival group, and has been profitable.

In 2003, HAL deploys 34 percent of its capacity in the Caribbean, 24 percent in Alaska, 11 percent in Europe, and the balance in South America and elsewhere. For 2004, the Caribbean portion will be 34 percent, Alaska 22 percent, and Europe 16 percent.

(The complete interview with Stein Kruse will run in the winter issue of the Cruise Industry News Quarterly.)

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