Premier Cruises has come full circle after its abbreviated foray into the "classic-ship" market: back to family-focused cruising aboard Big Red Boats. On Nov. 9, Premier CEO Bruce Nierenberg unveiled a major branding shift for the company: a four-fold expansion of its Big Red Boat brand in 2000, complete with a planned $20 million marketing budget. The Oceanic will be renamed the Big Red Boat I, and will continue to sail three- and four-day cruises out of Port Canaveral; the newly chartered Edinburgh Castle will have its hull painted red and become the Big Red Boat II, sailing a New England/Canada route from New York beginning in May 2000, then shifting to a seven-day Eastern/Western Caribbean route from Port Canaveral next fall; the IslandBreeze will be repainted and renamed Big Red Boat III for its year-round cruises from Houston beginning in June 2000; and finally, the Rembrandt (ex-Rotterdam V) will be repainted and renamed the Big Red Boat IV in November 2000, when it begins three- and four-night cruises from Los Angeles to Catalina, San Diego and Ensenada; followed by summer 2001 cruises to Alaska departing from either Seattle or Vancouver beginning in July.

The so-called "Four Comers of America" program allows Premier to bring "the Big Red Boats to the people," said Nierenberg, "eliminating the cost and inconvenience of getting to our ports by air for most of our targeted families."

Giving Premier the final piece in the four-part puzzle was the long-anticipated signing of the contract for the charter of the Edinburgh Castle from owner Cammell Laird shipyard, which is now in the process of converting the ship to Premier's family­ cruise layout. Nierenberg said the charter extends five years, with an option to extend in additional five-year blocks, as well as an eventual option to buy.

Three Different Brands

Essentially, Premier will have three different brands, according to Nierenberg. He explained, "You can look at it this way: it's like Carnival Corporation, with Carnival, Holland America, Windstar, and so on. What we have is Premier Cruises Corp. at the top, and then underneath it we have the Big Red Boat brand, the MexiCruises brand (this winter, the Triton in Eastern Mexico, the Seawind Crown in Western Mexico); and the 'transitional' blue-ship brand, which will eventually be our new-ship brand (currently this category includes the SeaBreeze, which will sail a new two-and five-day Boston-homeported New England/Canada route this spring and summer, and may possibly be shifted into the MexiCruises program in late 2000).

Of the latter blue-hulled "new-ship" brand, Nierenberg said, "We're looking to have the first newbuilding delivered by the end of 2002." Asked for specifics of the order, he said it would be "for at least five ships." He would not comment on rumors that Premier had at one point talked to Samsung, and had also talked to a yard in Spain about an extremely unconventional ship design. On the latter rumor, he offered no comment, except that "if you look at my track record, I don't like to do things the same way anybody else does."

Branding & Service Strategy

Asked about the fate of the "classic ship" strategy espoused during the initial Premier consolidation, Nierenberg said, "There is no classic-ship strategy at Premier - we haven't mentioned the word 'classic' here in nine months." Of the original consolidation of the old Premier with Seawind Cruises, Dolphin Cruise Line, and Holland America Line's Rotterdam V in 1997, Nierenberg maintained that the consolidation concept was sound in theory, but that it was never executed effectively, while the original management's classic-ship branding was undermined by cost-cutting. "When you start cutting back on the product and the service, that's it - you're in a death spiral," he said.

When he was brought back aboard by Premier's bondholders-turned-owners, led by Harch Capital Managment, Nierenberg was confronted with a very different Premier than the company he had founded back in 1983. "When I first came back, I didn't know what was there (at Premier). I went to the institutional investors (the bondholders) and said, lets see what we have to work with. Because last November, this was basically a bankrupt company." Nierenberg then spent the better part of the following year "stabilizing the business and getting the proper management team in place" - a year in which he said Premier experienced a $30 million turnaround in EBITDA. It was also a year wherein Harch and other shareholders have reportedly facilitated a significant capital infusion into the cruise line, although Nierenberg would not comment on specifics.

He continued, "It was apparent by April (1999) that we had a viable business." Once that determination was made, investments by the owners on capital improvements were agreed to, while Nierenberg's "Seven Star" service plan and the Big Red Boat expansion plans were laid out this summer. The Big Red Boat expansion plan was kept under wraps until now as Premier worked to secure the fourth ship (the Edinburgh Castle).

Asked how his Seven Star Service strategy fits in with the enhanced family-cruise orientation, he explained, "We will have seven-star service on all of our ships, whether it's aboard the blue-ship Rembrandt, or (after its rebranding), the Big Red Boat IV." And just because the new Big Red Boats look to capture a drive­ market seeking savings on airfare does not mean it will be focusing on the budget market, he said, asserting, "We are not going to compete on price, but on the value of what passengers get for their money. We are also going to do a lot of land packaging - so our program out of Houston may add a stay at a dude ranch, while the ships out of L.A. will target the honeymoon market with excursions to wine country, for example."

Thus, Nierenberg's plan is to invest in ship upgrades and enhanced service, to remove some air costs by bringing the ships to the prospective passengers, and to focus on the family market, in which he believes Premier "has no competition except from Disney, which is only sailing from Florida." He argues that Premier is · not in direct competition with mainstream lines like Carnival Cruise Lines and Royal Caribbean International, who have expanded their own family offerings in recent years. He said new ships being built by these lines are not designed to offer the same number of third and fourth berths that Premier's ships do. Consequently other lines make the most money by targeting couples, and do not have the same incentive to target the family market as Premier and Disney.

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