Apollo Management's Changes at Regent Seven Seas - Drinking the Kool-Aid

It has taken some time, but a change in philosophy by some and perceptions by others it seems is finally taking hold.

When Regent Seven Seas was purchased by Apollo Management and then folded into Prestige Cruise Holdings (which also owns Oceania Cruise Lines) there as uproar by Regent loyalists.  "Hedge fund guys are going to destroy our beloved cruise line!" "There are going to be massive cut-backs!" "The crew are going to suffer with being underpaid!" and the list goes on.

To the contrary, Apollo Management saw that the prior management had virtually run Regent into the ground with poorly maintained ships, abused crew policies, poor food and declining levels of service.  I first wrote about this in my June 2008 article, The Oceania-fication of Regent Seven Seas. 

But then I saw the beginnings of a turnaround because, as I predicted, a year earlier Regent's new sister was a better run company with a better delivery of product (both cuisine and service).  So, in June 2009 I wrote Oceania Cruises - More Like Regent Seven Seas Every Day...Or Is It The Other Way Around?

While this was going on, Apollo Management poured US$90,000,000 into improving the three ships, Regent Voyager, Regent Mariner and Regent Navigator.  The improvements were both long overdue and very well received.  More importantly, they were actually focused on doing what needed to be done:  Fix the ships; especially the Regent Navigator (which has such systemic problems the feat of correcting them was nothing short of incredible).

Shall we digress?  Why would a hedge fund spend $90,000,000 on fixing ships that were allegedly so wonderful?  It takes a long time to make back that kind of investment.  The reason was because it was the prudent financial thing to do.  And, thus, it is clear that the complaints (at least by me) were well-and-truly justified.  More importantly, they are a thing of the past.  (Note:  I do not believe the software is all of a luxury standard such as you find on Seabourn, but it most certainly is of a good standard and nothing that would cause one not to book a Regent cruise...as it might have in the past.)

With the provisioning and philosophy as to cuisine changing, there were/are grumblings that the dining choices were not as many as previously available and that some portion sizes were reduced (though I believe the portion in the Prime 7 alternative dining restaurant are far too large), the fact is that if your kitchen staff cannot produce proper quality and/or the diversity drives up costs and waste, the first thing to do is simplify the menu and each the staff to cook better.  This remains a work in progress, but the complaints do seem to be subsiding.

Service has remained a sore point as well because of inconsistency.  The concept of finding and latching onto a particular waiter is mind-boggling to me.  Some guests brag of this technique, but in fact they are damning the vast majority of the servers actually declaring them of inferior and/or insufficient quality. I know Apollo has, now that the ships are fixed, focused more closely on the service issues. 

And, alas, this is where the management onboard the ships just might be starting to "Drink the Kool-Aid".  I remember watching management play their afternoon shuffleboard while chaos rained supreme at the front desk and the dining room; leaving second or third tier staff to "handle it" while they, when available, gave guests nothing more than lip-service...blaming the home office for the problems. 

Well, folks, the home office is different now (you don't hear much from Mark Conroy anymore do you)...and the focus can't be shifted.  In fact, the home office philosophy is for onboard management to own the problems and correct them.

I have clients departing on a long voyage on Oceania in a few days out of Valparaiso, Chile.  With all of the uncertainty as a result of the tragic and devastating earthquake, Oceania has been excellent in providing emails and faxes with great explanations of what is happening and what is anticipated.  It has created such good will, not only with my clients, but with me.  Oh, for Regent to do such things!

(I will not comment on the "free", "free",  "free" marketing approach by Regent. As a travel agent I do not see the value in it when you look at the pricing versus other lines, but it most certainly has increased sales for Regent that was suffering badly with empty suites and disgruntled guests.  In the end that is the idea, right?  To sell suites so that Prestige Cruise Holdings shows profits and, eventually, can be sold as a well functioning entity at a premium.  (That affords Apollo to stay out of the day-to-day management for if it was involved there would be a discount rather than a premium.)

Well...on March 1, 2010 a poster on Cruise Critic (hondorner) wrote, in part and gently edited: 

"I can't help but wonder why you would automatically assume it was "evil" Apollo's decision, especially in light of the fact that other than a couple of members of Prestige Cruise Holding's board of directors, Apollo keeps a strictly "hands off" approach to the cruise line decisions.


Under the new corporate management, the ships are sailing full, which I understand is different than under the previous management; the cruise line is showing a profit and has record bookings, and more than $90 Million has been pumped into improvements, and the staff to whom I spoke in January were universally in favor of the changes. That doesn't sound very "evil".

I've been hinting at this, but I have to be frank -- while I enjoyed the all-inclusive nature of Regent, I find the service on Oceania to be just as good, the food better, and the overall ambiance to be superior to Regent. Why is this relevant? Because the management of Oceania that has brought it from nothing to one of the most successful cruise lines in less than eight years is now the corporate management of Regent."



Yes, it seems Drinking the Kool-Aid just might be something that is happening.

To be sure I need to see more consistency in cuisine and service and I do have some problems with the pricing being far to high for what I consider value, but HUGE improvements have been made at Regent and I believe it will continue to get better.  And, it seems, now there are guests that believe it too!

Silversea - Lost at Sea????

Every time I go to post something about Silversea Cruise Line, something else comes about that makes me shake my head. 

Not so long ago I posted about the Prince Albert II making a big play in Tahiti and French Polynesia.  Well, scratch that out.  That itinerary has been pulled.  It is not surprising in that it drew so little interest.  I, personally, found that a March sailing was literally wide open....and I mean WIDE open.  Obviously, either from a marketing, pricing or some external factor, people found the Paul Gauguin to be a better choice...if they even knew about the Silversea option.

Instead the Prince Albert II is. according to a Silversea announcement, heading to the Artic, but there is catch.  If you go to the Silversea website there are no itineraries.  That three month block of time is nowhere to be found.  On March 8, 2009 the ship is in Valparaiso, Chile and on June 1, 2009 it is in Hamburg, Germany.  Huh?

There may be good reason for this, but as a travel agent who specializes in luxury clientèle, I am very confident in saying that the appearance of chaos is not a good thing.  And, without question, this appears like chaos.

But then there is the whole discounted cruise issue and how that was handled.  Silversea announced that it was discounting its cruises through March by as much as 50% or more.  But then it was announced, to the public in places like Seatrade, that it was providing its travel agents with an unheard of 25% commission.  Doing the simple math:  A $10,000 brochure fare would really have a 20% early booking savings on it already, so it is a real $8,000 fare.  When that fare is reduced to 50%, it becomes a $5,000 fare.  When you then give a 25% commission, it becomes a $3,750 net fare rather than a much more significant one.  (I can't give you the exact amounts as commission information is supposed to be confidential, but know it is significantly more.)

This resulted in literally every one of my clients that showed any interest in a Silversea cruise afraid to book a cruise with it because it sounds like the line is starving for cash.  And being cash-starved in a credit-tight world is not a good thing.  Considering the last thing someone wants to worry about is whether their reduced expendable income is going to be lost (or, at a minimum, a credit card dispute tying up funds for weeks or months) or their getaway becoming a "get involved" or worrisome, the logic of Silversea's actions just escapes me.

I started to write, "I am assuming there is a plan in there somewhere", but then I thought again.  I must restate it as, "Is there a plan in there?" 

I am, to be sure, very concerned about the survival of Silversea.  Do I have firm evidence of financial
distress?  Absolutely NOT.  But I still have my opinion based upon the following series of events: 

     - Change from European to lesser trained and not all English-fluent Filipino staff;
     - Rotating chefs and reduction in food quality;
     - Announcement that Silversea wants over 50% of its passengers to be non-U.S. based;
     - Claims of passengers loads increasing by over 30% (a clear indication of empty ships, for you can't increase passenger loads if you have full ships and no new ones in operation);
     - Touting that there are many new passengers, so there should be no intimidation of feeling left out (Isn't that an admission of passenger not being satisfied, so the repeater numbers have declined?)
     - Sharp reductions in pricing through March 2009;
     - Publicly announcing 25% commissions to travel agents; and, without limitation,
     - Prince Albert II chaos.
     - (Note:  I have no solid information on this last one, but I have heard rumors of it:  Construction on the new ship has been slowed.)

I may criticize some aspects of other lines, as I just did with the Regent Seven Seas Prime 7 Steakhouse, but there is a big difference.  I have commended Apollo Management and Prestige Cruise Holdings for taking a much more fiscally responsible approach any effectively canning the new ship, not wasting money on the Navigator (which I believe will be leaving the fleet at the earliest possible time...which probably will be at least a couple of years away) and making upgrades (mechanical and in public spaces) on the Voyager and Mariner.  I also surmise that ending its relationship with the Paul Gauguin is based upon the net smaller returns since it had the added costs of chartering the vessel to deal with.  I also may not agree with Regent's pricing, but alas it is not "giving away the ship", but has focused on marketing (even making cold calls to past passengers).

So, there are ways to be aggressive in this slower market and there are ways to cut costs and expenses.  I see Apollo/Prestige Cruise Holdings/Regent's logic and await the results.  I hope someone can tell me what is going on at Silversea. 

I think it is important that Silvesea survives and flourishes.  Competition and Alternatives are both good and necessary...and they inspire Confidence in the marketplace.

Concerns: Apollo Management and Prestige Cruise Holding (NCL, Regent Seven Seas and Oceania)

I have hesitated to write about the effects of this poor economy on the cruise lines themselves because, in large part, we really don't know what the long term effects will be. While the issues of last minute discounts and more close-in bookings (ala post 9/11) on less than full ships are not beyond possibilities, the fact is that right now people who are cruising paid for their cruises before the bottom seemingly fell out and it is too early to really see what the next couple of months (post-election) has in store for us, the consumers and them, the industry.

Also, while some cruise lines are panicking, others are being creative and yet others are still figuring out what, if anything, should be done differently. So that too is not the focus on this post and speculating would not be fair or productive.

However, over the past three weeks there has been much in the industry news about NCL and Aker Shipyard having a "dispute" over Norwegian Cruise Line's new F3 ship. While Aker claims it has not stopped work on the first F3 (which is about 25% complete), it has been reported that they are now trying to sell the hull to other major cruise lines...and there is not much interest. Aker, though, has also stopped work on the second F3 ship.

Apollo and NCL have been silent claiming they do not discuss disputes or litigation. What has happened, however, is that their announcement of the new ship is not as clear in their taglines, mention of the F3 is all but absent from the NCL website, the F3 microsite has been buried (You you can still find it via http://www.f3.ncl.com/main.html.) and the person who was in charge of the PR for the F3, Susan Robison, has left NCL.

The word on the street is that Apollo has shut down the project as simply being too expensive. I think there probably is another, related, problem: Financing. Most entities like Apollo leverage their assets in order to obtain sufficient cash to improve products and then sell them off at a profit. If the product is losing value, or if a cash infusion will not increase its value, the desire to put money in drops. Banks and lenders - especially now - are not as willing to finance companies to put cash into a potentially unprofitable venture. Add to that the unexpected strength in the US dollar versus the Euro and some of the math turns upside down.

Here, the F3 ships have a radical - and unproven - interior design for a market that is being hit hard by the economic problems and, at least in the near future, probably are not going to be parting with as much cash on the holy grail of the mass market cruise business: onboard revenue. Add to that the downward pressure on pricing and the drop off in (long range) bookings, Apollo and its lenders have probably (my guess) said something along the lines of, "NCL's Hawaii plan seemed good, but we took a bath as it was unconventional and had unforeseen problems. NCL has lost over $350,000,000 in the last two years. Now we have a $1,000,000,000 (yes, one billion dollar) project which is now seeing cost increases (due to the loss in value of the Euro - the currency of the contract - as well as difficulties in creating the radical design elements) and we cannot assure a profit at higher prices with possible reductions in passenger loads...and NCL is bleeding cash flow as it is."

While that "magic" is playing out, the operationally pretty solid Oceania, through Apollo's Prestige Cruise Holdings (separate from NCL) is working hard to clean up the issues at Regent by increasing efficiencies on many levels and revamping the luxury line's ships from hardware to software to crew. We have seen the previously greatly publicized talk of a new ship for Regent being, quite obviously, pushed to the back...see the parallel here!...and, in its place, a $40,000,000 refurbishment of the Voyager and Mariner; leaving the Navigator for another day (if there is another day for that ship!) and there being talk on the street and some publications of the end of its relationship with the Paul Gauguin. Now, there is talk of the Voyager and Mariner refurbishments being scaled back as well.

I am not so sure these fiscally stringent moves are a bad thing. The concept of growth through huge increases in inventory has a great flaw: Not enough buyers of that inventory (i.e. cruise passengers). That, added to the cost of creating that additional inventory, can destroy a positive bottom line. So, Apollo and Prestige Cruise Holdings may just be saying that we would rather utilize what we have and utilize it well, possibly generating smaller profits, than growing ourselves (and our debt) right out of business.

I much prefer a higher quality product from a profitable cruise line than a less quality product from a cruise line trying to find its way out of a problem it created which, inevitably, would cause the passengers to pay more to get less.

It is going to be interesting to see how all this plays out.