On its inaugural voyage in 1972, Carnival’s (CCL) Mardi Gras cruise ship hit a sandbar outside the Port of Miami. The company’s quick-thinking founder, Ted Arison, invited the guests, mostly travel agents, on deck and plied them with drinks, turning the stalled ship into a floating party and an advertisement for his “fun ship” brand. Such good fortune has long favored Carnival, the world’s largest cruise operator. Even after its Costa Concordia ran aground off the coast of Italy last year, killing 32 people, the company’s shares barreled back. After falling 16 percent in two trading days, they recovered all the ground lost by June due to the continuing allure of its all-inclusive vacations. “Carnival is bulletproof,” says Jay Herring, a former employee and author of The Truth About Cruise Ships.
Now the company that’s proven so adept at turning potentially toxic business problems on their head is once more being put to the test. The question: Can it sail through the storm again, or have the near-constant images of its drifting ship, the Carnival Triumph, and news reports about the angry, sweltering passengers going to the bathroom in bags created more damage than refunds and a ship overhaul can repair? The Feb. 10 fire on the Triumph was the third major incident at Carnival in as many years. In addition to the Concordia mishap, a 2010 fire on the Carnival Splendor left that stricken ship to be towed for four days to shore with complaining, hungry passengers onboard. “The first time something like this happens, brands can bounce back well; the second time, less well,” says Allen Adamson, who consults with companies on crisis management at Landor Associates. “The third time it creates long-term problems.”
West Virginia Senator Jay Rockefeller, a Democrat who heads the Senate commerce committee, thinks Carnival can do better. “This unfortunate situation is just the latest example in a long string of serious and troubling incidents involving cruise ships,” he wrote in a Feb. 14 letter to the U.S. Coast Guard Commandant, Admiral Robert Papp Jr. Rockefeller asked for statistics on cruise line investigations and the cost to the government of responding to the Triumph and Splendor incidents. Among the possible consequences: a push to have cruise operators, who register their businesses overseas in part to avoid taxes, pay higher levies in the U.S.
To retain customers after the Concordia disaster, Carnival cut cruise prices, leading to a 4.1 percent decline in ticket revenue and a 27 percent drop in operating income last year. Robin Diedrich, an Edward Jones analyst, says the Triumph incident, coming as it does during the industry’s peak booking season, could force Carnival to again reduce prices. It’s already said the Triumph failure will cost about $80 million in repairs, refunds, and lost business from cancellations. That doesn’t include the costs of the passenger lawsuits piling up, even though Carnival’s standard cruise contract restricts many claims. “There is legal recourse,” says Jack Hickey, a Miami personal injury lawyer who is not representing Triumph passengers. “We’re talking about mental anguish.”
Chief Executive Officer Micky Arison, the founder’s son, has kept a low profile, letting brand-level executives handle the press conference when the ship finally landed at Mobile, Ala. He’s been criticized for attending games of his National Basketball Association team, the Miami Heat, while passengers were still suffering from the accidents. Carnival said he was not available for an interview. “We are very sorry for the difficult conditions experienced by our guests on the Carnival Triumph,” Micky Arison wrote on Twitter on Feb. 15 in his first comment on the mishap, “but glad that all guests are off safe & sound.”
Sorry may not be good enough for some passengers. “I’d say it’s a fluke, but I do think they should have been better prepared,” says Larry Poret, who slept on the floor in the ship’s hallway because his unairconditioned room reeked of feces and urine. “Surely they have a manual that could have told them what they should do.”