Carnival CEO steers cruise giant in new directions
Arnold Donald remembers taking his first cruise back in the 1970s.
He and his wife, Hazel, sailed the Caribbean on the SS Norway, Rita Moreno was the featured entertainer, and magician Harry Blackstone Jr. spotted Donald in the audience and called him up on the stage to be a part of his act.
"That's how I started,'' Donald, 60, says of that inaugural voyage. "I was first, a guest.''
Now, from a corporate standpoint, Donald is captain of the ship. The former chairman of Merisant, and top executive with the agricultural firm Monsanto, became president and CEO of Carnival Corp. in July 2013. He became steward of the world's biggest cruise operator in the wake of several high-profile incidents, including a deadly wreck and an idled ship that sullied the image of cruising.
But now, with profits rising and memories of those disasters fading, Donald is transforming the company, diversifying its leadership, spurring the company's nine separate brands to collaborate rather than compete, and even buying an ad during Super Bowl XLIX to woo new passengers.
Consumers have many misconceptions about the cruise experience, Donald said in an interview on board the Luminosa, a ship that is part of Carnival's Costa brand. "Our job is to dispel those ... and introduce people to what cruising really is . . .There's no more powerful marketing tool than a person that is excited out of their mind about the cruise experience and they're telling everybody they know.''
Though Donald had been a member of Carnival's board for 12 years prior to becoming CEO, some industry watchers say he was an unconventional choice. His professional background was in agricultural biotechnology rather than the travel industry. He would also be an African-American top executive in a sector that has generally been dominated by white corporate leaders.
But the changes that have occurred so far in his tenure have been promising.
"It was time for a changing of the guard,'' says Mike Driscoll, editor of the industry trade publication Cruise Week. The company was reeling from one of its ships, the Costa Concordia, running aground in January 2012, killing 32 people, and later, the so-called "poop cruise'' in February 2013, when the Carnival Triumph became disabled and left thousands of passengers stranded in unsanitary conditions.
Around the same time, some lawmakers had accused the corporation of not paying its fair share of taxes. And Driscoll says the company had less-than-stellar relationships with the travel agents who are so crucial to selling cruises.
"Now it's a different culture,'' Driscoll says. "It's like a breath of fresh air.''
A CAREER SURPRISE
When Donald first got the call from Stu Subotnick, a Carnival director, telling him that he was the pick to replace Micky Arison as the corporation's CEO, he was surprised and a little hesitant.
"I'd never thought about it,'' he says. "We had not once had a conversation about it. ... It was a shock, and I really had to think about it.''
Donald was enjoying retirement after holding numerous key positions at agriculture giant Monsanto, then joining with a handful of other investors to buy the Monsanto sweetener Equal, and forming a new company, Merisant, which he headed. But after talking with his family, as well as each of his fellow Carnival board members, he decided to take on the task.
Now, a year and a half into the new job, Donald can't believe he was ever reluctant. "I should have been begging for the job,'' he says. "It's a blast. ... First of all, we're in the business of making fun. If you can't have fun making fun, you need your head examined.''
Donald's first act was to engage the news media, rather than avoid it, and address the cruise disasters that had dominated the news.
"That definitely impacted us and the industry, and so we were at a low,'' Donald says. "It was a struggle to come out of that and recover from an image standpoint. ... So I exposed myself from day one.''
Donald continues to be a visible, enthusiastic advocate for Carnival. He speaks with passion about the 120,000 employees who are forging careers with the corporation's brands, which include Holland America, Princess Cruises and the namesake Carnival line, as well as the cruisers whom he says get to bond with family and friends as they experience new countries and cultures.
Carnival carried more than 10.5 million passengers last year, and of all the cruise traffic in the world, roughly one out of every two passengers sail on one of its brands. But there are plenty of travelers who've never set foot on a cruise, and they are the target of Carnival's first ever Super Bowl ad, which will debut on Feb. 1.
Six potential ads have been whittled down to four, and visitors to the website, worldsleadingcruiselines.com, can cast their vote for their favorite, helping to decide which will finally air during the championship game. Those who vote also become eligible to win a free cruise for two, every year for the rest of their lives.
It's just one piece of a multipronged plan to ultimately deliver a double-digit return on capital to investors in the next three to four years. "That's our goal,'' Donald says. And while savings can help, he says, the key will be to generate more revenue.
That means an uptick in what trips cost. "Cruising today is the greatest vacation there is, bar none,'' Donald says. "We will be that even with higher ticket prices.''
It also means encouraging guests to spend more on board, whether it's for excursions, beverages or shopping. "They're going on vacation,'' he says of cruise guests. "They're going to spend a certain amount of money. The more they spend with us ... the better off we are.''
SETTING HIGH GOALS EARLY ON
Donald has always been one to plan.
He was born in New Orleans, the youngest of five children, in 1954. It's a year he notes to give a little insight into who he is. "Often the times make the person,'' he says, "more than the person makes the time.''
New Orleans then was a vibrant but still segregated city. Donald's father, Warren, a carpenter, built the family home himself, while his mother, Hilda, was a domestic worker and teacher. Neither of his parents finished high school but were emphatic that their children get an education. In the eighth grade, Donald entered the prestigious St. Augustine school, where the then all-black and male student body was told three times a day that they would one day rule the world.
By his junior year, Donald had come up with a strategy to, if not run the world, grab an influential position within it.
"I was going to be a general manager in a Fortune 50 science-based global company, whatever that was,'' he says with a chuckle. "There's a Vince Lombardi quote, 'It's not the will to win, it's the will to prepare to win.' "
To eventually get into a top-notch business program, Donald knew he needed to stand out from the myriad other applicants. So he set out to get two undergraduate degrees instead of one, and to pair a liberal arts bachelor's with another in engineering. He went on to get his B.A. at Carleton College, a B.S. in mechanical engineering from Washington University and an MBA from the University of Chicago.
After carving out a successful career in science-based fields, Donald's move to helming a major travel company meant learning the details of a vastly different business. He embarked on a listening tour, garnering the input of Carnival's brand leaders, employees, guests and others. Such engagement is typical of the way Donald leads, say those who work with him.
"Arnold's not of the style where he likes to mandate things,'' says Alan Buckelew, who left his job as CEO of Princess to become chief operations officer for the overall corporation. Rather, Donald asks plenty of questions. "He likes his team to reach conclusions on their own . ... I think he did a good job of getting insights from a lot of different constituents, stakeholders. And he was quick to admit that he's not the one with all the experience.''
One of Donald's chief initiatives has been to get the nine Carnival brands to use their collective corporate heft to negotiate better deals on everything from airfare to food.
For instance, Carnival's cruise lines, together, are the fifth largest buyer of air travel. But they had been negotiating those prices individually. Now, those deals are being worked out for the entire group.
It's a significant shift from the not-so distant past when each brand functioned autonomously, and in some cases actively competed with one another.
"I would characterize it as a cultural transformation,'' says Jan Swartz, president of Princess. She recalled a pivotal retreat in Asheville, N.C., in November 2013 where Donald led brand leaders through a series of exercises that resulted in them signing onto the idea of working together more and pinpointing the areas that made the most sense.
"To my knowledge it was the first time the senior leadership from each of the brands around the world came together in a single place to discuss our collective future and ambitions for the company and for our guests,'' Swartz says.
Another focus for Donald is making sure the company's leadership is diverse. Swartz was promoted in December 2013 from her previous position as executive vice president of sales, marketing and customer service for Princess.
"Arnold is a champion of diversity and holds firm in the belief that diversity adds depth and breadth to thinking about challenges and opportunities,'' she says.
Donald says that "a highly talented team, with a process to work together, that is diverse will out-innovate a homogeneous team 99.9% of the time. ... Is it the right social justice thing to do? Of course it is. But it's also actually the right thing to do in terms of just flat-out generating return for shareholders and keeping a business sustainably successful.''
The long-term outlook for Carnival is still unclear. Driscoll says that despite being the cruise industry's biggest player, the cost per share for rival Royal Caribbean has increased by a bigger percentage than Carnival's over the past year. And with its new ships, Norwegian Cruise Line is stepping up competition in the Caribbean, a region that Carnival has dominated.
"It's early yet,'' Driscoll says. "You've had their competition making seemingly greater strides.''
Still, under Donald's leadership, Carnival has shown a willingness to go for dramatic change. "Within the industry,'' Driscoll says, "there's definitely more positive feelings about this company.''
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