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Carnival's World Cruise


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CARNIVAL'S WORLD CRUISE

Micky Arison is taking the company global

Even before its inaugural cruise, Carnival Corp.'s newest ship, the Destiny, won kudos. Not only is the 3,000-passenger cruise vessel the world's biggest, but it features a stunning atrium and amenities such as a 15,000-square-foot health club. Still, over dinner on an introductory excursion for travel agents and reporters last November, Carnival Chairman and Chief Executive Officer Micky Arison fretted about how guests would react to a risque scene in the floor show. His anxiety didn't subside until the show was met with sustained applause.

You'd expect a man who has enjoyed Arison's success to be more relaxed. He was only 30 when his father, Ted, turned the helm of Carnival over to him in 1979. The Miami-based company had just three ships, $45 million in revenues, and a revolutionary strategy of bringing cruises to the masses. Since then, Micky, now 47, has built it into the world's No.1 cruise company. Altogether, its four brands--Carnival Cruise Lines, Holland America Line, Windstar Cruises, and Seabourn Cruise Lines--boast 25 ships. In 1996, it posted profits of $566 million on $2.2 billion in revenue.

GROWTH SEEKER. But Arison is hardly kicking back. He's looking for growth abroad, "where we haven't scratched the surface at all." Last May, Carnival took a 29.6% stake in British tour company Airtours PLC. In September, Carnival and Hyundai Merchant Marine Co. launched Carnival Cruises Asia, which will begin operations in 1998. And in December, Carnival and Airtours announced plans to buy Italian cruise operator Costa Crociere for $300 million. Wall Street isn't fretting: Carnival stock hit a split-adjusted all-time high of 37 1/2 on Mar. 5, before receding a bit.

Even as he preps Carnival for global growth, Arison is adjusting to his visibility as managing partner of his family's National Basketball Assn. franchise, the Miami Heat. Soon after the family regained managing control in 1995, Arison set about luring legendary former New York Knicks Coach Pat Riley. To do so, he made Riley president and an owner, in a package valued in the sports press at more than $30 million, a figure Arison won't confirm. Subsequently, the Heat gave the Knicks a first-round draft pick and $1 million to settle charges of tampering without admitting fault and to compensate for the year left on Riley's contract.

His pursuit of Riley--and the costly trades that followed--show how far Arison will go to get what he wants. Riley praises his passion: "He feels the wins, is miserable after the losses, and watches every game while traveling." Now the once lackluster Heat is in a division race, and the number of sellout games has nearly doubled from two years ago.

During the dustup over Riley's hiring, some New York sportswriters depicted Arison as a willful rich kid. Yet his start in the family business was hardly grand. As a teen, he worked for his dad at Norwegian Caribbean Lines, running bingo games and helping with shore excursions. In 1972, Ted founded Carnival Cruise Lines with a tiny staff and one old ship, the Mardi Gras, which ran aground on its first cruise. Micky pitched in for months before an executive got Ted to put him on the payroll.

He began in sales, which made him comfortable, he says, with the business' marketing and social aspects. Ted says that as his son moved up, he didn't want to fire loyal executives in key posts to let Micky advance. So he stepped aside. Over dinner one night, he told Micky he wanted him to be president. "I'm ready," Micky says he replied. "But I'm not so sure you are."

The next day, Ted set up shop in a Miami office building and began referring all Carnival calls to Micky--important steps in smoothing the transition, say the Arisons and other Carnival execs. Timing helped, too. "If the company had been too big or public, I might not have had the courage" to elevate Micky, Ted says. Micky says he felt "numb" the first four months.

His experienced crew helped. While Micky rarely sought advice from his father, who remained chairman, he kept a group of key executives--Robert H. Dickinson, Meshulam Zonis, and Maurice Zamati--and hired a new chief financial officer, Howard Frank. All four are still top managers. They've stuck, they say, because Micky, who became chairman in 1990, has an open, measured style and delegates authority. Throughout his career, he has "matured and developed, and for someone with the success he's had, he's handled it very well," says Richard E. Sasso, president and CEO of rival Celebrity Cruises Inc.

Early on, Micky ran operations, Ted oversaw ship construction, and Carnival mushroomed. In 1987, it went public, raising $400 million and setting the Arisons, who control 70% of voting power, on the path to becoming billionaires. Micky began scouting for other brands, buying Holland America in 1989.

SHATTERED CRYSTAL. Not every venture worked out, of course. A notable setback was a move into hotels with the 876-room Crystal Palace in the Bahamas. Construction cost more than expected, Arison says, and running hotels turned out to be fundamentally different from operating cruises, where the guests' experience can be better controlled. Carnival took a $135 million write-off in 1991 and sold the hotel. Still, that failure gave rise to two other ventures--a partnership with a prominent hotel-management firm now called Carnival Hotels & Casinos, and Carnival Air, wholly owned by Micky, which was launched to ferry guests to the hotel. It now has 27 planes providing scheduled service in the Northeast, Florida, California, and the Caribbean.

Carnival's international expansion appears to be off to a solid start. Airtours stock has roughly doubled since Carnival took its stake, and Chairman and CEO David Crossland says "the chemistry is better today than when we did the deal." Airtours' extensive tour operations already help feed Carnival's ships. And the combination of Airtours' experience with European travelers and Carnival's cruise expertise augurs well for the Costa acquisition, which should be completed by late spring.

Arison, his casual air notwithstanding, obsessively sweats the details. In contrast to his father, whom he calls an optimist, Micky is an admitted worrier. "I carefully watch my ways of understanding the business, and through a variety of reports watch how business is proceeding," he says. So far, Arison's blend of determination and fretfulness has proved the right combination to propel his company and his team.By Gail DeGeorge in MiamiReturn to top


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