Arnold Donald, Carnival CEO — modernising the cruise industry
The leader is keen to prove his company has a future among younger generations
On Southampton’s concrete docks under a sky heavy with drizzle, tourists — most of them middle aged — crane their necks at the horizon. In the slate-grey river beside them towers a cruise ship that will carry them to the Solent strait and the blue waters of the Caribbean beyond.
The age of the cruise crowd illustrates a problem that Arnold Donald of Carnival Cruises is grappling with 4,000 miles away in his office in sunny Miami, Florida. The chief executive of the world’s largest cruise company not only has to lead a business that carries 11m passengers on its ships every year. He also has to secure its profitable future against a strong, demographic challenge.
Many within the tourism industry are sceptical about whether cruise companies have a future with younger generations of travellers. Cruising, says one executive at Carnival speaking on condition of anonymity, is for “the newly-weds, the nearly-deads and no one in between”.
“When I first got the call [to become chief executive] I almost said no,” says Mr Donald in a relaxed drawl. “It took two or three days before I called back.”
That was not only because of the problem of enticing millennials on to cruise ships. The multiple risks involved with transporting so many people every year mean running Carnival is a difficult task.
The company, which owns brands including P&O Cruises, Holland America and Costa, was handed a $40m penalty in a US federal court in December after pleading guilty to dumping polluting waste in the sea off the coast of England.
But Mr Donald, who sat on Carnival’s board for more than a decade, is used to adversity. First came the sinking of the Costa Concordia cruise ship in 2012 — 33 people were killed. In 2014 a power outage hit the Carnival Triumph, which became known as the “poop cruise” because its toilets stopped working.
“The media were pretty brutal to us,” he says.After taking over as chief executive from Micky Arison, who is now chairman, Mr Donald instigated reviews of culture and operations in response to the Costa Concordia disaster: “Just to right that ship and float it out cost millions,” he says.
Three years into the job, Mr Donald is credited with turning around Carnival’s reputation and its market value. Net profits rose to $2.8bn in 2016, up from $1.8bn the year before. The 62-year-old secured a joint venture in China to gain access to a growing tourism market in east Asia. Bookings have increased steadily.
The US-based company is in a comfortable position because it dominates the industry and takes more than half of all cruisers on holiday, but it may have run out of space to grow. Carnival is under pressure to retire its older ships and refresh its image, as the company enters a technological race with rivals to attract younger cruisers. One person familiar with the company says Mr Donald has pushed this agenda — sometimes to the chagrin of colleagues on the board.
Mr Donald insists that it is important for Carnival to modernise: “We built this business on a premise that works really well, which was to organically grow a brand and acquire other brands.
“It stopped working because the world changed . . . with the BP oil spill, then Lehman Brothers, then the Arab spring, which caused people to not to want to travel.”
Mr Donald describes his humble origins at the back end of the civil rights movement in the late 1960s, growing up in a “very poor” family from the ninth ward of New Orleans. As an aspirational child, he secured a place to study engineering at Washington University and joined Monsanto, the global agribusiness, after graduating.
After 23 years at Monsanto and a brief stint as chief executive of Merisant, a manufacturer of artificial sweeteners, Mr Donald was ready to retire before he accepted the Carnival job — which paid him $9.4m in 2015. His package includes stock and other benefits.
He emits a sense of ambition that others in the industry say has propelled the company forward. However, according to an independent analyst who did not want to be named, investors had wondered whether decision making would remain with Mr Arison, a member of the founding family.
“We thought maybe Micky wants to get out of the limelight so Arnold will take over and just be Micky’s guy,” the analyst says.
A former colleague from Monsanto adds that they were “surprised” when they heard that Mr Donald had joined Carnival. “He’s a very ambitious fellow, but what does he know about running cruise liners?”
Although Carnival — and the industry — have recovered from the Costa Concordia disaster, Mr Donald fears a change in global attitudes towards terror could undermine the business.
“Whether the world acts out of fear, whether the world overreacts, that’s what keeps me awake [at night],” he says.
For now, Mr Donald is focused on taking advantage of scale, which he calls “the yin and yang of being big”. Since 2013 he has attempted to cut costs, but he balks at the idea that Carnival’s 10 brands may come together in Miami. “No, no, no, we’re not centralising. I don’t believe in centralising,” he says.
Carnival announced a joint venture with the China State Shipbuilding Corporation and China Investment Corporation in 2014. Three new luxury ships are due to join its fleet of four in the country over the next two years.
At the Consumer Electronics Show in Las Vegas last week, he unveiled a wearable device for cruise passengers, equipping them with a personal digital concierge that recommends activities. But rivals are expanding and innovating and some question whether so many cruise ship berths can be filled by future
generations.
“We’re huge,” Mr Donald says. “If people cruise then we’re all good.”
