Cruising Life with Royal Caribbean CEO Richard Fain

0:28Hi, I'm Ryan Davis. a very exciting interview that I'm excited to bring to everybody today. Yeah, I'm excited to hear it. We're about to set sail. You know the cruise ships, they have giant sails now. That's the latest. It would be very green technology, actually. That would be very cool. No, I mean, this is truly incredible. because so my interview today is with Richard Fain, who was the CEO of Royal Caribbean for not 10, not 20, not 30, 33 years. 33 years. That's a lot of years. That's a lot of years. You got to be pretty competent to stay at the head of an organization. And what's so cool about this interview and that I just found eye-opening about his new book, which is why he's kind of out making the rounds, is it takes you through like the whole history of what like cruises were in like the 70s, which was this really niche business for like older retirees and how it's grown into where it is today.

1:37And it brought me to this insight that I was thinking of just through my own experience of the past few years, which is you remember my family did like all the cousins and things did like a Disney vacation that we decided not to go on because my kids were a bit too young. and the amount it was going to cost was just astronomical. And it made me think, have cruises actually become that like middle-class aspirational dream vacation that Disney World used to be? Yeah, I mean, I think a lot of my friends who are not like travel travelers, they go on cruises all the time, right? Like it's like every couple of years, they go on a big cruise somewhere.

2:17Well, and the name of his book is delivering the wow. And I remember that's how I felt as a kid when I went to Disney World. You go to Disney World a couple of times and it's like, wow. Like, I just can't believe everything that's here, the color, the people, the music. And it's really, you come to realize that like that's how these ships have been designed to deliver this kind of like wow factor, attractions and entertainment and stuff that you don't get in your everyday life that to me used to be the Disney World and Disney World went out, you know, There was that big New York time expose about how Disney took this business strategy of like, we're going to focus on higher wealth individuals and families.

2:57And that has to me, that's that's kind of become the opportunity for cruises. So super interesting. I mean, I just like it's not an industry I knew much about. Obviously, I went on my first one in June to Alaska with my two kids, which was a great way to travel with a family. And there's just lots of insights and some really nutty stories about how they transformed the industry from these tiny ships to these giant ships. So anyway, I'll let Richard Bain tell most of those, but it's really fun. Yeah, I mean, I'm excited to hear. Maybe this will get me in the cruising mood and I'll get on a cruise next year.

3:34I mean, we have to, of course, do the Judy alert just to know exactly where you are. I assume you're not on the deck of a ship. But I did think it would be nice to enter the interview by sharing. I have no idea. Have you ever been on any cruise? So first, tell us where you are and then tell me, have you ever been on any sort of overnight on a boat? So I am in Bogota, Colombia, in my apartment. I can tell you are nesting. I can tell this Delta experience has frightened you and you're stationary. Yeah, well, you know, and I'm supposed to get on a flight in a few days. to go visit my mom and hopefully the government shutdown won't impact that.

4:15I know there's been some talk about, you know, all sorts of ways that travel could be disrupted for folks. So, yeah, but so I am in Bogota. And the second part of the question was, have I ever been on a cruise? And the answer is yes. I went on a Norwegian cruise up to Canada from New York. And it was a Rosie O'Donnell cruise. and my boyfriend at the time, Kevin Curtis, was performing in Chicago. What does that mean, a Rosie O'Donnell cruise? Rosie O'Donnell did this cruise for a while. It was like a family cruise, but for gay families. So it was like lesbians and their five kids. So it was a very family atmosphere.

4:58But I was with my boyfriend who was performing in Chicago, like the show on the boat. And you said this was Kevin. Kevin. I remember Kevin. It was Kevin. Yeah. Broadway's Kevin Curtis. And, uh, yeah. And so, and so it was, it was fun. I mean, we knew a lot of people cause it was like, you know, the group of performers were all like New Yorkers. So we kind of, it was like, it was like, we never really left New York at night when the cruise, when the cruise people would go to bed, there was like that late night bar that stays open where all the, all the chorus boys. And, and so that was, it was fun.

5:33It was, it was a good time. And I, uh, I read an incredible amount. I remember. This begs the question, was Rosie O'Donnell on the cruise? Yeah, Rosie O'Donnell was most definitely, she was the star of the show. It was her and her wife at the time. If that were today, you'd probably have Air Force bombs dropping on it. It was very, it was a very sweet, lovely atmosphere. Everybody is very nice and very, very happy place. It's only like three or four nights. It wasn't like a ton of nights. But I would love to go on like a, you know, my, one of my bucket list is the Queen, the Queen Mary. the fancy trip across the Atlantic.

6:10Yeah, well, that's, and that's, you know, it also, it did make me think about, you know, how Rick Steves is always trying to like help people who are a little scared of travel, like get over that fear, embrace that fear to stretch themselves. And that is something too, that like the comforts and predictability of a cruise ship to take you to like foreign places, it seems to me like another opportunity. We don't really get into that, but I've been having all these thoughts about the industry since reading the book. So anyway, it's a great interview, and I'd suggest we get to it. Yeah, let's get to it.

6:44Tell the cabin crew. Flight attendants, prepare for takeoff, please. My guest today is Richard Fain, who served as chairman and CEO of Royal Caribbean from 1988 to 2022, 33 years in total. And he continues to chair the board. He's also the author of a brand new book, Delivering the Wow, which is out on October 21st. It's part business book and part history of the industry. And for the travel podcast set, I thought the way that you walk through what cruising was to what it's become would be just extremely fascinating. And for me, it's particularly timely because I just got off my first Royal Caribbean cruise to Alaska in June.

7:26And listeners will know I hauled the whole family out there. And the kids highlight was absolutely the ship, which was the quantum of the seas, which I obviously you oversaw the construction of that ship. So congratulations and welcome to Out of Office. Well, thank you. It's really good to be here. And thank you for having me. But you should be ashamed of yourself. You've got a three year old and a five year old and your first cruise was just last summer. That's terrible. I mean, I know, I know. Trust me, I'm on board now because it really struck me. I don't think we ever could have loaded the kids up and taken, you know, a 10-day journey any other way because you really need the level of organization and entertainment that the cruise ship provides.

8:14So congratulations, you have now learned something that millions of Americans already knew, and it's just taken you a while to do it. Well, from what I understand, when you were starting your career, it wasn't necessarily going to be in the cruise ship industry because that industry was actually pretty different starting then, which is, as you're saying now, it's become kind of standard for family travel. But back at the beginning, it was a very specialized sort of industry. So give us an overview of where you started, how that got you to Royal Caribbean, and then obviously you liked it because you stayed for a while.

8:52Well, I was just incredibly lucky. I started out in finance without any idea whatsoever of being in the cruise business. And frankly, the cruise business didn't attract people like me at that point. It was a small niche business, relatively few operators, relatively small operations. But I was working for a larger company that was in the shipping industry and had a small investment in Royal Caribbean. And I was just fortunate enough, at one point, they were talking about expanding the company, building a new ship. And there was debate at the board whether this was a good idea or not. And much to my surprise, they asked me to get involved and to help evaluate that opportunity.

9:48And it was eye-opening. When I did get involved, I saw just what an amazing industry this was and what a potential this was. And also, what wonderful people were in the industry. So that's actually how I got into it. And sort of that led into eventually my becoming chairman and CEO. So at that start, when you just started to learn about the industry, who were the cruises really for? Well, the cruises in those days were really tended to be a niche market. They tended to be older. We didn't even show children in our advertisements because we didn't want children. They were they were distracting.

10:32That continues to be true. Exactly. But the idea was that people didn't want to be with children. And so it was just mostly for older adults. And also the best market period was the wintertime. January, February were our best months. Summertime was a difficult time. And so we really started to look at who is our market, what should it be? And we started to say, wait a minute, the potential here is amazing. And it's really not for the select few. It's not a niche market. It's really something that everybody would enjoy. And that's really where I started getting involved. and we established as our long-term goal that we were really going to be an industry that would be appealing.

11:27We were going to be not a good cruise line, but a great travel and vacation supplier. And we wanted to be a part of the larger vacation market, not just the cruise market. That was the start of my introduction to the industry. And in the book, you share a story about one of these early ships that in pursuit of this business model of getting more people on, creating new attractions on the ships, you needed to basically double capacity of an older, smaller ship. And one of your executive partners there came up with a quite shocking idea that amazingly worked. You know, it shocks me even to this day.

12:12So that was Ed Stephan, who was the founder of Royal Caribbean, a visionary in his own right. He really created this whole concept of a purpose-built cruise ship. And he and the engineers figured out that if you take a 720-passenger ship and you cut it in half, which is a little scary as a thought, you build a new midsection and you float out the bow, float back in the midsection, float the bow back in, and then glue it all together, you would have a ship of 1 ,040 passengers. So for the day, it was a huge ship. And you could offer more to your guests, and especially got more economies of scale.

13:02And that was, as you say, that was really my first introduction to the business. I was asked to evaluate that. I did, and I still didn't understand how they did it, but I thought economically and financially, it was brilliant. And it proved to be a game changer. It was wonderful. We went on to do it in the future a couple of other times, but that concept and that concept of making ships larger and more interesting was very compelling. Yeah. Give us a sense on those early ships. What were the diversions? What was the entertainment? Because nowadays, there's an incredible amount of things to do, a great variety of things to do.

13:45I mean, a lot of the staff are entertainers. And so was there anything like that? Were there shows? Were there bars? Were there amusement parks in the same way that there are today? Yes, but on a much smaller scale. The concept was still, remember, this was an evolution. Ed actually took and made it more of a revolution, but really an evolution from simply transatlantic transportation devices. It got you across the ocean. And so you had your main dining room. You had a lounge show. It wasn't really a theater, but it was a lounge show. You definitely had bars. You had places to sit and to socialize.

14:30But there wasn't a lot of other activities. And the average age of our guest was in the 60s. It was an older crowd who had the time and the money to do this luxury kind of vacation. and really I think what we began to take off was when we said if we really want to appeal to a larger audience that means appealing to younger people it means appealing to families it means offering more activities so not one dining room but in today's ships you can go to 27 different places to have dinner um not not a lounge theater where there's maybe a singer but a theater, a proper theater that would put Broadway to shame.

15:15And you can put on full shows, whether they're Broadway shows or dancing shows or other kinds of performers. But you have all the activities. So that was really the early stages of that was way back in the late 80s. And give a sense of the size of ships today. I mean, you're talking about these smaller, older ships, which you were able to expand. And now the architectural and engineering challenges of these enormous ships, the one that I was on, Quantum, it's quite large. I mean, when it pulls up to a city, you notice it. And so what are the challenges and how do you even begin to design ships of that scale?

15:59Well, the ship that you were on, Quantum of the Seas, which is an extremely popular ship is one of our medium-sized vessels. And part of our expansion has been at both ends. We really don't feel that one size fits all. So our larger ship today, most recent ship, is about the size a little bigger than two aircraft carriers combined. And what's that one named? That's, well, it's the icon of the seas and the star of the seas. Okay. And it holds a typical voyage, 7 ,500 guests, a crew of 2 ,500, so you have 10 ,000 people on board. A little longer than the Empire State Building is tall. You know, they're massive.

16:53But the reason for that is not just to make them bigger. It's because we can offer more. Right. So I think it's interesting that the sound and light equipment in the theater on board icon of the seas costs more than that first ship that you were referring to. Wow. Wow. And I mean, also at that volume, you're also trying to keep costs reasonable for middle class families and, you know, the ability to actually bring four people in a family, five people in a family onto a ship, because that's certainly been a major story of the last year with travel, especially, you know, the American dream used to be we're going to Disney World for that like big family trip.

17:33and I know like my family and I, we turned down a family trip with several other families, family members last year, because when we looked at the final price tag, it, it made me choke. And I love Disney world. I really wanted to go, but we said, you know what, we can't, if we're going to do this, we can't do it when our, when Penny's three years old, we got to wait until she's seven and is really going to remember it. Cause we're probably only doing it the once. So how do you consider that accessibility point with trying to attract families and regular folks? Well, accessibility is a thing. And part of the beauty is that because it's a cruise and because we control all the experience, we're able to control the cost better.

18:19And so the experience isn't crazy. I think Jason Liberty, my successor, has coined the expression, which I really like because I think it encapsulates a lot of what we're talking about. This isn't the vacation of a lifetime. This is a lifetime of vacations. And it does become affordable. We're able to offer, because we do it consistently, because we do it efficiently, we're able to offer amazing vacations that people come back, not just raving about, but people are obnoxious about how wonderful it was. And it's still cheaper than any of your alternatives. Right, right. And we've touched on some of the entertainment that happens on board.

19:06As I dug into your book, I came to understand even more things that I didn't get to see on my cruise. The story of coming up with how an ice rink would work on a ship was super fascinating. So can you tell us about that? And what's the status of ice skating on current Royal Caribbean ships? Well, you know, we just want to offer a tremendous variety. I come back to, and I think people talk about, well, I'm not a train company, I'm a transportation company, but they don't really mean it. We really had, from an early day, an expansive view of who we were and what we should be offering. And if you're offering a full vacation, it needs to offer everything.

19:51It's not because it's on a ship. And so one of the things on a ship a little bigger than the one you were on was we wanted another lounge. We had the magnificent theater, but we wanted to go one step further and offer something special, something beyond that. And the idea was brought out to make an ice skating rink. And an ice skating rink on a ship seems a little unusual. But if you're offering, well, you can do anything, include an ice skating rink. And so it's a technical challenge, but it's also a financial challenge. How do you pay for this? And actually, that became kind of iconic in our culture because the early idea was to make it using artificial ice.

20:43Artificial ice would eliminate a lot of the technical issues, all the technical issues. and it's dramatically cheaper. But to try with artificial ice, you can skate on it, but it doesn't give you that beautiful, elegant, frictionless feeling that our professional skaters just look so good doing. So we said, no, we're going to, and this was an important lesson to us and to our people, we're either going to do it right, or we're not going to do it. and it proved to be very difficult, very expensive. But when you see these skaters, and today we are the largest employer of figure skaters in America.

21:28I've always wondered where they go after the Olympics, so it makes sense. But they are so good and they are so beautiful to watch and they put such energy into it. And the guests love it. So it's giving them one more experience. And this is just one of many experiences on the ship. Excuse me. It gives them one more experience that you don't find elsewhere. And it fits in with the whole concept of we're providing a vacation where you can do anything. I imagine this is one of the joys of leading a company because just the variety of challenges and places it takes. I mean, you weren't sitting there thinking about commercial cruising going, oh, you know what?

22:14I'm soon going to be learning about the science of different types of ice and speaking to athletes about the difference and how it feels on their skates. So was there any I just I always love stories like this. Were there any attractions or big ideas that you all had from a ship for a ship that either because of cost or engineering, you just couldn't get on there? Well, I have the best job in the world. There's absolutely no question about it. And nobody gets to play with toys like this. I'm essentially a big child. Yeah. With very large toys. With very large toys. Yeah, not many children get billion-dollar toys.

22:56But we've looked at so many things. And part of what was so invigorating about working for Royal Caribbean is that our people would always push the envelope and come up with new ideas. And one of them, you asked about ones that didn't work. One of them, which was, I think, a terrific concept, seemed a little strange at the time, was what if we could put people up in a blimp behind the ship on a gondola hanging from a blimp? Yeah, yeah. Could we do that? Sure. And, you know, it has to be of a certain size. We came up with a design where you had this enormous blimp. Hanging below would be a gondola that would hold 18 people, so you can get a sense of scale.

23:43And it would go up 300, 400, 500 feet off the ship. And we designed it on the computer. We ran simulations on the computer, ran simulations near the factory. Then we actually tried it out. We borrowed an old runway, and we tried towing it behind a truck to see if it could handle the speeds. And then finally, we took it on the sea trials of the ship that we were thinking maybe it would go on. That was an oasis of the seas. And I went to those sea trials just to try it out because it sounded almost crazy. And I went up in it. A little scary because I'm afraid of heights. And you're the test dummy.

24:28at this point. Dummy may be the right term, but I went up about 300 feet with our safety officer. And it was unbelievable. We're off the coast of Sweden, beautiful coastline for miles as far as you could see. Looking down on the ship, it was just an incredible experience. So I thought maybe we have something here to go with all the other things we were adding. Unfortunately, because it was just a trial that nobody had created a proper anchoring system. And during the night, a storm came up and blew our blimp up and away. Oh my gosh. Oh my God. And the next thing we know, the captain is getting a phone call from the Swedish Air Force.

25:20Oh my God. And the Air Force I said, look, your blimp is floating towards our airlines, our lanes. Yeah. So if you don't mind, we'd like to shoot it down. You know, what is a boy from Providence doing dealing with the Swedish Air Force? Yeah, shooting down your blimp, your private blimp. Fortunately, it sank on its own. and but we decided that the ship had so many other features that that one we could probably skip yeah that's great I mean that story does give me a sense of the reason you picked this title delivering the wow and I think you've told the story well about you're always Royal Caribbean really focuses on what's the next thing that we can create that's going to make people stop and say, wow, or write letters afterwards and say, wow.

26:17And I'll say in my experience, I experienced that at hospitality level, you know, house cleaning crew, restaurant crew, everybody extremely polite, very detail oriented. You know, there's a lot of small pieces like the, they would tie the towels that were left into your room and to creative animals that were made with these stickers and things, very complicated kind of towel origami that my kids just went nuts for. They're still talking about, particularly the monkey hanging from a hanger. Very, very good. I tried to learn how to do it and I couldn't. And so how did you create this idea of the wow?

27:01Where did that come from? And how does a company keep that up without it becoming something that, you know, for a crew that's on a ship many times over that clears out thousands of passengers and then loads thousands of new refreshed passengers right back up. How do you keep that level of intensity around hospitality and focus? Well, you've put your finger on the part that thrilled me every day I came to work. It's the people, it's the people, it's the people. And they are so passionate about this. And they They created a culture that wouldn't accept anything less than excellence. And we're constantly striving to get better.

27:48There is a certain insatiability to that, which can be difficult. But I'm always in awe of the crew. They are smiling. I mean, these people work very hard. It's long hours. It's weeks at home or months away from home and away from your loved ones. and they are smiling as though they're the ones on vacation. But delivering the wow is not something we said, ah, this is what we want to do. It actually came because that is what we did do. Wow is sort of the expression that comes out of your mouth all the time. And it's the crew member, it's the cabin steward, it's the waiter, it's the bartender, it's the dancer, it's the singer, It's the croupier.

28:36It's whoever. But it's also the people in the office who design the menu. It's also the people that figure out how do you feed 700 ,000 meals a day and across the fleet and make sure every meal is excellent. And the passion, the determination, the commitment to continuous improvement, that is the culture. And that's actually why I wrote the book, because everybody says the culture at Royal Caribbean is so special, it's so unique. I felt that it deserved an airing. Can you give a sense when you're designing a ship, what's a place where you as the executive saw, okay, this is going to be a substantial cost.

29:24There's a way cheaper way to do this. But you actually decided, no, we have to prioritize that sense of wow, that sense of wonder, something that nobody else is going to be able to have. And you greenlit a more difficult or less practical version of a project.

29:44I would say every day because it's a constant battle. What was so good was that a little bit breeds success. And people saw that the company wanted, the people wanted better and better. And so everybody felt that their job was to innovate. Their job was to come up with new things. And one example, I don't think you've been on it, but one of our more recent ships, the icon of the seas. We wanted to offer diving an aqua theater. So, I mean, what you can do is extraordinary, beautiful things, but we needed to create a dome that was just an incredibly large engineering challenge. But we again said, we're either going to do it right or we shouldn't do it.