Newsletter Sign-up

Managing reputational risk in the cruise industry has never been smooth sailing. Consider that the world's most well-known luxury cruise of all time is the one that struck an iceberg and claimed the lives of 1,523 passengers and crew.

Shipboard risk management, of course, is far more sophisticated an enterprise than it was in the days of White Star Line's RMS Titanic. Risk managers in the cruise industry, however, still navigate through decidedly choppy waters. Just within the past decade or so, cruise lines have taken more than their fair share of high-profile hits.

* Exacerbating the illness stigma, news broke two years ago citing eight cases of Legionnaire's disease among cruise passengers between November 2003 and May 2004--two of them fatal.

* The industry took a further lashing in July 2005, when a young honeymooner disappeared from a Royal Caribbean ship traveling off the Turkish coast. Journalists dug up the details of every cruise passenger disappearance they could find, and soon the incident metamorphasized into an epidemic. Senate hearings on cruise passenger safety began in early 2006.

* Fires plague cruise lines regularly. As recently as March of this year, a stray cigarette was the alleged cause of a blaze aboard Princess Cruises' Star Princess, injuring 11 passengers and contributing to the death of another, who suffered a cardiac arrest.

Suffice to say that life is never dull for risk managers in the cruise industry.

Some of the group's most serious woes date back to 1998, when Royal Caribbean Cruise International pled guilty to federal charges that included oil dumping, falsification of records, obstruction of justice and witness tampering, related to five years' worth of incidents. The cruise line agreed to pay $9 million in fines--one of the largest settlements ever involving a cruise line accused of intentionally polluting the environment.

Fallout from the case hurt more than Royal Caribbean. Data from CoreBrand Communications shows that other top cruise lines such as Carnival and Royal Olympic took a reputational hit from 1998 to 1999, as did the cruise industry as a whole, based on detailed surveys and other measurements that the branding firm uses to assess the familiarity and favorability ratings of companies' brand names. CoreBrand's data reveals that the favorability and overall reputation ratings of cruise lines dropped off around 1998, even as the leisure industry as a whole was enjoying increased favorability.

"People hear of an event and they don't think 'Disney,' they don't think 'Carnival.' They hear 'cruises,'" says Brad Puckey, brand intelligence director at CoreBrand. "That's a real danger to this industry."

THE PRICE OF SILENCE

CoreBrand's favorability ratings, however, show a steady comeback since 1999. In spite of the continued barrage of negative events, the industry has consistently increased its share of the leisure market--no small accomplishment.

So how do they do it? "It's always preparing, always operating above regulatory standards," says Bill Fay, who's been with Royal Caribbean since 2000 as an insurance manager in risk management. "We recognize the value of our guests, and when situations occur, we do the right thing."

Critics believe there's a little more to it, noting that reps pay weekly visits to local editorial boards in popular port cities to offer the industry's side of any issues that might arise. Skeptics may call that undue influence, but it's a tactic that some public relations experts recommend as part of an overall strategy for managing reputational risk.

"The media are not your enemy," said Michael Hatcliffe during a session on the subject at the recent Risk and Insurance Management Society Inc. conference. Chicago-based Hatcliffe, executive vice president, U.S. corporate practice, at Ogilvy Public Relations, tells clients to make nice with the media on sunny days, so that they'll have friends when the stormy days roll in.

Individual cruise lines, though, don't always toe the p.r. line. Many critics, for example, felt that cruise lines were slow to react when reports of widespread norovirus outbreaks began to surface. Not so, says Fay. Just cautious and avoiding a knee-jerk reaction.

"The media tends to sensationalize a lot of things," says Fay. "The norovirus and other issues that have occurred over the years were wrongly attributed to the cruise industry. I think whenever anything happens we basically just have to . . . do the homework, find out what the real issue is and go to the media with the real story."

Still, it's easy to see where even a short period of silence could send the wrong message.

"The cruise lines do not want bad things to happen to their passengers," said Charles Lipcon, a lawyer with Miami-based, maritime-specialist firm Lipcon, Margulies & Alsina, in a February interview with the Miami Herald. "But when something goes wrong, they take it as a bad press kind of thing--let's hide the ball, and hopefully people won't hear about it."

Similar statements were made after the July 2005 disappearance of newlywed George Smith IV. Royal Caribbean's initial silence drew criticism from the media and Smith's family, even though the cruise line was quietly cooperating with the investigation. Fay says Royal Caribbean was eventually able to shake off the attacks by issuing a statement that took a defensive stance but remained sympathetic.

What's troubling is that the pattern of delayed response can cast a dark shadow on risk management programs that are otherwise top-notch.

"You would expect a cruise ship to be really well-drilled and to have great scenario planning and . . . processes and good resources--and I'm sure most of them do--but it doesn't always look like that from the outside," said Ogilvy's Hatcliffe in an interview.

Royal Caribbean, for instance, has exceptionally complex crisis plans in place, with well-defined roles for every team member involved. Fay says the cruise line is continually fine-tuning its program, and conducts realistic large-scale, high-tech drills once or twice a year, coordinating with local government, hospitals and the Coast Guard, as well as media outlets. But it's unlikely you'll read about that in most mainstream publications.

The industry is in a prosperous phase, sure. But the question remains whether cruise lines could be doing even more to protect their brands' integrity. Says Hatcliffe, "You read that cruises are growing in popularity; they're very good at promoting themselves . . . but you don't know if that wave of rising attendance might have even been a higher wave if some of the opportunity hadn't been lost."

MICHELLE KERR is associate editor of Risk & Insurance®.

July 1, 2006

Copyright 2006© LRP Publications