EXCERPTS from a group interview with Genting Hong Kong chairman and chief executive officer Tan Sri Lim Kok Thay.
Q: We are here for a significant milestone in Genting Hong Kong’s cruise business, the handing-over ceremony of Genting Dream, the first vessel under the new luxury brand Dream Cruises. Can you give an overview of how the new line fits into the group’s overall operations?
A: My involvement with the cruise business stretches back more than 20 years, when I started what was known at that time as Star Cruises. Now, because of the expansion, we will see more Genting cruise lines or Genting cruises. Under the Genting cruise umbrella sits three brands — the original Star Cruises brand and Dream Cruises, a completely new brand that we have launched based on this ship, and the sister ship to be launched next year. The third brand is Crystal Cruises, which has the distinction of being the most awarded cruise line in the world. Two leading industry magazines — Conde Nast Traveler and Travel Trade — have awarded it the No. 1 cruise line in the world for 20 years in a row.
We’re very proud that Crystal Cruises is part of Genting cruises. Its acquisition about two years ago gave us the motivation that we had the strength and depth to build this new cruise brand, Dream Cruises.
Every time there is a delivery of a new ship, it’s a very big occasion. There are thousands of people putting together the final touches. Until they deliver the “keys” to us, it’s not my ship yet. This ship took 12 months to build, from what we call keel laying to the handover. On land, it would be impossible to put up a 1,500-room hotel in 12 months from foundation. So, the shipbuilding business, especially what is done by the German shipyards, is quite amazing.
Q: You recently bought German shipyards that can build cruise ships. Can you explain why?
A: It’s more because we had no choice. We have built all our ships with Meyer Werft. There are only three shipyards in the world that know how to build a complex ship like the modern cruise ships, and we think the best is Meyer Werft. There’s another in Italy (Fincantieri) and the third in France (STX).
But demand for cruise ships has grown so substantially that slots become more and more scarce in terms of delivery of new ships. There are three shipyards and also three big cruise lines — Carnival Corp, Royal Caribbean Cruises, both American, and No. 3 is proudly Malaysian, the Genting cruise group.
At that time, we had active participation. We bought 100 per cent of Norwegian Cruise Line (NCL), which was close to bankruptcy in 2000. Carnival made a public bid for NCL, which was listed on the Oslo Stock Exchange. Genting saw that this was the last opportunity for us to globalise our Asian business, because you need a brand to enter the North American market, and NCL was the father of modern day cruising.
The cross-Atlantic ocean line business is what we call Cruise 1.0, where it was used more for transportation from point A to B. In those days, migrants moved from Southampton to New York and Bremerhaven Port was one of the famous jump-off points for European migrants.
Cruising 2.0 is what the SS Norway introduced in Miami, which was Miami to Miami, not for transportation but vacation.
Cruising 3.0 is when we bought NCL and introduced what we call “Freestyle”. That changed the whole cruise industry and with new ships, we were able to re-position NCL to be the third cruise force in the world. With this new brand called Dream Cruises, we are looking at Cruising 4.0 — “Total Freedom”. A lot of that is still under wraps. And hopefully, to complete the circle, when Crystal Cruises gets its first ship built by our new yard, that would be Cruising 5.0.
From a business standpoint, you have to stay very flexible and have vision to play on the same field as the Americans. They are giants, very aggressive and competitive. We have to stay on our toes, be creative and think outside the box. This business has only three meaningful players on a global basis. Not many mega industries have that small number of players. Between the three of us, we account for 70 to 75 per cent of the total global cruise business.
Q: Can you share more about Cruising 4.0 and what you envision with Cruising 5.0?
A: For that you have to wait (laughs). But if you understand where “Freestyle” comes from and the fact that our two competitors have finally adopted the same concept — of course they call it by many other names — it’s about multiple restaurants, food and freedom of choice.
Before we came along, the two American players were running the cruise business very rigidly.
I remember my first cruise... I had to bring my dinner jacket to the Caribbean in 90º heat, and especially for an Asian, you really feel uncomfortable. You’re assigned a table and if you have a 6pm round (for dinner), you have to eat, otherwise you’re stuck. There’s only one choice, the main dining room, and obviously it’s all Western food. After the third day, you get so sick and tired because there’s no choice.
When we planned Star Cruises, we said since we’re targeting it in Asia with the same culture and background, we need to offer that freedom of choice. So we called it “Freestyle”. When I talk about “Total Freedom”, it is moving in that direction.
Now that we have our own shipyards, we are in a better position to keep it confidential from our competitors. The longer it takes them to adopt it, the better it is for us. We get to enjoy the so-called monopoly until they catch up. It’s also not easy when you build your ships in somebody else’s yard as it’s on a very tight production schedule, they won’t be able to change the design or thought process.
That’s why the necessity (to have our own shipyards). Meyer Werft couldn’t give us the slots we wanted. Nobody can operate a business with no ability to command the supply side of the equation.
Q: When can people expect to see in these new ships?
A: We’re targeting 2021. It’s a lot of ramping up, such as equipping the yard with modern technology, robotics and so on. We are very happy that the choice was in Germany. Technology and engineering-wise, you can’t be in a better place. Like BMW and Mercedes, our plant will be state-of-the-art, which hopefully will be more advanced than Meyer Werft.
Q: Does that mean that Genting Hong Kong will invest more, on top of the €100 million (RM456 million) already announced?
A: We have already stated there will be another €160 million. So, the total would be €260 million, but I think rounding it up to €300 million may not be a surprise because we really need state-of-the-art technology to stay competitive.
Q: On board a ship, what is your main revenue?
A: It’s broken into two. One is the ticket revenue, the other is onboard revenue. Ticket revenue is what we sell, and that would include food, cabin and some form of entertainment. The rest is up to you to spend on board. The more attractions there are on the ship, the more you are induced to spend. When you look at this ship, it is designed to provide a lifestyle experience. This is the new way that the old industry is trying to build. The player that gets it right will enjoy the biggest margin. It doesn’t matter whether it comes from the ticket side or onboard revenue side.
Q: Is it fair to say Genting cruises traditionally has got most revenue from gaming than ticket sales while for the American boys, their share of revenues is the opposite?
A: That’s how we get stereotyped because we’re Malaysian and we have a casino business. While that may be true with the Star Cruises brand, if you look at Crystal Cruises, there’s no gaming dollar there. Not that they don’t have a casino, they do. All cruise ships have casinos, but it depends on which area of the world you are operating in, which market you are focusing on and the product itself. Cruise ships have become more innovative.
Q: You mentioned whoever gets it right gets the biggest margin. Is it part of rebalancing your product offering on a cruise ship? Maybe Star Cruises is more gaming-centric, and the others have different focus, now that you have three lines?
A: For Genting Dream, we are definitely pushing a lifestyle product. If you don’t want to spend a single dollar (on board), you can. It’s up to what facilities we build that customers like. That’s the name of the game. You (also) need a strong marketing department to create a new lifestyle brand. After a lot of research and debate, we decided to call it Dream Cruises. It’s an aspirational brand — you dream about it, but it can become real. The branding has gone viral on China’s social media. The younger generation have embraced the love story of our astronaut and mermaid.
Our brand is becoming known in China but it’s not by accident, because we’re creating a new brand, we know what medium can best deliver that story and we work on that. We’re quite confident that the Americans may not understand as much.
Sure, they have a strong brand, but it may not be relevant to the Chinese market. In spite of that, because there’s lack of supply and there’s demand, they still do very well. But in terms of sustainability I think it’s worth our while to spend a little more effort, energy and time on understanding the background to it all.
A lot of Asian businesses don’t approach it that way. For many it’s just a knee-jerk reaction. Just because demand is there, everybody jumps in and then you get over-saturation. We are in a unique position because there is an entry barrier to the market. It’s a US$50 billion (RM209 billion) industry and there are three main players, and therefore you can build any number of ships and still be very successful.
Q: Do you reckon that you have changed the landscape with the Dream Cruises concept?
A: The three brands are purposely engineered to be different. We don’t meddle with the Crystal Cruises brand. It would be silly of us to try and influence it in any other way, other than to let the current management do what they know best, which is to keep Crystal Cruises as the No. 1 cruise line in the world consistently. We learn what we can from them in terms of the luxury lifestyle experience and incorporate it into our new brand.
We want Dream Cruises to be a luxury line, too, but with a different mix. On Crystal Cruises, 80 per cent of the clientele would be Westerners and 20 per cent Asian. With Dream Cruises, it is also luxury but in time to come, it would be 80 per cent Asian and 20 per cent Caucasian. If we can do that, these two brands would be right up there.
The Star Cruises brand, because it’s 20 years plus in the making, has a certain image and to change it completely would be foolish. Star Cruises’ image is a bit more gaming-centric, but with the next series of ships, hopefully that image of a casino ship would also change.
The next global-class ship would be based on the success of Genting Dream. We learn from this and how to convert what may be mass market to what could be a premium mass market that has more balanced earnings, ticket revenue, onboard revenue, gaming revenue and so on.
Q: Do you think Asians are changing their minds about what a cruise ship represents?
The fact that they’re now trying to get onto Crystal Cruises ships where there’s no gaming, I believe has to do with the crossover. Since we own Crystal Cruises, we made it more visible in the Asian’s consumer mind. I have no doubt that contributed to the increase in Asian customers and surprisingly, before we bought Crystal Cruises they already had loyal customers. I met people who take a Crystal Cruise every year, and it’s not cheap. This tells me that cruising has special appeal.
You don’t necessarily need gambling to attract customers. Under Crystal Cruises, we started this concept of river yachts.
Before that, river ships were quite bad. They were like floating barges and you hardly see Asians cruising on river ships, But as soon as we launched our first ship — the Crystal Mozart — we had 10 per cent Asians on the yacht. It tells you the strength of the brand. And there’s no casino on the river boat.
Q: When is the Crystal Luxury Air coming on stream?
A: Next year, we’re launching our (Boeing) 777 long range and after that, we hope the Dreamliner will be delivered, but we haven’t decided what or when to launch it.
Q: From shipping to airline?
A: It’s integrated. All that comes under Crystal Lifestyle. Fly in the Crystal Air to join the Crystal ship. It’s end to end.
Q: After Genting Malaysia sold down their stake in Genting Hong Kong, now pretty much 70 per cent is your personal stake. Why did the Genting side want this? Why did you want it so much?
A: Shareholders kept complaining about related-party transactions, so I decided not to be related. It’s one of those things (that) if you do, you die; you don’t do, you die.
We have been very unfairly tagged — especially from analysts — as a group with the most related-party transactions. My explanation is very simple. If you are the majority shareholder, you would, by protecting yourself, also protect the rest of the shareholders.
I don’t get any special dividend. My one share enjoys the same benefit as your one share, but if I have more shares than you, when I take care of those shares, I’m taking care of your one share too. That’s how I see the related-party thing. If it’s a bad thing, why would I want to do it? I have as much to lose. But if it’s a good thing and you can make money out of it, so what if it’s a related-party thing?
When Genting Malaysia started looking at the cruise business, do you expect them to run off and start another cruise business? Or let’s try to join together and use our combined strengths to build up this business?
But if people see it as related, then fine. In a way, yes, it is related with the public side selling to me on the private side, but of course with the proper disclosures and advice.
Q: At present, when people hear your name, they think of casinos. In the future, what do you hope people will associate you with?
A: I think it will be the cruise business. I would like to think that because that’s what I started more than 20 years ago, without really knowing what it’s all about until where we are today.
I think we should be rightfully proud. But it’s still not finished yet. The story is going to get more exciting. Whether I’m doing land resort or designing new cruise ships, I’m very passionate and very much a hands-on person. In short, I enjoy what I do, whether it’s the cruise or land side of the business, and I would continue to do it as long as I enjoy it. If I stop enjoying it, I might retire and live on a cruise ship (laughs).
Q: Do you think of retirement?
A: Not yet. If I do well on a cruise ship, why not enjoy it too by building a cruise ship that I can retire on?
As a last word, on Crystal Cruises, many of our customers have cruised more than 300 times. If you average out that each cruise is one week, you’re talking about 300 weeks, and that’s six years of cruising.
On one of the ships, there are two tiger ladies who compete with each other to see who stays the longest on the ship. The one that’s leading at the moment has stayed continuously over four years and the other, who is a bit younger, is three months behind her.
So, she has not stepped off the ship for four years and she’s determined to stay on board because she doesn’t want the other lady to overtake her!