Julia Wilcox, a 24-year-old veteran cruise passenger, is used to having her inbox flooded with promotional emails from cruise lines touting their loyal customers. But Wilcox, who vlogs about her cruise experiences on TikTok, said some cruise lines are taking a more idiosyncratic approach to marketing. Two or three times a month, a thick, glossy paper envelope arrives in the mail from the luxury cruise ship Viking Cruises. She accompanied her on a 10-day trip in January 2023. They are the only cruise line that sends her paper mail, and they do so relentlessly.
“I get a lot of paper mail from Viking. ‘This is insane,'” she said. luck. “With the amount of paper and stuff you send me, you can send me on a free cruise.”
The company’s marketing strategy is unusual, but the logic behind Viking’s insistence on sending snail mail makes more sense after Wilcox, a Gen Z TikToker, admitted that he wasn’t the company’s target demographic. In fact, she was 40 years younger than the median age of cruise passengers, which is 60 to 70 years old. That’s what the Vikings want.
“They are the wealthiest group around us,” Viking CEO Thorstein Hagen said in a May 1 interview with CNBC Squawk on the Street. “They have money. They have time.”
Mr. Hagen, 81, has customized his cruises to suit the tastes of his target audience, an older demographic that exceeds the baby boomer generation and accounts for 70% of the country’s disposable income. Children under 18 are not admitted and there is no casino. Instead, Viking’s 92 ships travel to all seven continents, employ 10,000 staff, and offer walking tours and cheese tastings of European cities.
“It’s a very peaceful environment for people in this age group,” Hagen said. [who want] Go to water slides etc. ”
Hagen’s strategy has certainly worked so far. Viking, valued at $10.4 billion, raised $1.5 billion in an initial public offering on May 1, the most of any company this year. According to his SEC filing last month, Viking recorded 14.4% growth from 2015 to 2023, the largest increase among luxury river or ocean cruises during this period. was recorded.
“We have a very clear focus, and that’s reflected in all of our customer reviews, the rewards that we get, and so on,” Hagen told CNBC. “It won’t make us as big as other companies, but it will certainly make us more attractive to consumers.”
The Vikings didn’t respond. luckThis is a comment request from .
The precise, analytical approach Hagen brings to the company reflects his background in physics at the Norwegian Institute of Technology before coming to the United States and earning an MBA from Harvard University. The Norwegian from the Oslo suburbs honed his business instincts through failure before success. As CEO of cruise line Royal Viking in the 1980s, Mr. Hagen arranged a $240 million management buyout that fell through when a competitor suddenly acquired the company. He was immediately removed from his post.
Hagen, who runs the company with his daughter Karine Hagen, founded Viking in 1997 at the age of 54. Mr. Hagen envisioned it as a modest venture consisting of “two guys with two cell phones and four riverboats,” according to the company’s prospectus. In Hagen’s words, Viking’s goal since its maiden voyage has been to become a thinker’s cruise, not a drinker’s cruise.
flow
Viking has benefited from favorable timing for the cruise industry as it recovers from pandemic lockdowns, when wealthy vacationers were itching for a luxurious break. Patrick Sholes, managing director of lodging and leisure equity research at Trust Securities, is bullish on the industry’s future given the strong demand.
“People want a vacation,” he said luck. “They’re looking to do things differently that they weren’t doing in the first two or three years of COVID-19, and that certainly was on cruise ships.”
Cruises have gained a reputation during the pandemic, as their confined spaces are prone to contagious diseases and, in some cases, have forced ships to dock early. Even Viking was hit hard when 100 passengers battled norovirus on a cruise in June 2023. Companies have stepped up deals to win back customers, promising discounts and access to private beaches. Restaurants and hotel resorts have been slow to recover from the pandemic due to labor shortages, but cruise ships’ presence in foreign waters means they don’t have to follow U.S. wages and have sufficient staff, mostly foreign workers. It meant hiring. During Wilcox’s Viking cruise, she was amazed by the consistent and frequent turndown and cleaning service.
“That value proposition includes consistently high levels of staffing and service on cruise ships,” Sholes said. “You’ve been to restaurants and hotels where staffing is an issue and also a post-COVID challenge. And cruise lines haven’t had that problem.”
said Bob Levinstein, CEO of travel agency CruiseCompete. luck Viking specifically delivers on its value promise, making food, service, travel and communication a trusted product.
“They’re really nailing it down,” he said.
The company is on the verge of further growth. Coming out of the pandemic, Viking has 24 ships on order, with options for 12 more, and ambitious plans to expand its customer base in China to 150,000 passengers by 2025. There is. Viking’s resilience during tough times for the industry led to the decision to go public. -Brainer for Hagen.
“Private equity firms, at some stage, need to generate liquidity from their investments, and they’ve been around for eight years, so there’s never been a better time,” Hagen said. luck last month. “It wasn’t easy during the pandemic, but I think it was natural for us to come out of it now and do well.”
ebb tide
But the tides are turning, and the economic conditions that fuel the cruise business are no different. As cruise lines meet growing demand by commissioning more ships, promotional packages and the company’s pricing power will wane, Sholes predicted.
“This is just economic capitalism,” he said. “In 2029, there will be a lot of new ships coming out and filling a lot of cabins. It will be difficult to raise prices.”
Levinstein argued there’s a reason Viking has remained calm throughout the industry’s maturity. He said the company’s $1.5 billion IPO came at a good time but would not shake up Viking’s future. Perhaps this is just a way to keep ownership liquid and line your wallet.
“This is just four of the ocean-going vessels. If prices have gone up since the last transaction, it could be a little less,” he said. “But it’s not game-changing money.”
Cruise’s modest but established amenities aren’t perfect either. “The food was definitely a failure,” Wilcox said of boarding the Viking, which resulted in “the worst room service hot dog I’ve ever had.” She heard from other cruise ships that the cruise’s signature menu would change every night, but the food served has been the same for 10 years.
The loss of Viking’s reputation for solid amenities may be a blow to the “cookie-cutter” model that Hagen touts as the reason for the cruise line’s success, but the CEO remains firmly committed to the company’s philosophy of streamlining and solidity. A service that looks after you.
“In my opinion, the moment you try to be all things to all people, you know what happens?” he said. “Nothing will work for you.”