Tuesday, February 12, 2013

Carnival's Decision Point

Right now there is a large ship floating in the Gulf of Mexico, with over three thousand armed bomb waiting to go off.  Obviously a tense situation, but especially for Carnival Clueless Cruise Lines, whose cruise ship 'Triumph' suffered an engine fire, but whose disaster management has managed to turn a bad situation into one which could kill their company.  The three thousand bombs I was writing about, are the paying customers trapped on that ship, whose opinion of Carnival is predictably angry, to the point that Carnival should expect a lot of lawsuits and very bad press.

Carnival's web site, rather stupidly, is still bragging about the Triumph, as if spin could overcome the disastrous way the company has mangled their response to the episode.

So what happened?  Carnival released a statement which reads:

The Carnival Triumph, while on a four-day cruise that departed Galveston last Thursday, experienced an engine room fire on Sunday morning and has been without propulsion in the Gulf of Mexico since that time. The ship's automatic fire extinguishing systems activated and the fire was successfully extinguished. Fortunately, there were no injuries to guests or crew members.
Earlier this evening, the first of two tugboats arrived and is tied up to the ship with the second expected in the early hours of Tuesday morning. We had originally planned to tow the ship to Progreso, Mexico, the closest port to the ship's location early Sunday. Since that time, the ship has drifted about 90 miles north due to strong currents. This now puts the ship nearly equidistant to Mobile, Alabama and given the strength of the currents, it is preferable to head north to Mobile, rather than attempt to tow against them. We now expect to arrive in Mobile sometime on Thursday, roughly the same time the ship would have arrived in Progreso given the distance the ship has traveled. From there, we will provide the necessary transportation to get our guests home. Mobile also provides simpler re-entry, particularly for the 900 guests onboard traveling without passports.
We have maintained constant contact with the ship's officers. All of our guests are safe, and we're doing everything we can to make them as comfortable as possible. The ship has maintained emergency generator power since the fire occurred and the technical team on board has been successful in gradually restoring auxiliary power to operate some basic hotel functions. Currently, public and cabin toilets are operational in certain sections of the ship, power has been restored to a limited number of elevators, and some power in the Lido dining area is providing for hot coffee and limited hot food service.
All guests on the current Carnival Triumph voyage will receive a full refund for the cruise, along with transportation expenses. In addition, they will receive a future cruise credit equal to the amount paid for this voyage, as well as reimbursement of all shipboard purchases during the voyage, with the exception of gift shop and casino charges.
We're terribly sorry for the inconvenience, discomfort, and frustration our guests are feeling. We know they expected a fantastic vacation, and clearly that is not what they received. Our shipboard and shoreside teams are working around the clock to care for our guests and get them home safely.
At first glance this might appear to be one of those act-of-God things, something that could happen to anyone.  But let's consider how Carnival bills itself.

Remember that ad, where a couple recalls the horrible experience they had on their last vacation?


They are enjoying a nice, safe, comfortable vacation this time with carnival, and they happily sigh "never again".

Now consider what is being reported as conditions on the 'Triumph' right now:

The LA Times reports, "Passengers stranded on a cruise ship adrift in the Gulf of Mexico say they must stand in long lines to use working bathrooms and to get hot meals."  It also says "there were no toilets. They were using little red bags. And no running water, no lights, except emergency lighting."


CNN reports "sewage running down the walls and floors" with passengers being asked to defecate in bags and urinate in showers due to a lack of functioning toilets."


Sounds like those passengers will go somewhere else next year, and it will be Carnival they mean when REAL PEOPLE say "never again", hey?

But that's not the half of it.  CNN also reported that passengers told them "they had no power, no running water, and she said she hadn't been able to eat anything yet. Then you call the Carnival phone number for families, and they tell you that everything is all right".


Lying to the families is really, really stupid,  After all, the truth is going to come out and there's going to be all kinds of trouble, and juries really don't like liars.

So what does Carnival plan to do for the passengers?  CNN reported that  "After being towed to port, those aboard the Carnival Triumph will be flown home at no cost to them, the cruise line said. They will also get a full refund, credit that can be used toward a future trip and reimbursement for all expenses, except casino and gift shop purchases, for their current trip."

Folks, there is absolutely no way any reasonable person would settle for that.  Imagine if you had been in a car accident; the liable party has to pay for your 'pain and suffering', not because they feel like being nice but because the law requires it.  And there's no way Carnival is going to get away with a token gesture here.  

Some folks will do the math quick and say that a refund and some credits for three thousand people will hit Carnival for a few million dollars.  The problem is, they lost that as soon as they had the engine fire.  Right now, every one of those passengers is ready to tell their family and friends to never buy from Carnival, and there will be lawsuits, which Carnival will lose.  If Carnival were smart, they'd settle as soon as possible, not just refunds or token discounts, but serious cash right away.  Doing so would have short-term costs but earn Carnival the reputation for doing the right thing, which would protect their brand and rebuild the confidence they have lost in the way they bungled the incident.  Trying to get off cheap now is a transparent insult to the passengers, and will warn off potential customers that Carnival does not really care whether or not it does the right thing.

When I was in business school, one thing I learned was that when bad things happen, companies basically do one of two things - they either suck it up and do the right thing, or they try to get off as cheap as possible.  In this age where everything is online and social media can make or break your company, only an absolute moron would fail to understand that there are three thousand people whose opinion of your company will influence hundreds of thousands of potential customers, who will remember the 'Triumph' and ask whether Carnival is a trustworthy company.

Let's remember that when cruises are concerned, there's a lot that can go wrong, so people will want to see evidence that the company really will make sure things are safe, secure, and comfortable.  For some reason, it has not yet occurred to the suits at Carnival that the kinds of vacation they made fun of, are exactly what just happened to their paying customers on one of their cruise ships.  This is extremely serious, because nobody feels they have to take a cruise.  If Carnival lets the image of its company become that of a profit-first, screw-ethics business - which is exactly what they are doing right now - they will have destroyed their competitive advantage and vaporized their growth potential.  

As for me, I don't plan on ever buying a cruise from Carnival.  I would not be surprised if investors in the company don't demand major changes at the top.  But the way they're screwing up this whole situation, don't be surprised if the company is bankrupt in the next decade or so,.  Because Carnival is just not prepared for the long term.  They are doing exactly the wrong thing to survive as a business.

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