Why did Holland America sell itself to Carnival in 1989?

The information I can readily find online doesn't provide any insight into the actual conditions, economic, financial and cultural, that served as foundation for the acquisition. I can readily understand why Carnival would buy up a cruise line, but why did this cruise line, specifically, sell itself?

Don't know how true this is, but what I was told, HAL was on the verge of going belly-up. HAL didn;t have the resources to build new ships to attrack more cruisers. Carnival did.

Maybe someone else can provide more information.

Thanks for the info. If that was indeed the case, I'd also specifically be interested in information relating to why Holland America was in such dire straights, if there was any such insights available at the time.

That was the same year that Sitmar was sold to Princess. We were originally scheduled to sail on an Alaskan cruise on Sitmar - I think the ship's name was to have been Majestic or Majesty (?). We got a call from our TA that Sitmar had been sold and she wanted to know if we still wanted to do the same cruise on the ship that Princess got from Sitmar - the original Star Princess. We went and loved it.

Don't know for sure but Carnival perhaps made them an offer they couldn't refuse.

Here is info on Carnival from Wikipedia.

http://en.wikipedia.org/wiki/Carnival_Corporation_&_plc

and on HAL

http://en.wikipedia.org/wiki/Holland_America

and another good financial source on Carnival.

http://www.referenceforbusiness.com/history2/51/Carnival-Corporation.html

Billl

That was the same year that Sitmar was sold to Princess. We were originally scheduled to sail on an Alaskan cruise on Sitmar - I think the ship's name was to have been Majestic or Majesty (?). We got a call from our TA that Sitmar had been sold and she wanted to know if we still wanted to do the same cruise on the ship that Princess got from Sitmar - the original Star Princess. We went and loved it.

Krazy - It was the Fair Majesty. I also sailed on the Star Princess to the Caribbean in 1989. I was a loyal Sitmar cruiser and was upset when they were bought by Princess. I couldn't see how the British reserve of Princess could blend with the Italian warmth of Sitmar. But somehow, it worked and I love Princess. I'm an ELite member in their Captain's Circle.

But I wasn't the only skeptic at the time. Sitmar loyalists were very upset about the sale. I can just imagine what the Sitmar/Princess boards would have been like had CC been around then! Every issue of Cruise Travel for 2 or 3 years had several letters from former Sitar passengers who ranted about the sale to Princess. On our cruise on the Star, we were approached by several cruise staff who wanted to know what made Sitmar so special that their passengers were so loyal.

At least Carnival allows it's cruise lines to operate under their own brand and maintain their own identities. Princess absorbed Sitmar, much the same way HAL absorbed Home Lines or Cunard absorbed NAC, before they were purchased by Carnival. You used to have numerous cruise lines. Now there's basically 3 - Carnival, RCI and Star (NCL). If there are any smaller lines still operating, they they tend to serve a niche market. they just can't compete with the giants for market share. That's just the way of the business world today. The bigger companies gobble up the smaller ones in all industries. It's all about increasing revenue and profit and keeping shareholders happy no matter what business you're in.

Bicker, A little background - maybe this helps to answer your question : 1983 had been a disastrous year for HAL caused by a dip in bookings. As a result, cruises had to be severly discounted. HAL was in the middle of a merger (with Westours), moving its headquarters to Seattle, selling off older ships (Statendam IV, Volendam II, Veendam III), building new ones (Nieuw Amsterdam III and Noordam III) and there had been a relatively high turnover in top management positions. The booking problems could not have come at a worse time. This all changed when Mr. A.K. "Kirk" Lanterman was appointed as president and CEO in SEP 83. He would make HAL into one of the most profitable cruise companies the world has ever seen. This was achieved by relentless cost control and a strict focusing of the core qualities of the company's product.

During 1988, the cruise industry for the short Alaska and Caribbean markets had been rapidly expanding with a continuous growth indicated. To be a serious player in this market, bigger ships were necessary as they had to offer all the amenities of a floating resort and at the same time be also more cost effective as they had lower operating costs. Other companies followed the same concept as it was the only way to survive.

One of the major operators was Carnival Cruise Lines of Miami. Carnival, with a very agressive new building program, was cornering a substantial part of the cruise market and appealed very much to "first time cruisers". HAL felt this competition severely! Carnival's way of operating severely threatened the seven-day cruise market as it could offer , with its biger ships, the same itinerary for a much lower price. In order to survive, HAL had to follow the other companies and order bigger ships, although it was not consistent with the company's policies. At the time, HAL had a fleet of four ships: Rotterdam V, Nieuw Amsterdam III, Noordam III and Westerdam II. A decision was made to order two 65,000 ton cruise ships from a German yard with a capacity of 1,876 pax each.

Before the new ships could be built, however, Carnival surprised everybody with the announcement on 25 NOV 88 that an agreement had been reached between Carnival Holding Ltd. of Bermuda and the Holland America Line Trust Ltd. of Bermuda thet it would buy their Division Tourism for U.S. $625 milion with all its assets and liabilities. This takeover became effective on 15 JAN 89.

Carnival , being the fastest expanding cruise company in the world, was also shopping around to expand even more quickly. After a failed attempt to take over Royal Caribbean, Holland America Line came into the picture. HAL was already firmly established in the cruise market and well run but did not look as if it was able to survive if Carnival continued to grow. A take-over would benefit both companies .

Source: 125 Years of Holland America Line by H.A. Dalkmann and A.J. Schoonderbeek.

http://en.wikipedia.org/wiki/Carnival_Corporation_&_plc

http://en.wikipedia.org/wiki/Holland_America

http://www.referenceforbusiness.com/history2/51/Carnival-Corporation.html

duplicate post

One of the major operators was Carnival Cruise Lines of Miami. Carnival, with a very agressive new building program, was cornering a substantial part of the cruise market and appealed very much to "first time cruisers". HAL felt this competition severely! Carnival's way of operating severely threatened the seven-day cruise market as it could offer , with its biger ships, the same itinerary for a much lower price.

HAl is my preferred line but it seems to me that the HAL I originally

fell in love with, has eliminated alot of their amenities. For one, I can

do w/o the dutch nite & I don't like baked alaska but I am sure

new cruisers to HAL are suitably impressed as it does add to the

'gaiety' of the evening.

Who should be assigned blame for this? Carnival's take-over or

HAL merely watching their bottom line?

Just a query, folks...I am not jumping ship but would appreciate

more of the classical entertainment (i.e., the pianist Mr. Finkel)

formerly offered.

HAl is my preferred line but it seems to me that the HAL I originally

fell in love with, has eliminated alot of their amenities. For one, I can

do w/o the dutch nite & I don't like baked alaska but I am sure

new cruisers to HAL are suitably impressed as it does add to the

'gaiety' of the evening.

Who should be assigned blame for this? Carnival's take-over or

HAL merely watching their bottom line?

Just a query, folks...I am not jumping ship but would appreciate

more of the classical entertainment (i.e., the pianist Mr. Finkel)

formerly offered.

So basically, it sounds like Holland America felt it couldn't survive unless it reduced costs, because its customer base was being drained away by Carnival.

In a nutshell, yes - specifically in the short Alaska and Carib market. HAL's world cruises on Rotterdam V were doing fine

John, thanks for the fantastic history lesson!

In a nutshell, yes - specifically in the short Alaska and Carib market. HAL's world cruises on Rotterdam V were doing fine

That raises the question, I suppose, as to whether just doing world cruises is a viable market niche, by itself, in the absence of a broader set of leisure cruise offerings. I suspect that dichotomy, between the world cruises and the short cruises, is the fundamental dichotomy between what some people want Holland America to be and what other people want Holland America to be.

I've never been on a WC and doubt seriously that I will ever have a chance to go on one (unless maybe I can get a job in the galley peeling potatoes;) ) but I've got a feeling there is a group of HAL fans (traditionalists, maybe) that are perfectly happy taking HAL's world cruise/grand voyage every year while steering away from Alaska and the Carib (I guess you can add the Mexican Riviera to that now also).

Crystal, maybe, Cunard and some others are probably the closest to that WC niche you are referring to

You're welcome Aaron

My husband and I were on our 3 and 4th cruises B2B) on Cunard's Vistafjord. We loved that ship. We had a standard cabin, but on these sailings we sat at the Cruise Directors table, and he provided champaigne on the formal nights. We were also invited to a cocktail party in the Captain's suite. They also asked us to be in new promotional video they were shooting. We pretended to be dining at the Captain's table and toasted "The Vistafjord".

We were advised, at one point, that the ship now belonged to Carnival and that. in fact, the new owners were on board. Within the year, the name of the ship was changed to the Caronia, obviously the video was scrapped and we never received any further promotional literature from Cunard (Carnival)

The 20th Century saw the failure or demise of several exquisite cruise lines that were dedicated to doing it the right way.

Royal Viking was arguably the deluxe cruise line of it's day. They really set the standard for cruising in the late 20th century. As the American Public suddenly started shopping for the cheapest cruise available, Royal Viking suddenly found itself with half-full ships and diminishing revenues. Owner Knut Kloster swore that he would refuse to take the cheap route, and vowed to continue to offer a first class product if it killed him. It didn't kill him, but it murdered his excellent cruise line company. The American cruising public voted overwhelmingly for cheaper alternatives. When Kloster declared bankruptcy in the 1990's, they were 8 BILLION Dollars in debt, with very few assets left.

Holland America has a similar story. They tried to maintain a high level (and costly) product in the face of heavy discounting from big rivals like Carnival.

When it came time for the American Public to vote for high quality or low price, too many chose low price. HAL couldn't make a profit - and certainly couldn't raise new capital to build new ships. HAL could have silently faded away, but Carnival chose to resurrect them in a form that preserved some of the old elegance, but in a fashion that allowed them to remain profitable.

Royal Cruise Line remained very high profile and very popular until the early 1990's. In 1992 and 1993, Conde Nast named them the "Best Cruise Line in the World". The next year, heavy discounting from rivals prevented them from filling their ships. The American cruising public voted with their wallets. If quality cruising was going to cost more money, they didn't want it. Royal Cruise Line couldn't raise enough money for new ships. In 1994, NCL purchased the line and dismantled it to try to stave off bankruptcy for it's parent, Kloster Holdings

Thanks Bruce! Makes you wonder how lines like Silversea, Crystal, Regency and a few others survive on their own nowadays(without having a Carnival to back their play with $$$). They must have carved out that niche that Bicker is talking about

Excellent explanation, Bruce. That's it in a nutshell---ya gets what ya pays for.

there were other reasons why Uncle HAL sold itself to Carnival but I don't feel comfortable discussing them in an open forum but I will say that had Carnival NOT come along I doubt Uncle HAL would exist today. Their plan was to build a pair of 38,000 tons cruise ships in Germany, not the four (originally an order for three) built in Italy. Those 38,000 ton ships would not have allowed HAL to remain in the market and might have bankrupted them as some newbuilds have done to owning companies in the past.

With about 1,000 days on HAL ships and 100 upcoming between Jan 26 and May 10 I have fairly extensive experience with how things have come along in the past decade. I agree that it has changed and that a lot of old times gripe reminding me so often of lemons and limes squeezed free of juice and looking all wrinkly....BUT...they ALL fail to consider that their cruise fares have NEVER been lower both in a tangible dollar paid or in relation to earlier dollars. I find they have forgotten the pricetag of $3,850 they used to pay per person for an A grade cabin for a 7 day cruise in either of the two N boats when they were new in 1984 - you dont see rates like that now, they're much lower...and as for the world cruise bunch which Chris and I are part of when we feel like it - not this year, last year's was AWFUL - HAL's world cruise is pretty damn cheap compared to earlier years - like the old $37,000+ per person for an inside upper and lower...in 1997 for instance...As for those who complain of being "nickled and dimed" by the line - they don't have to buy what the line offers and most of us heavy hitters don't - we have friends whose onboard account for a whole world cruise was $4.00 for the TWO of them!

Both Bruce Muzz and Willem Ruys have hit the ole nail on the head.

What has changed more so than anything, over the years, are the passengers. The cruise fare, when expressed as a percentage of passenger net income, is probably greater than it has ever been in the history of ocean liners/cruise ships, despite that cruising has never been cheaper.

Well said.....

Ruth & Jim

there were other reasons why Uncle HAL sold itself to Carnival but I don't feel comfortable discussing them in an open forum

Very enlightening post. Thank you Willem.

Many fail to realize that corporations such as HAL or Carnival are publicly owned and a CEO is responsible to stokholders. Stockholders usually want immediate returns, not vague promises of hopefull financial reports some time in the future.

HAL responded appropriately to a good offer that made sense and that enabled them to continue to offer a great service at a very reasonable price. Who could ask for more?

Carnival was in expansion mode and looking to move upmarket with "Project Tiffany" CCL had already had a ship designed, but didn't know a thing about how to market effectively to a premium audience, much less have a name for this new premium line.

As stated before, HAL all but had the pair of 65,000 ton newbuilds based on an expanded N-Class design on order with Bremer Vulkan (After the N-Class debacle with the French yard, HAL weren't about to return to them for their new ships...) but financing was a major issue.

HAL Chairman, Nico Van der Vorm, was earlier approached by Micky Arison - but rebuffed the offer to enter talks. It was later when HAL was having difficulty with the newbuild negotiations that Van der Vorm called Micky and initiated discussions to sell HAL to Carnival.

Once the deal was finalized CCL immediately cancelled negotiations with BV, put Kurt Lanterman in place as CEO, redesigned Project Tiffany to accommodate HAL's needs and put the project to bid. Fincantieri had just finalized the order for Costa Classica, so they already had a hull design for a similar sized ship ready to go - therefore their cost basis was low enough to suit CCL and the deal was made for Fincantieri to build a series of 3 S-Class ships.

Although technically the new ships followed Carnival designs, Holland America were given complete freedom to continue to employ their Dutch house design firm VFD to design the interiors - Holland America was also allowed to name the ships. As a result, when the ships entered service they were widely regarded as traditional Holland America vessels and were so successful that a 4th (Veendam) was added to the order.

HAL desperately needed to retire Rotterdam V as she was approaching 40 years old. It was an easy choice to engage Fincantieri to enlarge and refine the basic S-Class design to a ship fast enough to be capable of World Cruising and be a worthy flagship successor - what we now know as Rotterdam VI.