LEVICK | May 11th, 2020

Cruise Lines Must Think Strategically to Avoid Sinking in the Coronavirus Wave

In one way or another, the COVID-19 pandemic has put almost every global industry under siege – but a few, such as nursing homes, hospitals, academic institutions, and, of course, the cruise ship business – are in for a particularly bumpy post-pandemic. Since the first days of the crisis, cruise lines have received a torrent of criticism from commentators and opinion leaders, many of whom are deploying 20-20 hindsight.

Yes, passengers and crew were put at risk – but the same can be said of airlines, railroads, car rental agencies, ferryboats, and dozens of other lines of business, almost none of which understood the dimensions of the pandemic in its earliest moments. Now, cruise lines are being hit with plummeting stock prices, lawsuits, and public recrimination. To survive and prosper, they are going to have to develop a post-pandemic playbook. Regardless, it is going to take a long time to return to some level of normalcy.

Beyond dealing with these immediate crises, cruise lines need to focus on a host of strategic challenges, many of which they’ve never faced before, says my old friend and former colleague Ernest DelBuono. Ernest, a retired Coast Guard commander, has spent much of the past two decades helping the cruise line industry with its crisis planning and communications.

“The cruise line industry must anticipate the regulatory and cultural constraints heading their way – and plan accordingly,” says DelBuono. “Its ‘new normal’ when they finally get ships back to sea  won’t be business-as-usual – far from it.”

According to DelBuono, consequence management is an essential piece of the crisis management lifecycle. As a result, the cruise lines will need to be planning their recovery efforts on two tracks:  first, responding to current crisis issues such as loss of revenue, lawsuits, loss of shareholder value; and second, anticipating alternative risk scenarios and identifying high-impact scenarios – no matter how unlikely.

The changes the industry will be forced to make to regain regulatory and consumer confidence are likely to be fundamental, DelBuono points out. “In reality, the industry must recognize that certain draconian steps may be inevitable,” he says.

One example, he notes, could be new guidelines from the Coast Guard, the Centers for Disease Control, the U.S. Public Health Service, or the International Maritime Organization, curtailing the number of passengers allowed to board ships to meet stringent social distancing rules.

The industry’s handling of passenger connectivity issues will also dictate its future, maintains Paul Ferrillo, a partner at McDermott Will & Emery who helps direct its cyber practice.

“There’s no better way to gain that trust than to come back ‘hard and fast’ on the things that matters most – connectivity to their iPhones and iPads. Conquering age-old vulnerabilities and an ‘I am not a target’ mindset, the cruise industry needs to harden its connectivity while making intra-ship Internet safer, faster and more secure,” Ferrillo says.

If the industry fails to regain consumer confidence once the COVID-19 crisis ebbs, it could spell long-term trouble. “A reduced passenger list alone would mean huge financial consequences for the industry,” DelBuono says. “The big ships are built around a business model that require an optimal number of cabins be booked to offset the cost of the ship’s operation.”

In addition, cruise ships will almost certainly have to take the temperature of every passenger who comes aboard, which will require additional personnel and equipment. The swimming pools and recreational areas will have to be carefully monitored. The chairs around the roulette wheel and blackjack tables in the casino will have to be separated. The seating arrangements on the excursion boats and buses will have to be changed, too, as will the excursions themselves, for fear that passengers will be prone to contract the virus while on land.

Ernest is right: All this and more will need to be planned for and communicated, with best- and worst-case scenarios built into every new initiative. The cruise ship industry has long been targeted by critics and regulators. But its challenges are about to get far tougher.