Richard Fain, the chairman and former long-term CEO of Royal Caribbean Group, recounts the dark days of the Covid pandemic for the cruise business, and explains cheap expensive decisions, the antidote to fear, elevating and innovating the industry, and why he literally, LITERALLY, had to cut a cruise ship in half.

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Taelor

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Taelor

Let's talk about your incredible professional history. I really want to hear your journey as CEO of Royal Caribbean cruise line, especially during what I think of some of the darkest and most challenging times in the cruise business.

Well, I've been incredibly lucky in my career. I've worked with some wonderful people, and Royal Caribbean is just the best company on Earth, because the people are so passionate about what they do, they're so determined to do better every day. So they're insatiable about getting better. And the opportunity to lead a company like this, especially for 33 years, which is sort of unheard of in today's modern world, is just an amazing opportunity that few people ever get. Nobody gets to work with the toys that I get to work with, the magnificent ships and the magnificent properties and the magnificent destinations, and most importantly, with the people who are so determined to provide the best vacations on Earth. So having that opportunity is amazing, but as you say, we've also had to deal with some really, unfortunately, really awful times, and I don't like to focus too much on them, but probably the most relevant today is what we've just come out of, which

is the covid pandemic. That was one of the few times I'd actually say we've had a company threatening situation. Revenues went literally to zero in a span of literally a couple of weeks. We went from generating a billion dollars a month to pay all our bills to zero. Nothing in my training, nothing in my business school background, prepared me for zero revenue. It's very hard to run a business with zero revenue. I think that was a very scary time for us, but it was also, frankly, a very fulfilling time, because to see the way our people came together, to see the way they all said, Okay, how are we going to make this work? And early on in the pandemic, we said our goal isn't just to get through today or next week or next month. Our goal is when this pandemic is over. Nobody ever doubted it would end. It was just a question about law. We need to make sure that we're in a position so that when it does end, we're in a position to move forward in a positive way. And that

meant taking care of our people, that meant taking care of our ships, that meant taking care of our private destinations. And I have to say it, it's one of the most gratifying. It's also one of the most horrifying, but it was also one of the most gratifying times of my life to see the way everybody came together to a common goal, and that, I think, has been a characteristic of Royal Caribbean since its founding.

That's a lovely answer. How do you do that? How did you take these wonderful leadership ideas and execute

Well, first of all, nothing happens in a vacuum. And the good fortune that we had going into the pandemic was that we had a cadre of people who had been successful by always looking to the long term our real focus, and it's been part of Royal Caribbean success from its founding, our real focus was on the longer term. Because, remember, in the cruise business, nothing happens quickly. If we decide that we want a new ship, from the time we make that decision to the time the ship arrives, is five years. If we want to build up a private destination, like our perfect day cove, okay? Or our royal beach club in Nassau, we need to start preparing that 5, 6, 8, years in advance. And so we already had a long term orientation, and that was a focus. And so our organization was used to thinking long term. They're used to saying, what I do today doesn't make that much difference to what happens over the next 12 to 18 months, but it makes an enormous

difference to what happens three years from now, five years from now, and in the end, the other thing that we had going for is leading into the pandemic was by. You mentioned the cadre of people, it's the people, it's the people, it's the people. And the people at Royal Caribbean are so passionate about it. And so once we all said, this is where we're going, our mantra is not, how can we save money by shutting down the ships and putting them in cold layup. But if we put them in cold layup, will they be ready to go when the pandemic is over and on a ship? Laying up a ship, ship, Being idle is the worst thing for a ship to do, so by making a conscious decision not to put just the fewest number of people on board. What's called Cold layup. Layup is when you idle a ship, not to put the fewest number of people on but to have a large enough cadre, 100 150 people, in some cases, just to keep the ship running for that year and a half that we knew we weren't going to be

doing anything with it. And that's a very expensive thing to do, but if you remember that our goal is what happens after the pandemic, then it becomes a cheap expense. It becomes a necessary expense. And frankly, as long as our conversations relied on the long term and focused on our North Star of coming out of the pandemic strong, those conversations were easy. And the other thing it did was it aligned everybody. Once we had said that's our mantra, everybody understood. So one of the issues, of course, is you're making 1000s of decisions. We have 100,000 employees, all of them are making decisions, and that can't be managed centrally. You need each person to understand what the objective is of the decision that she or he is making, and so having that mantra, having that goal, and having a group of people who are aligned and passionate about what they're doing, frankly, made it a relatively, I won't say simple, but made it an obvious outcome.

Was there during that time, was there any practices? Because again, we're really talking about leading and managing two different things. One was the business itself and all the livelihoods that came along with that. But then also, it was a time of a lot of fear. People were worried for their safety, their health, their loved ones, so forth and so on. Were there any practices that at the top of the house you put in to play again? It sounds like you were very empowering to let people know how important the decisions they were making for the livelihood of the business. Was there anything that you did to help? I don't know if I love the word manage, but deal with the fear side, the very personal fear that people felt.

You know, it's funny you mentioned the fear, because the fear was so pervasive. And I think the fear, fear makes people stupid. You really can't act out of fear. And there was reason to be concerned, but there wasn't reason to be afraid, because if you know where you're going and you have a plan to get there, you don't need to be afraid. I think a big part of it, and a big thing that stoked the fear was lack of information, lack of communication. So I think one of the things that we did extensively was all discussions, we actually, we're used to being together and discussing them face to face, and all of a sudden we were stuck in our homes, and we, yes, we had extensive meetings. We called town halls where our employees came together. Vicki freed our head of sales, did some amazing things, which she's continued to this day of a weekly Coffee Talk, 1000s of people would come to her, thought her coffee talk, I did videos. It's interesting the beginning of

the pandemic. Our PR department put together a big structure. We had two, three, camera people, sound people, directors, everything to do a video, and it was well received. But then we went home, and the PR people sent me a tripod and a microphone, and I did videos in my backyard. My wife was the only camera operator. She was very good. She got to be very good at but it was interesting that we went from all these people organizing this very formal structure to my simply standing up and talking to our travel agents, our guests, et cetera. And the fact that we were open about this, the fact that we talked about this, seemed to go down very well and seemed to give people reassurance. But I think overall, the key was we were open about the problems. There was never an issue. We didn't try and sugarcoat stuff. This was this was serious. You lose a billion dollars a month and you start with a total cash balance of a million dollars. Life gets very interesting. But that our

finance teams, we had had very good relationships. Operations with our bankers and with the shipyards and with the governments, and so we were able to bring everybody together. And I think the key was alignment on getting everybody pulling in the same direction. So fear was an issue. The antidote to fear is information, in my view.

That reminds me of a quote, and I'm sorry I can't remember who said it or where it came from, but transparency breeds trust. And it sounds like that's exactly out of your playbook.

Well, and here there's, there was nothing to be, to be dishonest about the facts were. It was very evident to everybody what the facts were. So it wasn't a question of trying to convince people. It was just going to make sure. To make sure that people understood what the facts were, what our position was, and how we were going to come out of it. So we kept talking about how we're coming out of it. We didn't talk about how we're going to get through next, next month's expenses. We didn't talk about how expensive it was to keep a ship operational during this period. We talked about how we're going to come out of this. And that communication, I think, made sure everybody understood. We had a plan. We had a way to get through this. We would get through this. Everybody did amazingly well. And I was, I was really so impressed, and when we came back just to see, however, how happy everybody was and how smoothly it all restarted.

Now gotta give credit where credit is due, because this is not a culture that is often built in crisis. It's usually a culture that is built long before and then the culture reveals itself during crisis. So let's, if you don't mind, let's take that and transition over to the book, Delivering the Wow. Talk to me about that.

Well, thank you. It's, it's, it was fun to write the book, and actually, because the focus of the book wasn't so much a memoir as it was, a focus on the culture of an organization that I think has stood the test of time and has stood us well in good times and bad. It's a culture that is never satisfied, constantly looking for improvement and constantly finding that improvement. And again, it comes back to the people the it's always the people, and the people had a passion for making sure that we were providing the best vacations we knew how to do, and so building that culture. And I have to say, when I joined the company, it already had a strong culture. That culture had been established from the very first day by Ed Stephan, who really founded Royal Caribbean, and then we had an opportunity to build on that culture. And that culture helped us in good times and bad, and it helped us innovate with our ships. Helped us innovate with our product. It helped us

innovate with the kinds of activities that we offered to people. The other thing besides innovation that that culture focused on, was on having a goal and making sure that everything aligns with that goal. So having a North Star was part of the founding of the company. When the idea was, we're building ships specifically for the Caribbean, it also worked with us well as we moved forward, and we said we want to make sure that our ships are not only the best cruise ships that we know how to build, but also beyond that, we wanted to be a factor in truly competitive in the larger vacation market, So we didn't see ourselves just as competing with other cruise ships, we really focused on competing with with Disney World, with Marriott, with sandals, with whoever we wanted to satisfy our customers needs, rather than this is the product we offer. And if you're looking for that product, we are the best

And there's a lot of it again, it wasn't just about hey, if you're going to choose a cruise, choose us, but rather that perspective of hey, for this certain type of vacation, regardless, we are the best.

Well, you know, the cruise industry is even today, but back then was an infinitesimal part of people's vacation to planning. Jason liberty, my successor, has actually encapsulated that in a wonderful phrase. He says, we're not trying to offer the vacation of a lifetime. We're trying to offer a lifetime of vacations. I thought that was a wonderful articulation of this concept that we are, we are competing for your time. That's the, you know, the one of the things here is, this is one of the most important times of a family's year, because they don't get that much vacation time, and so they really want. It's really. Important that it be done right, and that they get the best vacation. And if the best vacation is at sea, that's fine, but we really want to make sure that we're competing in a total market, not just the best cruise.

It's an elevation of the entire industry, which is such a cool perspective.

And the result is that our guests have such an amazing time. Whenever you take a vacation, you come back to work and yeah, I had a good time. It was great. I had a great I went there. I went there. It was wonderful. When our guests come back from their vacation, they're not just we had a good time. They're missionaries for the cruise industry. They're obnoxious about it because they had such a good time. We did surveys that showed, in some cases, the cruising on a Royal Caribbean Cruise was had a higher level of satisfaction than chocolate. I mean, we are just, it's hard to imagine, but it turns out, there are weird people in this world that don't like chocolate. Who knew? But we are obsessive about measuring what we do. One of my experiences over time is, if you measure something, it gets better. Now, if you use the data, it gets even better. But simple fact of measuring it, even if you don't ever look at the data, actually helps people

understand what drives it, and things get better because of it. And so we measure obsessively, and we when, when we see something, we deal with it. So we're constantly looking to our mantra is continuous improvement, constantly looking to do better each time we do it so that that rankings, that appreciation by the guests, keeps getting better, and it has, over time

That's incredible. It has been rare and not I don't want to discount any previous podcast guests. I just can't remember. I haven't heard anybody talk about the elevation of the industry like this. Usually the focus is a little bit more of you know, elevating our brand, our company, but this, again, because you have chosen this path, the entire cruise industry, I think, has been elevated. And again, of course, that has absolutely served Royal Caribbean, but it has served the industry as a whole as well. That's incredible.

It's what our people live for and take pride. I mean, I am just often, just amazed, even when things are very difficult and our people work unbelievably hard, but when you work with a purpose, it's easier to work hard. And I think we all get a satisfaction out of that. And the result is, I come back to it's the people, it's the people, it's the people. I'm so blessed to have had a chance to work in this industry and with these people. And I'm every day, I'm just thrilled with the people that I get to work with. I'm I'm I'm probably your luck, the luckiest guest you've ever had.

Not trying to sound cheesy here, but this is what real leadership is about, and this is what people want to know. How do I duplicate that? How do I create that? And that's why leadership topics and books and podcasts and everything else are an incredible industry, and it's so awesome to hear it in play.

You're very kind, but you know, again, I think it's the culture. It's always the culture. There aren't many people who have had the chance, as I did, to enter into a company that already had a very powerful culture, a very strong commitment to excellence and to work with the kind of people and the kind of mentors I've been very fortunate in my career to have some leaders who have also helped guide me. And I have to say, there aren't many who get to have a succession with a leader as powerful and as inspirational as my successor at Royal Caribbean. So it's just not only had a great fortune in the company I've worked with, but also in my family life. I met somebody 60 years ago. We've been married for 56 we've had an extraordinary family, and all of that is so supportive. And you know, it isn't one thing. Everybody wants the seven secrets to whatever. And it isn't seven secrets, it's it's hundreds or 1000s, and it's also luck plays a big role here. I don't

think we can minimize that, but we've been in the right place at the right time, and we have a group of people who care about what they do. They really care. It's amazing. It's all I'm always shocked. I mentioned earlier coming back from covid. When I went back, I remember on the first ship after the covid, celebrity edge out of Fort Lauderdale. I remember everybody suffered during covid. Everybody it was, it was just. Difficult time, uncertainty, fear, everything else, financial constraints, all of that. I went back and I boarded the ship early in the morning, long before our guests would arrive. And I had an appointment. You know, I was going to see the captain who was up on the in the plaza, and I entered the ship through the crew gangway. So there's a crew gangway, and there's a walkway to the elevators. It's about, I don't know, 3040, feet. It took me an hour and a half. People just lining up. Everybody wanted to tell their story. People were crying. People were

hugging, selfies. I mean, literally, an hour and a half to go, whatever distance that was. And one of there was a sort of, there was a waiter there and and he said, you know where our guests are coming, and we're going to give them the best cruise they've ever had. These people are going to love it. And they did. And that commitment was unbelievable, so it was a tough time, but with the passion and with the commitment, it all came through.

Story gave me chills. I love it. Okay, so now I'm gonna shift gears ever so slightly. I don't wanna ask a technical question. Sure, we've talked a lot about implementation and leadership and those things, and they're wonderful and great, but one of the things I read was that you were looking to make the ship bigger. And for some reason the answer was, cut it in half, and go from there. I'm going to need you to walk me through that.

Okay, yes, that was, that was actually my first introduction to the cruise industry. So the founder of the company. And the company had been built with three 720 identical passenger ships, and they were quite revolutionary at their time, and but they were sort of a standard size. And Ed Stephan, who was the founder, and then the time, the president of Royal Caribbean, said, We need the ships to be larger so that we can get economies of scale, so that we can get we can add more activities to make this the more interesting cruise, but mainly the economies of scale. He said, the way we can do that is we cut the ship in half. We float out of the new midsection, we float back the front, and then we glue it all together again, and we end up with a ship that is not 720 but it's 1040 1020 passengers. And if you think about it, when you cut the ship in half, you cut all the wires and all the pipes, and when you put the midsection in, it has to have a pipe that

connects that and a wire that connects they did it beautifully. And I was shocked. One of the things we did was we surveyed our guests, what did they think of that? And the third of them thought it was better, and the third of them thought it was worse, and the third of them said, I didn't notice. They had made a change. I was shocked, very successful, and that was early days.

That's incredible, incredible. Okay, a couple other just kind of silly questions, if you don't mind.

Go for it.

Where was the first place you went on a cruise?

The first place I went on a cruise was to Nassau.

Okay, where was the last place you went on a cruise?

You know, I don't cruise as much as people think. I think the last place I went was Antarctica, a wonderful cruise, absolutely

That is fantastic. That is on my bucket list.

And you should do it. It's a wonderful experience. We have a fantastic crew down there, and they offer amazing expeditions around the whole area. It's a life changing experience.

Did you see the penguins?

We were overwhelmed with penguins. The one thing I didn't do was the icy splash where you jump in. I passed.

I've done a ton of research, and this is really interesting. Is the only way I think, to do it is via cruise.

It is the only way to do it. And I have to say, I think all of our cruises are exceptional, and I don't distinguish one from another, you know. And we have 66 ships, and I love them all equally, but, but Antarctica is an exceptional vacation.

Okay, that just got moved up on the bucket list. Is there anywhere you haven't gone yet that's on your bucket list?

I've been lucky enough. We've traveled a great deal. I'm fortunate. My kids love to travel, and so we go all over the place. So I don't really have a place where I say, Gee, I wish I had been to so and so, pretty much gone to most of the places, and many of them I look forward to go back to I think I'm also a little bit different that most people, when they do that kind of travel, they want to see something for the first time. I like to really understand things, so I prefer to go back a fourth time and an eighth time and feel a little more immersed in the local culture. I'm a leaver in culture. Culture as a driver of human activity. It's the culture that makes everything possible. People are amazing if you give them a purpose and you give them an opportunity and you give them support, and I'm lucky enough to have been in a position to do all that and watch while the company has thrived on the as a result.

So cool, Richard, thank you so much for your time. It's been truly a pleasure getting to know you and your leadership a little bit better.

Well thank you. You've made this very easy. It's it's easy to understand why people enjoy your podcast, and I appreciate you giving me a chance to be here and talk a little bit about my favorite topic, which is the people in the culture of Royal Caribbean Cruises.

That's awesome. Thank you.

Thank you very much.