Scale and innovation

Adam Aron's career has touched just about every segment of leisure travel. He was chairman and CEO of Vail Resorts and held senior marketing positions at United Airlines and Hyatt. He sits on the board of Starwood and Carey International. He was CEO of Norwegian Cruise Line from 1993 to 1996.

Last week, he was onboard the inaugural sailing of the Norwegian Getaway, not as a member of a Norwegian executives alumni club, but rather as a senior operating partner of Apollo Global Management, the private equity firm that is the controlling shareholder of both Norwegian and Prestige Cruise Holdings (which operates Oceania and Regent Seven Seas).

We met in the lounge of the Haven, the private, "gated community" experience Norwegian offers as an upscale ship-within-a-ship. I was curious to get Aron's take on the dynamics that have changed, and continue to change, Norwegian and cruising over the 18 years since he ran the company.

"In 1993, we had what was the longest passenger ship in the world, the S.S. Norway," he began. "She held a little more than 2,000 passengers. If you look at ships being delivered today, they routinely carry well north of 4,000 passengers."

Aron said the scale of the ships impacts the underlying financial fundamentals of cruising and is the primary driver of growth.

"The economies of scale have brought the cost of operating a ship, on a per-passenger basis, down significantly and have kept the base fares relatively low," he said. "The cost of going on a cruise is lower today than 20 years ago. It's been moving in this direction steadily, and that's why cruise passenger traffic has been growing since the 1970s without interruption."

He gestured out to the Haven. "At the same time, the quality of the onboard experience has gone way up."

But not only in the premium cabins, he emphasized. "The size of the ships helps in other ways, too," he continued. "Once people are onboard, there's so much more for you to do and experience. If you look at any line, the array of activities and amenities at your fingertips at any hour is mindboggling. We have 26 restaurants on this ship. And room service. The cruise industry has come a long way from one or two dining rooms with two seatings per night.

"And look at the size of the spa and the activities onboard: water slides, rope courses, rock walls. You would be hard pressed to experience everything once in the course of a seven-day cruise."

I asked Aron if he ever wished he were CEO at this point, when technology and scale enable lower costs and greater diversity of experience.

He didn't hesitate: "No, I'm more than delighted to be consigliere. But I come onboard today with an immense amount of pride. This line has come a long way. The quality of the ships has improved so dramatically, and the food and service onboard have become a real strength. Financially, it's solid as a rock. These are not exactly the things you would have said about NCL 30 years ago."

Or 10 years ago. My observation is that improvements in the line over the period Aron commented on have not been in smooth increments, but rather have occurred in leaps.

And they are related to another aspect of scale: As a cruise line, Norwegian is a distant third in size, and that has forced its leadership to think differently about marketing and strategy. It simply cannot progress with a "me too" attitude, or the economies of scale that have benefited cruising as a whole would kill it in head-to-head competition with Carnival Corp. or Royal Caribbean Cruises Ltd.

As a result, in many instances, Norwegian has led from behind. The concept of "freestyle cruising," launched at the turn of the century, has had a tremendous impact on the entire industry, forcing almost every line to offer more options and flexibility.

The Epic introduced a special area for single travelers -- a concept now being tested on other lines -- and on the Breakaway and Getaway, Norwegian introduced the Waterfront, with its outdoor dining options.

The line's CEO, Kevin Sheehan, told me that executives from other lines have already hinted to him that Norwegian will not have the only ships offering alfresco dining for long.

There have been missteps. Driven by the idea that if it can't ever be No. 1 everywhere, it would try to dominate one geographic region, it installed three ships in Hawaii. Bleeding red ink, it retreated to one.

I remember speaking with Aron on the inauguration of the Norwegian Epic, and at that point, he told me he hoped the ship would be an enormous step in the evolution of Norwegian away from being a "hot dog and hamburger" cruise line.

It was. Norwegian does not have a lock on innovation -- far from it -- but it has demonstrated that creativity, too, can be scaled. And in that regard, Norwegian has done an outsize job.

Email Arnie Weissmann at aweissmann@travelweekly.com and follow him on Twitter.