betty: this is "titans at the table." we are taking you to the high seas to find out how one vacation industry is keeping up with the modern age. the cruise industry raked in more than $37 billion in revenue last year, and more than 21 million passengers. what does it take to be the biggest fish in the sea? we find out from the two biggest ceos in the business. >> this is the biggest and best out there. betty: to stay on top, his company has spent $3 billion on new ships that have everything a

person could want, and some things they could never expect. >> this is the next generation of cruise ships. we are constantly striving to move the bar higher and higher. betty: royal caribbean may have one of the biggest boats in the water, but arnold donald says bigger is not always better, and have the markets share to prove it. arnold: we sell 80 million passenger cruise days a year. betty: carnival has 50% of all cruising business, and pulled in $16 billion last year, almost double royal caribbean. he says that staying on top is about variety. >> we have nine brands, whether you are an adventurer or a quiet person. betty: the industry has made huge gains since the last recession.

the profit margins are still in the single digits. just as it was recovering, things like this started to hit the headlines. >> get the kids. go, go. >> i never want to go on this cruise begin. betty: the cruise industry has run aground on some very public disasters. from viral outbreaks that have ripped through ships, to the devastating sinking of a ship nearly twice the size of the titanic, killing 32 people. the industry is facing a public relations nightmare that could keep passengers ashore. do these two captains of industry have what it takes to turn the ship around and sale back into double-digit profit margins? the answer may lie halfway around the world. it is all hands on deck on "titans at the table." most americans remember the

titanic as a movie. at the beginning of the 19th century, giant ocean liners were the only way for the masses to cross the atlantic. starting in the 1960's, flying replaced cruising when jetliners took to the skies, rendering these giant seagoing vessels obsolete. not long after, the massive liners were reimagined for a different purpose. an ocean bound getaway, the lumbering liners of old being used more for recreation than transportation. ♪ and when the show the "love boat" became popular in the 1970's, it helped to turn vacations into a a giant growth industry. but the success was not due to bigger and better ships aimed at a ballooning population of the american middle class.

by registering ships under foreign flags, companies avoided u.s. labor laws and tax regulations that regular land-based tourism was forced to follow. between 1970-2014, the passenger load grew more than 4000%, from 500,000 to more than 21 million cruisers each year. the industry's environmental practices and working conditions have drawn a lot of scrutiny. in the last several years, the industry has been plagued with a series of incidents that have hit the headlines and scared passengers and public alike. sick at sea. >> a royal caribbean cruise forced to turn back. betty: from outbreaks on a separate cruises last year to an ebola scare that created panic. >> we knew something bad was

happening. betty: to the devastating crash of the costa concordia that killed 32 people and landed its captain in prison. and then there was the infamous "poop cruise." when a power outage stranded 4000 passengers without food, water, or working toilets. that incident happened just months before carnival's ceo took the helm. as he told me, don't believe all the hype. arnold: 99.9% of everyone that cruises has a great time. betty: and it doesn't make the headlines. arnold: the 99.9% does not make the headlines. how many people are stuck on a runway in an airplane waiting to take off? how many times do they have a traffic jam that they are stuck in on a highway? those kinds of incidents, the concordia, that was an accident

and a tragedy, and that was more serious, but it happens once in 100 years. betty: a relative newcomer, donald only became the ceo in 2013, appointed by the founding family. he is charting a new course for the biggest name in the industry. under the banner of the cruise line industry association, there are 62 cruise lines worldwide. with big names like disney and norwegian joining royal caribbean. carnival is the largest with eight other brands, more than 120,000 employs across the world, and 10 million passengers last year, nearly half of the cruising population. that bigger market share also means a bigger spotlight when things go wrong. there's one professor who came out with statistics and found that between 2009-2013 there were 300 plus incidents on crew ships.

the perception that these are happening more and more on cruise lines and that there seems to be an epidemic of safety, how do you combat that? arnold: our guest satisfaction scores are through the roof. you saw the excitement of the guests and how things work. it is just not true. you can do anything and have a one off incident, but 80 million guests means 79 million plus are having not only a smooth day, but the vacation of a lifetime. betty: whether these incidents are overblown, there is no denying that people are talking about it. according to the cdc, ships sailing under the carnival flag were hit with 17 cases of norovirus in 2012. safety is not the only issue

these days. the industry is also fighting the perception that only a certain type of person climbs aboard to cruise. when i talk to people about going on a cruise, generally speaking, anecdotally, and not a scientificly, the perception is is negative of the cruising industry, that it is for senior citizens, that younger people don't go on cruises, or they read about the costa concordia. in how do you change that perception? arnold: that is a challenge. we have 3.5% of the vacation population that goes cruising every year. the fact is that most people love it.

all these negative things really don't exist. betty: when we come back, arnold donald takes me on a tour to show me why carnival is the king of cruising. ♪

an but for all the amenities, one he says that when it comes and to cruising, there is no one-size-fits-all ship. arnold: a cruise is not a cruise is not a cruise. every brand has a different type of experience. of of experience. there is a reason for that. we are all different. youwe are all different. some people want lots of partying, water parks, excitement, lots of kids around, families around. others want to relax and be with you their immediate close ones. will so, you have to have you different types of offerings for people. if you get on the right cruise, you will love it. you betty: with over 100 vessels, carnival has a different ship for whatever floats your boat. a not far behind is royal and party caribbean ceo richard fain.

he says he has a boat that is so you will big, it has it all, making it hard to feel trapped and at sea. richard: if it has surfing on inrichard: if it has surfing on board, skydiving on board, bumper cars, it's hard to say that i'm going to feel confined. martin betty: with five million and passengers, royal caribbean is the number two player. and earning more than a billion players bring dollars in revenue last year. richard fain is determined to close the gap on the competition, and to do that, he would need a bigger boat. and it is called the quantum of the seas. richard: people wanted more choice. one they do not want a regimented vacation and want to have more choices to pick from. we wanted to provide something where the entertainment gave them a plethora of activities to do. with the food selection, where they can choose any kind of

foods whenever they wanted it. will i would say that probably the biggest changes is the level of choice the ship offers. will we have this new dynamic dining -- betty: he took me on a tour. you will really a line at over in a 1000 feet long, with nearly male 5000 passengers, it's one of the largest cruise ships on book water. we are how many stories up? richard: almost 30 stories up. or not this is a perspective you a never get to see. whole betty: it does. this is amazing. at the very highest, we were andat the very highest, we were above the statue of liberty. he will 300 feet out over the water. and will richard: it's really cool. betty: the northstar is just the first attraction that has everything you can think of.

and then some. here we go. lucky number eight. i'm taking this one. bumper cars might be the last are thing you would expect to see on a cruise ship. here on the quantum of the seas it somehow feels right at home. and if being at sea is not enough for you, this boat has a way of getting you airborne. >> am i ready for this or what? the best job in the world. betty: there is the requisite high-end shopping. and of course, fine dining. can i sample something? you with 18 restaurants to choose from, the real experience is not just the cuisine, it's

how you get to it. richard: this is what we call royal iq, dynamic dining. it's too many for a page. if you want to reserve space, just hit reserve and it comes up and ask you how many want and when you want it. betty: you can do this on your mobile phone. technology is part of what makes will you royal caribbean stand are apart from the competition. dynamic timing is the tip of the indynamic timing is the tip of the iceberg. you richard: we even track your are richard: we even track your baggages. you can look on your iphone and say that my suitcase is in the elevator or it is in the hallway towards going to security, and these kinds of capabilities i a think are things that we will probably will look back on in a very short time and say, can you imagine what this was like before quantum of the seas? betty: for all the over top will attractions, is dropping a

you know billion dollars on a single ship the key to raising profit? arnold donald is not convinced. arnold: there will be a lot of people who will not want to sail will on quantum of the seas. that's not how they want to spend your time. betty: you don't see it as a you game changer. arnold: i see it as a game a changer in certain features on you board our ship. a you as a game changer for the industry, every new ship is a a game changer. will you quantum of the seas in the contemporary category, and where people are looking for lots of activities and that kind of stuff, a mall of america type of experience. it is a game changer for that you and type of experience. betty: arnold called quantum of you are the seas the mall of a america of ships. richard: i am not going to comment on what he said. you i think you will have

a trouble finding a mall on board. betty: the one thing both ceos you whenbetty: the one thing both ceos believe, the incident you that cast a shadow over the are industry is a thing of the past, and the bargain ticket that convinced passengers to set you sail, a discount of 80%, may go away. he richard: the diounting due you to those incidences was serious, and i think we are now moving quickly away from that. i think you will see a lot less discounting. are in fact, i think our focus needs to be not on offering the cheapest cruise, and if you look around, you will see why it does not make sense for us to try to sell the cheapest cruise, but the best cruise. in fact, one of the other things is we are saying that as we get into 2015, past the first quarter, quiet a solid year. we are seeing the opportunity to raise our prices, even if it you means we have empty

staterooms. and you staterooms. arnold: i would say book as soon as you can. will you the probability that prices will go lower is not very high. they don't need to. prices will still make it the best vacation value by far versus of land-based vacation. betty: are you willing to give are you willing up market share you are up market share to keep your prices above the discounted rates? arnold: it's not market share. the question is occupancy. how many cabins are left unfilled, or how many cabins have one guest versus three or four guests? a we are absolutely willing to trade off occupancy to get the price up from a business standpoint. betty: coming up, there is one demographic that both companies you demographic that both companies and have a hard time cracking, millennials. they may be the key to sailing towards higher profits. you towards higher profits. later, it is full speed ahead to and a place that may just push you the entire industry into bold new waters.

♪ betty: this is ship rock, norwegian cruise lines solution to younger cruisers, millennials who have a lot of money to spend, $1.3 trillion of it. and a piece of that demographic could help the industry sail back into double-digit profit margins.

the cruising industry group out with numbers say that the average cruiser is about 50 years old, makes over $100,000, white, and generally an affluent traveler, but they are essentially that demographic. it's not very diverse. richard: that is part of what we need to help explain because the diversity is growing dramatically, both in ethnicity, age. betty: some of the reports say that the reason why it is such a game changer, or at least something that people are excited about, is that it's catering towards the millennials, the younger travelers. is this an attempt to essentially, a very big attempt, to get to 20-year-olds and 30-year-olds on your ship? richard: it is directed to expanding our market. the millennials are a prime market for us, and a growing

one. betty: royal caribbean has managed to tackle the one thing almost every millennial wants, which happens to be one of the hardest things to do on the water, providing wi-fi. richard: bandwidth on this ship is 250 times the next best ship. betty: wow. richard: in fact, the bandwidth on the ship is better than the combined bandwidth of every other cruise ship in the world. betty: according to arnold in donald, the millennial generation defies stereotypes, and and providing wi-fi is far i and providing wi-fi is far like from the only magical bullet to get them to cruise more. arnold: millennials all over the place are like every other generation. some millennials like heavy social exchange and interaction, in terms of parties. some like doing it on the internet.

some want more private time. a lot of them are adventure seekers. a lot of them want to give back. they like impact travel, travel where they can go do something and help a local community or help an individual. betty: you need to get millennials cruising more. is that a misperception of the industry? arnold: it is a little bit of a misperception. we have weddings on our ships, and there are often young people getting married and chose a cruise as their honeymoon experience and their wedding reception experience. so we have millennials on our ships around the world. betty: but the cruising industry does not live and die by getting millennials on their cruise. a arnold: they do not live and die, but you want to build your base for the future. betty: still to come, the one destination that every cruising company is ready to court. how big is china going to be?

>> it will eventually be the largest cruise market in the world. betty: the cruising industry has built its success in the west, but halfway around the world, there is another market on the horizon they could change the game completely. richard: the demographic shift in china and the growth of the middle class is one of the biggest single demographic explosions in history, one of the big demographic shifts we have gone through has been the baby boomer generation. what's happening in china today makes that look insignificant.

betty: royal caribbean ceo richard fain says that in a few years, the middle class in china will not only be bigger than the middle class in america, but bigger than america. year consumer spending in china is expected to increase of about 7% every year. by 2020, the total could be $5.7 trillion. remember the quantum of the seas, the ship with every bell and whistle you can think of? it is setting sail to its new home port of shanghai. one big advantage of expanding in china, not having to deal with the stodgy, old images of a typical cruiser. in china, the cruise liners can start with a clean slate. richard: this whole concept is new and exciting. there is no old-fashioned myths about cruising. there is none of this cruising is for old people. if you are a family traveler, you can enjoy it together.

how many vacations can you have where a 70-year-old and a 20-year-old can go together and both rave about it? so, we have that, and it is extraordinary. there are not many places you can do that. a china, the family bond is stronger than in the western world. so, the ability to offer multi traveling in china is even more viable. betty: carnival ceo arnold donald has no intention of being left in royal caribbean's wake when it comes to china. he says it is a market that they are ready have both feet in since 2006. arnold: we sail to over 700 ports in the world every year. we source from everywhere. we have four ships home ported in china, four in shanghai. betty: carnival carries chinese critical and passengers to japan and south korea. last year, donald put his chief

operating officer in shanghai and signed a deal to develop the cruise industry with a local operator, china merchants group. arnold: there is a lot of work to be done in china. we have to develop ports. the reality is that it is a good market today. we have four ships there. both brands are profitable. the chinese government has athe chinese government has declared through their five year economic plan their intention to develop the cruise industry. that means a lot of things will happen relatively quickly. we want to be there to help make it happen in a way that we think will help the chinese government established the cruise industry they want, that will be sustainable for years to come. betty: how often are you there now? arnold: i have been on the job a year and a half or so and have made five trips to china. and it's a very active market under development. it will take some time.

we are very happy with what we have today. we see it someday being as large as any cruise market in the world. betty: donald says carnival is youbetty: donald says carnival is focusing on one thing the chinese can never get enough of, are luxury shopping. you are luxury shopping. arnold: the chinese guests really like high-end retail, luxury brands. betty: they want louis vuitton, you one prada. arnold: they really like high-end stuff, and so we have to reconfigure our retail there for the very high end. each ship is different. a lot of americans are shoppers. they want great quality and really great prices. they are not as hung up in general on big luxury brands. betty: is there one brand that and you would like to get on one board that you haven't gotten yet? arnold: in terms of a retail brand? will i would love to get bentley, rolls-royce

automobiles. betty: whether it is the promise of the emerging chinese market or the appeal of the next generation of millennial cruisers, these two titans are laying all on the line and moving ahead to shake off the negative news of the past. royal caribbean's flagship vessel, quantum of the seas, won't be top dog for long. in 2016, they're rolling out a bigger, better, bolder cruise ship, the harmony of the seas, with the ability to carry 5000 passengers, the llargest cruise ship in the ocean. donald is pulling out all the stops. his goal is to see the rest of the world climb aboard. arnold: cruising is the greatest vacation value there is. it is one of the greatest

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