Horst Rahe must be kicking himself.
Five years ago, the hotelier and founder of Aida Cruises gladly sold his German river cruise business, A-Rosa. The days when money could be made from cruises on the Rhine, Mosel or Danube were over, he thought. Cheap ocean cruises were leading to sinking profits on the waterways.
“Riverboats need at least €800 ($1,010) per passenger for a week of vacation,” Mr. Rahe calculated. “Ocean liners can offer rates of €399 because of their large size.”
But today, A-Rosa, bought and now managed by the Düsseldorf-based private equity investment firm Waterland, is on the verge of a spectacular turnaround.
“Our sales are 23 percent up over last year.”
“Our sales are 23 percent up over last year,” Jörg Eichler, A-Rosa’s CEO, told Handelsblatt in a recent interview. For the first time in two years the company will show a profit in 2014, he said.
There are plenty more positive figures. Occupancy for the company’s 11 ships on the Rhine, Rhone, Danube and their tributaries is up 7 percent, while revenue per passenger has risen by about the same. By the beginning of September, A-Rosa had already achieved 92 percent of its 2014 bookings target.
Mr. Eichler, who has been with Rostock-based A-Rosa for 18 months, is trying to follow in the wake of a successful 15-year period for the ocean cruise industry, driven by the transition from staid excursions for well-heeled retirees to adventure tours aimed at younger travelers.
Lines such as Norwegian, MSC and Tui have livened up their cruises with a host of image changes. Gone are formal captain’s dinners, replaced by climbing walls, water slides and trendy nightclubs.
Mr. Eichler is more than familiar with the Aida ocean cruise model, which from 1996 revolutionized the industry with its party and entertainment “club ship” concept and bright red lips logo. Aida was affiliated with A-Rosa for two years (until 2004), and Mr. Eichler himself worked for the overseas cruise line for four years as head of marketing and sales.
Gone are formal captain’s dinners, replaced by climbing walls, water slides and nightclubs.
He is now putting that experience to good use at A-Rosa. The 48-year-old has shoved its antiquated entertainment lineup overboard, put cheesy pop music on the black list and turned the company’s advertising approach upside down.
He replaced discount coupons with 3,800 brightly lit billboards at traffic intersections across Germany. He took out full-page ads in popular magazines, touting the sexy new brand ambassador, actress and singer Yvonne Catterfeld.
“Today, price advertising is taboo for us,” said Mr. Eichler. Communication involves emotions, he said.
Price battles had recently steered Germany’s river cruise business into the red. Sales in Germany collapsed by 8.2 percent in 2012, and fell another 8.5 percent in 2013 – to €416 million ($521 million). The cruise lines had to dump their remaining vacancies at bargain prices.
The U.S. giant Viking left the German market after giving away discounts of up to 50 percent last year. In 2009, low margins from the river cruise division drove the cruise line Deilmann into bankruptcy. Tui wants to pull out of the business next year.
A-Rosa weathered the storm better than its rivals. In 2012, the company’s revenues sagged by 8.5 percent to €64.5 million. It had a shortfall of €1.3 million that year, and in 2013 also failed to get into the black. It now seems to be steaming away from the storm.
A-Rosa took its first steps toward internationalizing last year by opening offices in the United States and Britain.
To bolster profits, Mr. Eichler is trying to bring a hint of luxury to the fleet. Passengers who book at “premium” rates not only get all-inclusive service, but are also picked up from train stations and can use a concierge service. A butler takes care of their concert tickets during port visits or if they need a something from a pharmacy.
A-Rosa took its first steps toward internationalizing last year by opening offices in the United States and Britain. It might have been a clever strategy: Hype is growing there for river tours that take in the famous Lorelei rock on the Rhine, the junction of the Rhine and the Moselle and Budapest.
And there’s more good news: According to the German Travel Association, more than half of the 39 ships planned to be built this year for European markets have been commissioned by tour companies wooing American travelers.
The author is an editor at Handelsblatt covering the retail sector. To contact the author: email@example.com