It's summer in Oregon, so of course it's raining. I'm sitting in my cold kitchen, affixed to a cup of coffee, having a tropical daydream. I'm watching the sun leave its gaudy signature in pastel inks across the evening sky. Early stars stroll the heavens and a breeze, warm and newborn-soft, moves across the stillness. It's my daydream, so I'm traveling in the company of 2,500 lobsters and 1,500 bottles of champagne. We're heading almost due East from Miami to a small, private spit of paradise called CocoCay between Freeport and Nassau in the Bahamas' Berry Island chain. Life is good.
Somewhere below deck, a grind of Las Vegas show girls is kicking up a storm around David Brenner, but they can't compete with the sunset. Still I worry. Displacement notwithstanding, there is the disquieting thought that anything weighing 74,000 tons has no right to float. But every time I raise a hand to scratch my sunburn, someone brings me another drink, so not to worry. Royal Caribbean Cruises, Ltd. (RCCL) takes good care of you.
Back in the early '70s, RCCL took alert advantage of the public infatuation with sea cruises popularized by the dronish Love Boat TV series. Starting with the Song of Norway in 1970, RCCL now operates a fleet of nine ships sailing to more than 100 destinations on four continents. Its combined 14,228 passenger berths make it the world's largest cruise line based on capacity. The company reports revenues of more than $1 billion a year.
Of the many strategies that contribute to its market competitiveness and profitability, two complementary ones are comprehensive use of technology- specifically the AS/400's communications capabilities-and sumptuous service.
Royal Caribbean's service extends well beyond providing its customers with cabin space. From the moment I decided to indulge my vacation fantasies aboard a floating alcazar, catered to by a staff so deferential they resemble personal servants, RCCL used the AS/400's communications proficiency to book my airline and hotel reservations and arrange ground transportation, credit services, and a post-cruise land package. I admit, though, that having my shoes aligned in neat rows by the room steward was a bit much.
Four AS/400s form the hub of RCCL's global network connecting business, transactional and operational systems. Whether the business activity originates in a booking office in London, a supply warehouse in Alaska, corporate headquarters in Miami, or aboard a ship bobbing in the Gulf of Mexico, each transaction is ultimately recorded on the AS/400s.
As late as 1988, RCCL was still operating with a collection of S/38s when application and business demands began to outstrip existing computing power. Enjoying rapid growth, the company wanted to protect its investment in hardware and applications. But a successor system would have to both accommodate and consolidate the stand-alone reality beyond RCCL's corporate headquarters.
The company had collected a tropical-fruit assortment of hardware: an ICL mainframe in London, Unix-based point-of-sale (POS) systems running on NCR platforms aboard its ships (which recorded the purchase of my resonant Hawaiian shirt); Tandem systems supporting other on-board applications, Sun and NCR workstations, and a variety of Ethernet and token-ring local area networks. Connectivity was key, and the AS/400 provided the solution. "The AS/400 connects to virtually anything," beams Ron Sieman, vice president of Information Technology. In fact, he concedes that he hasn't found a piece of hardware that can't communicate with the AS/400. And he has tried.
In 1991, RCCL introduced CRUISEMATCH 2000, a real-time, direct-access computerized booking system. No fewer than 20,000 North American travel agents-and even agents in Chile using who-knows-what equipment-are now linked to an AS/400 through an IBM Series 1 computer acting as a communications front- end. The AS/400 also gives RCCL's personnel online access to most major airlines' computer reservation systems. Unix systems now talk to the AS/400s through TCP/IP. Shipboard POS systems transfer passenger billing information, inventory levels, and operational data to the AS/400 before and after each cruise. PCs connected to an AS/400 in Miami, locally networked on a PC LAN, are linked by way of a wide area network to the ICL mainframe that propels RCCL's British operations.
"Open systems today," says Sieman, "means being able to connect anything to anything and exchange crucial information." Within the company, Sieman used the AS/400 to connect 1,000 corporate users who transact the company's business on an assortment of local and remote systems. These systems support a new generation of applications that interact. From passenger reservations to on- ship inventory, from accounting to human resources, the communications capability and the growth path provided by the AS/400 allowed RCCL to absorb a five-fold increase in business transactions in the last seven years.
The result has been an increase in RCCL's North American market share from 13.3 percent in 1987 to 19.7 percent in 1992. Ships operate between 98 and 100 percent of capacity. Not without cause. Personalized service (ah, here comes another cocktail) and shipboard opulence combine to make the enjoyment of the journey surpass the destination. Basically, they spoil the stuffing out of you and use technology to make the experience seamless.
The ships are palatial, featuring big-city amenities free of big-city anxieties. A five-deck atrium with glass elevators caps an array of indulgence opportunities. A nightclub, a casino, the signature Viking Crown Lounge cantilevered from the ship's funnels and modeled after Seattle's Space Needle, two dining rooms, a cinema, twin swimming pools, an exercise facility, and a two-level, indoor-outdoor cafe offer sea-going diversions. There is even a shipboard library for the more sedate.
Feeling sedate, I leave my deck chair and wander toward the library. With a shipload of distractions, I don't imagine it being busy. I've been reading an unsettling book, full of untidy information unavailable in marketing brochures. Beyond excellent use of technology and superior service, I read that RCCL holds another key to profitability: clever use of the tax code. Royal Caribbean is able to do something unthinkable for its passengers or its employees. Owned in part by the Pritzker family, who rank near the tippy-top of Forbes' list of America's richest 400, this U.S.-based company which markets primarily to U.S. customers and earns annual revenues exceeding $1 billion, pays not one penny of U.S. income taxes.
It's possible because Royal Caribbean is incorporated in Liberia and registers its ships in the Bahamas, Liberia, and Norway. A Bahamian partnership represents the interests of the Pritzkers through investments in various trusts. For reasons no average taxpayer can comprehend, all of this makes RCCL a "controlled foreign corporation" and therefore exempt from paying U.S. income tax.
It's quite legal and RCCL's competitors enjoy similar advantages. But it's enough to spoil a perfectly good daydream.
Victor Rozek has 17 years of experience in the data processing industry, including seven years with IBM in Operations Management and Systems
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