#7: What can we learn from Viking Cruises?
Six lessons from Viking's rapid ascent to their position as the largest high-end cruise brand
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This week, I’ll finish a two-part deep-dive on Viking Cruises, one of the fastest-growing, best-executing travel companies of our time. And if you don’t already, subscribe to get my newest pieces in your inbox!
Last week, I wrote a history of Viking Cruises. If you missed it, read it here!
This week, I’ll distill six broadly applicable themes from Viking’s story.
1. Risk minimization and the long-game
Hagen is a self-professed risk-taker - “I love risk. I really do” - but the story of Viking is also one of risk-minimization.
Viking’s founding has elements of acquisition entrepreneurship. When Hagen started the company, he bought existing ships and - I assume - tour operators and large travel agents were accustomed to buying space on them. Even the purchase of KD was inherently risk minimizing. KD already had customers and a functioning operation. Viking probably realized early that focusing on the American market would be more profitable than European sourcing. However, Viking maintained KD’s diversified (and less profitable) European distribution for more than a decade after entering the US market. In those early years, if something didn’t work out in the US, they could fall back to their legacy (and less profitable) European distribution.
Viking’s start in river cruising may have been an opportunistic coincidence - "a couple of oligarchs […] let me have four ships cheap” - but river cruising is inherently less risky than ocean cruising. First, river vessels are smaller than ocean ships meaning there are fewer customers to source. Second, river ships have lower capital costs than ocean ships and can be laid up cheaply, which means it’s easier to “turn them off” when cruising is unprofitable. Oceangoing ships need to operate continuously because even layup is costly. Third, river ships in the 2000s were fungible. You could charter another company’s ships or charter out your own. Lastly, I’ve heard (but can’t confirm) that it takes a year to build river ships and last-minute construction slots are readily available. Because river cruise companies had long booking windows, they could essentially build ships on-demand - ordering ships after they had good visibility to next year’s bookings. That’s not possible in the ocean cruising world, where shipbuilding slots are reserved 3+ years out.
When Viking expanded to the oceans in 2015, it seemed like a big gamble. But they had two things going for them. First, they already had a loyal customer base interested in their travel products—who cares if the ship sails on a river or an ocean? Second, Viking had proven the ability to take on significant new capacity. In 2012, they simultaneously inaugurated 6 river ships and in each subsequent year, they introduced even more. Their first ocean ship in 2015 had fewer beds than the six longships they inaugurated in 2012.
I strongly suspect Torstein Hagen had a dream of re-entering the ocean cruising world when he started Viking. But he took almost two decades to build up a customer base who would fill those ships.
2. Product standardization
No cruise company has been more disciplined in standardization than Viking.
Once they locked in the longship design, Viking refused the temptation to make changes. This allowed the success of the longships to compound. All their European river vessels are now “longships.” While there are some smaller variants for certain rivers, the cabins, interior decor, and public facilities are nearly identical. The ocean ships were a departure from the river vessels - they’re larger and have more facilities - but all the ocean ships are copies of one another too. Viking does have niche products in Egypt, Southeast Asia, and the US, but even there the decor and facilities are as similar as possible to the main products.
Itineraries are highly standardized too. They would rather run many departures of the same itinerary than have variety in itineraries. As of publication, Viking’s website had 39 Mediterranean itineraries listed while Silversea’s had 189.
Beyond the obvious operational benefits (think Southwest/Ryanair and their uniform fleet of 737s), Viking’s level of standardization has two interrelated benefits for sales:
Simplicity - Most cruise companies worry about focusing too much of their marketing on shiny new ships when they have a whole fleet of older ones. Viking doesn’t have that problem. They can market the hell out of a single consistent product. And because travel agents account for more than half of their distribution, there’s another huge benefit. Once an agent has seen a single European river ship and a single Ocean ship, they can confidently sell the vast majority of Viking’s products.
Power - When you have more units of a single type of product, it’s easier to justify marketing investments. The marketing team can confidently put money behind an itinerary knowing that it will operate many times. A travel agent can justify trying out a new itinerary or flying out to see a ship for the same reason.
3. Clearly defining a customer
It’s human nature to chase new ideas rather than remain disciplined. I can imagine conversations in Viking’s early days where they wondered if they should appeal to families, multi-generational groups, or younger travelers. If you read trend reports for the travel industry, you’d feel like an idiot not to appeal to those groups.
But Viking focused on the demographic that has always been the core of the high-end travel industry: English-speaking older travelers who have built a lifetime of wealth, want to see the world, and have time to travel. This is the only large and high-spending demographic in travel.
Viking’s focus made their product better. By forgoing families, for example, they attracted older customers who didn’t want to be surrounded by screaming kids at the pool. By focusing on English-speakers, passengers could easily socialize and the ships didn’t have annoying announcements in multiple languages. By focusing on culture, history, and the destination, Viking could forgo casinos and keep the ambiance calm and classy.
In recent years, there’s been a major exception to this focus: China. Affluent Chinese travelers have the potential to be similarly numerous and high-spending, and Viking has decided they are worthy of focus. They’re pursuing the opportunity in typical fashion - separate Chinese-language ships ensure those guests get the same benefits English-speakers do without changing the English-language product.
We wanted to offer an equally good product to Chinese guests as we did to Americans. So we did focus groups, asking: what do you really want, what annoys you when you travel, what scares you? When we take American guests on the Yangtze River, they want to try Chinese food, but do they want it for breakfast? Never. It’s the same for the Chinese guests, and the cruises are designed to give them as much of a taste of Europe as they want, but with the comforts of home. - Brendan Tansey in Dragon Trail
4. Customer-centric expansion
Most travel companies think of themselves as having a product (eg. hotels or flights) and they try to sell that product to as many types of people as possible. Multi-generational groups? Sure! Gen-Z travelers? Why not! Business people? Of course, they pay more.
There’s nothing inherently wrong with that product-centric approach. In fact, it can be resilient to have several customer “constituencies.” Think of airlines post-Covid - they’ve increased their leisure traffic and recovered despite the sluggish return of business travel. That wouldn’t have been possible if they always focused on business travelers. But a customer-centric approach has some obvious benefits too - companies can create a product perfectly aligned to a demographic’s desires and they can focus their marketing on that demographic.
The most interesting part of Viking’s customer focus, though, is how it enabled their expansion to a new product (from river cruising to the ocean cruising). When Viking expanded to the oceans, they designed an ocean product that would appeal to the exact same customer as their river product. They could rely on their existing distribution to sell this new product line and 100% of their customers, at least in theory, would be interested.
A product-centric company with multiple customer personas takes on more risk if it expands to another product category. Do you triangulate among your multiple customer types to create a new product that will please them all? Do you just focus on one of your many customer personas, ignoring a big chunk of the distribution that has made you successful? Both approaches have risk. Viking’s focus on a single customer type made it easier (and less risky) to expand to new products.
5. The power of no
Standardization requires saying no. Choosing a demographic and sticking to it requires saying no.
In their first decade, Hagen was often asked why Viking’s river vessels didn’t have flashy amenities that their competitors had (gyms, spas, pools, or bikes for rent). His answer was basically - most guests don't care about those enough to change their purchase decision, especially if Viking’s prices are a little lower. And in the space it takes to store all those amenities, Viking could pack in more cabins.
Arnie Weissmann in Travel Weekly put it well in 2013:
While others focus on luring customers with extras, Hagen's strategy assumes economics will trump those amenities and services and that passengers will be more than happy to book his "similar product" if they can get it for less. One gets the sense that Viking's management understands that its product doesn't need to be best, as long as it's good enough. - Travel Weekly
Viking has always refused to enter the amenities arms race.
6. Inclusive value and respect for the customer
When you look at Viking’s marketing material, you get the sense they respect their customer. The customers they target are experienced travelers - they know the lowest upfront price may be a trap - and they are willing to pay for value. As Arnie Weissmann astutely pointed out in 2013 (quote above), this is not the same as having the “best” or most inclusive product.
What Viking includes and how they communicate it are both important. Viking includes the items that most customers in their demographic will actually want and nothing more. You could easily go on a Viking trip and not pay for anything extra. A major exception is gratuities, which are not included. I assume this is meant to align with American customs (Viking cruises sold in the UK include tip). Besides gratuities, Viking includes what any reasonable person would want. [Side note: I’d love to know the history of this bundle. Was it driven by gut instinct or by Simon-Kutcher-style research?]
Beyond the bundle itself, how Viking communicates these inclusions matters just as much what they include. Embedded in the value communication is a secondary message: having all this included will eliminate hassle. The upfront price is the real price. You won’t be bothered onboard by people trying to upsell you. When you want a glass of wine at dinner, you won't have to fuss with receipts. Your waiter will just pour some wine. This ease is a key part of Viking’s appeal, and it clearly resonates.
Let me know what you think! And thanks for reading 😊
Very insightful pieces on cruises. Good to know that is a trend towards modern cruise travel and the days of the old fashioned cruise is waning. Good news! There is a need for your kind of analysis in travel. Best wishes.