Exclusive: New Carnival Corporation CEO talks with TPG about his vision for its 9 cruise lines

Josh Weinstein is walking into what may be the toughest job in corporate America.

The new president and CEO of cruise giant Carnival Corporation — he takes the reins today — is confronting a business that has been turned upside down by the COVID-19 pandemic. Once enormously profitable, the parent company of nine cruise brands has been hemorrhaging money for two straight years. It has had to take on an enormous amount of debt just to survive.

But ask Weinstein, 48, for a big-picture overview of the task that lies ahead of him and his vision for the company, and he doesn't even mention its current financial troubles. He talks about making people happy.

"What do I think about the company and where do I see it going? I think that we do have a purpose, and our purpose is to create happiness. And the way we do it is by delivering unforgettable and much-needed vacations," Weinstein says at the top of a one-on-one interview with TPG — his first with a media outlet since being appointed CEO.

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There's a lot to do on the financial front to right the ship that is Carnival Corporation in the coming years. Weinstein admits as much. But the company will win or lose in the long term by how well it delivers wonderful vacations, he suggests. During the hour-long interview with TPG over Zoom, it's clear that that will be his focus at the highest level.

It's a philosophy that began forming in Weinstein's mind soon after he joined Carnival Corporation two decades ago as a corporate lawyer, having worked for one of the top New York law firms specializing in mergers and acquisitions. He'd never been on a cruise until that moment. But soon he was heading to ships regularly — not just for work but increasingly for fun. Weinstein, his wife and his three children became cruising enthusiasts early on in his tenure at Carnival Corporation and made it a regular thing.

"I have these memories of my family growing over time, and I can associate them with cruises," he says, pointing to pictures of his family on ships that he keeps near his desk. "They are unforgettable because not only are we just creating that happiness in the moment, but I can close my eyes and I can just start smiling when I think about the experiences that I've had, that we have provided."

It's that sort of feeling that Weinstein says he wants to make sure Carnival Corporation's customers continue to have. And if they do, he suggests, the company will thrive.

No big changes for now

Weinstein is taking over as president and CEO of Carnival Corporation from Arnold Donald, who is stepping down from the position after nine years on the job. Since 2020, Weinstein has reported directly to Donald as the chief operations officer for the company and also the head of its U.K.-based cruise lines. Before that, he ran the U.K.-based lines for three years.

It's a transition that is unlikely to bring major changes to the way the company operates — at least at first. Weinstein tells TPG that he is "on a bit of an exploration path" of understanding the company's various divisions and how they're delivering on the promise of happiness that he talks about — each in their own way.

Carnival Corporation is perhaps best known as the company behind Carnival Cruise Line — the world's second-largest cruise brand. But it also operates eight other major cruise brands, each offering something a little different.

The brands include everything from big, mass-market lines such as Carnival, Princess Cruises and Holland America, which offer cabins starting at under $100 per day per person, to luxury line Seabourn, which sells rooms on its ships for more than $1,000 a day in some cases. Carnival Corporation also operates some of the world's biggest cruise brands based outside of North America, including U.K.-based P&O Cruises and Cunard; Italy-based Costa Cruises; Germany-based AIDA Cruises; and Australia-based P&O Cruises Australia.

It's a massive portfolio that makes Carnival Corporation not only the world's biggest cruise company — the company accounts for nearly half of all cruise vacations taken worldwide — but also one of the world's biggest leisure travel companies.

Weinstein is quick to point out that the "happiness" that he envisions each of the brands providing their customers will come in different forms.

"There are very, very different target audiences for each of those brands," Weinstein notes. "Somebody who goes on a Carnival cruise, which I do with my family, loves the waterslides and the boisterous nature of [the trips]. The idea of what it means to create happiness in that environment is completely different than [what it is on] a world cruise on Cunard."

Those differences are to be cherished and won't be changing under his leadership, Weinstein suggests. Indeed, if anything, the Carnival Corporation brands under his watch will become more distinct.

Related: The ultimate guide to Carnival Cruise Line

"Each [of the brands] have their own ethos, their own way of creating that happiness," Weinstein says. "I think the more focused each brand can be in clarity around what its proposition is, the better we'll be."

It's not just about honing the brand promise, he adds. It's about delivering on what's promised.

"The onboard experience has to match what that promise is, and if we do that well, we are going to end up with [cruiser ratings] off the chart," he says. "People are going to come back, and they're going to tell their friends."

To that point, Weinstein says his job in the coming years won't be to tell each individual brand what to do. It will be about "making sure that each of our brands is doing everything they do based on their guest and target market.

"I'm not coming to any brand to dictate that I expect you to have a steakhouse, [or to ask] 'why don't you have a hot stone massage?' ... because I don't know what their guests want. What my job is is to make sure they ... understand what their proposition is, why their guests should choose them, and that they can deliver on that. And so that's where my focus is."

Working back to normalcy

In the short term, of course, Weinstein will need to navigate the company through some major financial hurdles. No other segment of the travel industry has been hit as hard by the pandemic as cruise lines, which were forced to shut down operations completely in the early days of the pandemic and went many months without operating a single trip — or bringing in any revenue.

While most of Carnival Corporation's ships are now back in operation, bookings have only recently begun returning to something close to normal levels and occupancies on ships remain off their peaks. Carnival Corporation’s ships sailed just 69% full during the three-month period ending on May 31, well below the 100% or more that is typical for the company (reported occupancy on ships can surpass 100% when more than two people stay in some cabins).

As a result, Carnival Corporation has continued to lose massive amounts of money in recent quarters — $1.83 billion in just the three months ending May 31, a magnitude of quarterly loss that once was unthinkable for the company.

Perhaps more troubling, Carnival Corporation is now saddled with a substantial pile of debt — $35.1 billion as of the end of May — that it mostly issued in the past three years to raise money to stay in business. That's up from less than $12 billion at the start of 2020. The interest on the debt alone is costing the company more than $120 million a month.

For context, in the company’s last good year (2019) it made about $2.9 billion in profits.

Among the immediate concerns that Weinstein will need to address is that some of the abovementioned debt will need to be refinanced relatively soon in a market where interest rates are rising and borrowing is getting harder. And there's growing worry among Wall Street analysts that a potential severe recession in the coming year could further weaken the company's financial position.

In a research report issued in late June that made waves in the industry, Morgan Stanley analyst Jamie Rollo warned that, should the economy deteriorate greatly, a possible worst-case scenario would be for the value of the company's stock to drop to zero. He didn't use the word bankruptcy, but it was implied.

"If the high yield market [where Carnival Corporation could borrow money] closes, and/or if there is a demand shock that causes trip cancellations or weak bookings (and hence customer deposit outflows), liquidity could quickly shrink," Rollo wrote, meaning that in such a scenario, the cash the company had on hand to pay its bills could evaporate.

Investors on Wall Street are clearly worried about the company's future, as can be seen in the 58% plunge in the company's stock price this year. The stock is now trading below $10 a share, down nearly 90% from highs set four years ago and significantly below the level where it was trading when Donald took over as CEO nine years ago.

Weinstein says he won't comment on the Morgan Stanley report. What he might say "is probably not fit for print," he quips. But he says he has "extreme confidence" in the business long term, and he sounds upbeat about the company's ability to weather any coming storm.

Weinstein notes that he spent 10 years as Carnival Corporation's treasurer starting in 2007, "right before the wheels fell off the world economy and we went into the Great Recession." It was a role that had him in the thick of the effort to keep the company's financial position steady at a very stressful time — a "trial by fire," in his words, that he says has prepared him for the current moment.

He's also taken a front-and-center role in the company's comeback from the pandemic shutdown in his most recent positions as chief operations officer and head of the company's two U.K.-based brands.

As he sees it, Carnival Corporation is in the midst of a "monumental" comeback. "As I think about the next year and a half, we've got great booking momentum ... the occupancies continue to build," he says.

As long as the company delivers on providing that happiness to customers that is his focus, the good times will return, and the company can start paying down the high levels of debt, he suggests.

"If we can deliver on that purpose, if we communicate it the right way, if we are real clear with our target audience about what they can expect and then deliver that, the financials fall into place because we're going to be generating the demand and the revenue that we know that we can achieve, and [that will] continue to improve the financial picture," he says.

Is it wise to book a cruise right now?

Still, there's that worse-case picture painted by Morgan Stanley's Rollo. What if we do get a severe recession that freezes up credit markets and prompts cruisers to shy away from bookings? Can a weakened Carnival Corporation survive that sort of event? Or, as we put it to Weinstein, echoing the worry of some of our readers: Is it wise to put down money for a future cruise right now knowing that more trouble for the industry could be brewing?

The question may seem extreme, given the way Carnival Corporation's brands have begun bouncing back. But cruisers already have been burned by the failures of several much smaller cruise companies since the pandemic began, most notably Crystal Cruises and its Asia-based sister brands Star Cruises and Dream Cruises, and the U.K.'s Cruise and Maritime Voyages. The latter was the second-biggest cruise operator in the U.K. after Carnival Corporation's P&O Cruises.

Many cruisers who paid in advance for cruises on these defunct brands have yet to get their money back.

Related: Crystal Cruises shuts down after parent company runs out of money

In answering the survival question, Weinstein talks a lot about the nature of recessions, noting that we don't even know for sure that a recession is coming; that if one does come, it might not be severe; and even if it's severe, it likely wouldn't occur in all of the places the company operates at the same time.

Perhaps more significantly, cruise lines historically haven't seen as severe a downturn in business during recessions as other travel providers. Weinstein notes that's because cruises tend to be perceived as value options in the travel space. During recessions, people don't necessarily give up vacationing. Instead, they cut back on how much they'll pay for vacations. And in doing so, they sometimes end up switching from a land-based trip to a cruise.

"I'm not trying to downplay [the risk of a severe recession]," he says. "But we do know that we are recession resilient."

Weinstein also points to strong pent-up demand for vacations in the wake of the pandemic lockdowns and also the boost in demand that cruise companies should get from the relaxation of COVID-19-related vaccine and testing rules for cruising that is starting to occur. Both factors should keep bookings coming in, he says.

Plus, the company had $7.5 billion in liquidity on its books as of May 31, a cushion against further losses.

"Business momentum is pretty fantastic," Weinstein says. "We are sitting in a pretty good place right now when it comes to our liquidity position, and all of that bodes well."

Are the days of rapid growth over?

Even if the economy proves to be stronger than some expect in the next year or two, Weinstein is facing some tough decisions, including whether and how extensively to begin ordering new ships again.

Up until the pandemic, Carnival Corporation and its major rivals such as Royal Caribbean Group had long pursued a strategy of ambitious growth that involved ordering new ships almost as fast as they could be built. The arrival of new ships at major brands, often with new features, seemed to be always around the corner, and it drove both excitement and bookings among cruising fans. It was at the core of the rapid expansion of the industry.

But since the pandemic began, such orders have been on pause, and restarting them at Carnival Corporation carries new risks given the company's high debt level.

When asked whether ship orders could soon resume, Weinstein is noncommittal. He notes that the company is determined to get its debt level down and rebuild the "fortress balance sheet" that it once had. To do that, the company will have to divert a significant chunk of any profits it generates in the coming years to paying down debt, not buying more ships.

Any ship orders that are to come are likely to be for delivery several years into the future, he suggests.

"I will say that our order book is set for the next few years ... [If] everything works out the way we hope, we'll have the opportunity to pay down debt in a meaningful way [in the coming years]," he says. "That doesn't preclude us from doing what we think is appropriate in the growth profile ... [But] we'd be looking at ships [scheduled to arrive] in four, five, six, seven years down the line."

Related: The ultimate guide to picking a cruise line

The good news for cruising fans who love new ships is that several of Carnival Corporation's biggest brands including Carnival and Princess still have new ships on the way — vessels that were ordered before the pandemic began. But the pipeline of new ships on order for Carnival Corporation brands is quickly running dry. The company has just seven ships on order across its nine brands, all but two of which will arrive by the end of next year.

Four of the brands, including Holland America and Costa, do not have a single ship on order.

The order drought, moreover, comes on top of the early retirement of 23 vessels across Carnival Corporation's nine brands during the pandemic as the company slashed costs to survive. The company went into the pandemic with 105 vessels in all. Even after several new ship additions in the past two years (ships that already were in the pipeline), it's down to just 92 vessels.

Weinstein suggests that new ships aren't as key to the health of the cruise industry as some might think.

While "a lot of our guests love the new ships," some of the highest ratings Carnival Corporation brands get from customers is from sailing on older ships, he says.

"New builds are awesome, but it's the whole fleet that drives the business, the profitability," he says.

Contemplating a 'weird' world of black swans

TPG ended its conversation with Weinstein with a broad question about how the pandemic has changed the way he and the rest of the leadership team at Carnival Corporation think about long-term planning.

Specifically, how are they now modeling the possibility of a business-halting event such as the pandemic? Do they see the pandemic-caused shutdown of cruising as a one-off "black swan" event so rare that something like it is likely never to happen again? Or is their view of what the world could possibly throw at them forever changed? And, if so, will we see a new conservatism in how they run the business?

Weinstein won't predict the future, but he did say that Carnival Corporation had modeled the possibility of a global pandemic into the company's business planning — though he suggests it hadn't conceived of the magnitude of the effects something like the COVID-19 outbreak could have.

"Did anybody predict a pandemic? Did we build that into the models? Yeah, we've looked at that in the past as (a possible) 'black swan' event, along with other 'black swan' events," he says. "But I'm fairly certain we're not the only ones that didn't get this one right. I mean, from a modeling perspective and thinking about the impact, there's [only] so much you can do and plan for."

Weinstein suggests it's a challenge to build a day-to-day business model that factors in the possibility of another pandemic that would have the worldwide effects of the COVID-19 outbreak, or a similar phenomenon that would shut down cruising for months on end.

"I think it'd be very difficult to live our lives planning around something that looks like the impact of what just happened," he says.

That said, the remote possibility that something else as unexpected and damaging to the company as the COVID-19 pandemic could happen is one reason Carnival Corporation's leaders want to restore the company's balance sheet as soon as they can.

"Our ability to, over time, rebuild the balance sheet, get back to that fortress [balance sheet], that's the path that we want to get on," he says. "I think we can do that in a way that still allows us to grow and to order more ships over time. I don't look at them as mutually exclusive. But we absolutely have a priority that we're going to use our cash to ... reduce financial leverage."

His basic message: You never know what's going to happen, so it's best to be in a strong position at all times.

Or as he puts it at the end of our conversation: "The world's a weird place."

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