Message Boards

Message Boards (http://www.steamboats.org/forum/)
-   Save the DELTA QUEEN (http://www.steamboats.org/forum/save-delta-queen/)
-   -   A different (optimistic) view (http://www.steamboats.org/forum/save-delta-queen/2831-different-optimistic-view.html)

Bill McCready 01-31-2009 01:17 AM

A different (optimistic) view
 
Hello from a former lurker. Carmen thought my positive viewpoint on the DQ was valid and worth sharing. Here's the first of three installments. One favor I'd like to ask. Could you please "hold your fire" and read all three installments before blasting me? After all, this way you can take better aim!

Background: I own a tandem bicycle factory and found this site while researching the advisability of chartering the Delta Queen for a week-long Memphis-to-New Orleans bicycle tour in order to promote the "tandem lifestyle." (An alternative to the Harley lifestyle, tandeming couples are a bit lighter and considerably more fit). After our first charter event sold out, I chartered the DQ for an encore tour. These highly successful Delta Queen "tandem cruises" occurred in April 2006 and April 2007.

My Delta Queen charters were negotiated with executives from Delaware North. On the week of my first charter the Delta Queen Steamboat Company was sold to Majestic America Lines. While planning the encore charter I dealt with a transition team made up of exec's from both corporations. After the second DQ charter I worked closely with Majestic America on prospective charters on the Columbia River. We were in the midst of ironing out the final details when Majestic America decided to exit the river cruise business.

From my 3 years of working with various executives of two companies that owned her, I obtained a Delta Queen viewpoint that is somewhat different from what I have read on this forum. Although I am a rank beginner compared to most of you, I have now logged four sternwheeler cruises (2 scouting plus 2 charters) on 2 vessels (3x Delta Queen plus 1x Queen of the West). I've also taken guided inspection tours of the AQ, MQ and CQ.

As opposed to a normal cruise, my bicycle-centric charters required a half dozen landing spots that were entirely new to the DQ (including Angola Penitentiary and the former Carville leprosy colony). In our post-9/11 world every new landing spot required a special permit from the Coast Guard.

Some points of interest.

There will always be a certain tension between the DQ vs. USCG. Because the Coast Guard doesn't want to be blamed when the DQ "inevitably" suffers a disaster with resulting loss of life, their practiced position is to formally object while bowing to the will of congress. They don't hate the DQ, but she will forever be the vessel that "rates" strict interpretation and extra inspections. The masters and owners of the DQ have become used to this, and have no desire to do anything that will raise hackles. Finding a loophole is not an option.

The DQ always made money! While her younger and bigger sisters were cheaper to operate on a per-stateroom basis, and each had a much higher potential profitability, during a decade of valiant attempts three different owners never found a way to fill the bigger boats without major discounts. Year after year a higher percentage of the DQ's smaller number of staterooms were filled without discounting. Unfortunately, the DQ's ACTUAL operating profits seemed pitifully small when compared to her sisters' PROJECTED yet unrealized profits.

The DQ had two other distinct advantages over the MQ and AQ. First, she attracts an "authenticity" clientele that is not drawn to her sisters (or any other cruise vessel). Second, her smaller size allows her to travel on nearly twice as many miles of river. Unfortunately, because she invariably "steals" clientele from her sisters (who always seemed to need just a few more passengers to "turn the corner" on profitability), owners have sometimes considered her a nuisance instead of an asset.

The past three owners all wrongly believed they could somehow increase demand and fill their trio of Mississippi steamboats without discounts. After three successive failures it is impossible to believe that anyone would give this a fourth try. In talks with sales executives I learned that millions of Americans dream of cruising the Alaskan passage, Mexican coastline or Caribbean islands. A much, much smaller number can imagine cruising the Columbia and Snake Rivers. The number who think that a cruise on the Mississippi and Ohio rivers might be entertaining is smaller still. That's right, when it comes to attracting new passengers the Columbia outscores the Mississippi.

Next installment: DQ and the perfect storm.

-Bill McCready

Shipyard Sam 01-31-2009 07:03 AM

Very interesting. Keep going.

Lexie Palmore 01-31-2009 10:08 AM

So, I googled you and found out more about your business. There is a tandem cycle club that comes to our area every year. We pass them on our way to church. Someone once asked if my husband and I would like to rent a tandem cycle. As far as I am concerned, it would be a big fat ticket to disaster. We get along by Not doing things in close proximity. Nose to back on a bicycle?.......No. We greatly admire those who do because it has to take coordination and cooperation of the highest order, or everyone ends up in a ditch or pasted to the front of a car. I look forward to reading the rest of your story.

Bill McCready 02-01-2009 02:01 AM

Delta Queen—an optimistic view: Installment 2 of 3

The execs I worked with at Delaware North during 2005 and 2006, including Delta Queen Steamboat Co.’s CEO, were well aware of the DQ’s need for a new exemption in 2008, and were on schedule to obtain this exemption a year early. What happened?

First was Katrina. Even before this September ’05 hurricane suddenly knocked out New Orleans tourism, Delaware North’s DQSC division couldn’t find enough full-fare customers to fill their 3 steamboats. And when you go back and look at pre-Katrina brochures you’ll discover that a majority of the cruises either started or ended in New Orleans. If you factor in the huge number of Spring and Fall 3 and 4 day loops that both started AND ended at the Robin Street Wharf, you’ll realize that New Orleans anchored up to 60% of DQSC’s total bookings. Projecting a profit on the Mississippi after Katrina destroyed New Orleans was akin to projecting a profit at IHOP without opening for breakfast. After years of disappointing financial results Delaware North decided to quit playing with steamboats.

Fortunately, Delaware North found Ambassadors International (AMIE), a young company with an entirely new business plan. After a short courtship (and only a few months after Katrina) AMIE bought DQSC from Delaware North in April ’06---the same week as my first Delta Queen charter.

AMIE’s intriguing game plan was to bring all six American riverboats (3 on the Mississippi plus 3 in the Pacific Northwest) under one ownership. Time was ripe, they figured, to promote a type of upscale river cruising that had become wildly successful in Europe. By adding luxury touches, cutting operating costs and avoiding price wars (which had killed river-cruise profits on the Columbia), AMIE could project a profit at fare levels too low to attract new competitors, who would be forced to build new vessels. Moreover, AMIE was able to create its American riverboat monopoly at fire sale prices. In the case of DQSC, Delaware North’s selling price for their 3 Mississippi boats was about half of what they’d paid at a bankruptcy auction only four years earlier.

But to survive, AMIE had to control costs. In doing this Majestic America made some regrettably poor decisions that have fueled many, many posts to this forum. Majestic not only made a bunch of silly choices that alienated core passengers, they also upset travel agents, ditched shorter (less expensive) itineraries and rescaled Mississippi River cabin pricing to “bring it in line” with their West Coast offerings. Another thing they “brought in line” with their West Coast operation was getting rid of the unions.

When post-Katrina bookings on the Mississippi remained soft, AMIE decided it was an opportune time to lay-up the Mississippi Queen. More than a simple refit, they decided to rip out dozens of the MQ’s interior walls to create a class of larger balcony staterooms that commanded premium prices out west.

In the midst of all this integrating and streamlining AMIE failed to fast track the DQ’s exemption process—which had been started before they purchased her in early 2006. On the first Tuesday of November 2006 the Delta Queen was thus vulnerable to a sea-change that proved more disastrous for her future than Hurricane Katrina. That was the day when frustrated independent voters who were unhappy with developments in Iraq surprised political strategists on BOTH sides of the aisle by showing up in unprecedented numbers to vote against the party of the commander-in-chief. That day’s surprise vote not only swept Democrats into office, it simultaneously flipped every congressional committee chairmanship. With pro-Union Inouye and Oberstar suddenly in charge of determining the Delta Queen’s fait, the former “slam dunk” exemption became a political football.

Many posters on this forum have imagined that Oberstar is some sort of crook who tried to bribe AMIE while receiving illicit payoffs from a pair of unions. I do NOT share this opinion. By my view, Oberstar had bigger goals. A year after Delta Queen changed owners, Oberstar's office informed an AMIE representative that the Delta Queen’s exemption was dead in the water. Was AMIE presented with an option? AMIE says no. While I have no personal knowledge of discussions between the two parties, I do know that AMIE was largely controlled and managed by the Ueberroth Family, who is as closely identified with Republican Party politics as unions are identified with the Democrats (90% of organized labor’s political contributions flow to Democratic candidates). Given the natural antagonism, I do believe reports that AMIE’s immediate concessionary offer to staff the DQ with a union crew was met with jeers, and a “suggestion” that AMIE should write-off the DQ and hire union crews for their 6 other boats.

In my unsubstantiated personal view, staffing AMIE’s entire fleet with union members would not have made one iota of difference. As proof I will remind you that Oberstar and both unions quickly made public pronouncements that they were not in bed with each other, and that no Delta Queen deal was on the table. If a few hundred union jobs was the underlying issue, why would the unions and Oberstar’s office have gone to such pains to distance themselves from each other?

If Oberstar wasn’t looking for a favor or payoff, was his motivation safety? I doubt it. Instead, in the middle of ’07 Oberstar may have figured a way for the little ol’ Delta Queen to raise millions of dollars for hundreds of Democrats who would run for election the following year. While Oberstar provided plausible political cover, his fellow Democrats could put the pinch on thousands of local unions. During these behind closed doors sales pitches the Delta Queen would be offered as “proof” of the party’s devotion to union causes. By my view all of the various public efforts to “save the Delta Queen” only made it easier for Democrats to quietly wring tens of millions of dollars from union coffers.

Do I have proof? My proof is the two related votes that got around Oberstar’s roadblock. In April 2008 Steve Chabot (R-Ohio) averted Oberstar’s Committee by attempting to attach a reprieve for the Delta Queen onto a revision of an unrelated bill. He lost the first round when a congressional rules committee blocked the inclusion of his revision on a 9 to 4 vote. Does anyone want to argue that all 9 Democrats wrongly believed the Delta Queen was unsafe while all 4 Republicans were somehow better informed? When Chabot then tried to overturn the rules committee with a procedural floor vote, 90% of the House Democrats (including those representing states served by the Delta Queen) voted to prevent a move that may have opened up a discussion of the Delta Queen’s safety. Were these congressional members afraid of learning about safety? More probable is that they voted against cutting off a prime source of election-year funds.

Am I a cynic? Actually I have a degree in Political Science plus 8 years of experience as an elected official (Claremont City Council 1984-1992).

This is not to say, however, that AMIE was merely a victim. Majestic America delayed the announcement and subsequent fight to save the Delta Queen for several months. Those of us who follow this forum were dispirited that AMIE’s initial public response was hardly more severe than a shrug of the shoulders. Like many of you, I questioned whether or not AMIE really wanted to see the Delta Queen survive. I checked with my contacts, and was told by an ex-Delaware North Executive that my suspicions were flat out wrong. While the process of preparing the application had been delayed through the transition, for a full year AMIE had spared no effort in finishing, presenting or backing its request for the Delta Queen’s continued exemption.

In the Spring of ’07, when someone in Oberstar’s office told AMIE that any bill with a Delta Queen exemption would never make it out of committee (in spite of AMIE’s offer to re-instate the union), why wasn’t AMIE’s initial public response more combative?

My contacts at Majestic America (where I was working on putting together a Columbia River charter) provided two explanations. First, it wouldn’t have been effective (Oberstar is in a very safe seat). Second, AMIE had by then realized that their Mississippi strategy had been a disaster. Instead of finding new passengers, they’d driven away travel agents and past clients. Even with one of their big Mississippi boats sidelined, they couldn’t find enough full-fare passengers for the two that remained. The silver lining of Oberstar’s message was that AMIE could use this “bad news” to create a buzz. Instead of declaring an immediate war on Oberstar, they instead decided to run a short-term “last chance” promotion where they'd work with travel agents to fill empty cabins while raising needed public awareness. Unfortunately, this AMIE plan, like most others, proved unsuccessful.

Why didn’t AMIE transfer the DQ to a third party? Wouldn’t a non-profit or Democrat-affiliated bigwig have had better “luck” obtaining a new exemption? Throughout 2007 AMIE was still optimistic about the long-term success of their river cruise monopoly. The only thing worse than losing the use of the Delta Queen would be to have her survive to become a potential competitor.

In a casual conversation one AMIE insider told me that if the Delta Queen could no longer carry overnight passengers she’d be worth more if broken apart than if kept whole. In this totally candid conversation we wondered about the E-Bay value of the calliope, pilot’s bell, doors, windows, etc. Although the person I was talking to was NOT senior enough to know AMIE’s fall-back position, it caused me to recall those old west “WANTED” posters. Was the DQ worth more “DEAD or ALIVE”?

A second personal fear came by way of a small railroad museum here in Los Angeles. Their prize display is an ex-Southern Pacific steam switch engine with curious burn marks and missing sections of drive rods. It seems that on the eve of its transfer to the museum, some idiotic railroad employee desecrated the locomotive to make sure it wouldn’t fall into “enemy hands.” In my mind’s eye I could envision a "preserved" Delta Queen with a spiked boiler or shorn pitman arms.

As 2007 came to a close I was convinced beyond all doubt that 2008 would be the Delta Queen’s final season; and that she’d soon be scrapped or permanently disabled. Now, however, I can imagine a bright future. I’ll share this with you in my third and final installment.

Bill McCready

Franz Neumeier 02-01-2009 06:00 AM

Bill, I can't wait to read part 3! Thanks so far already for this brilliant analysis. It tells the whole story that until today has been spread over hundreds of postings here on the message board and also includes insights and information I had only through e-mails of personal conversation, if at all.

Again, thanks a lot and please post part 3 as soon as possible!

Franz

R. Dale Flick 02-01-2009 01:58 PM

RE: 'Installment #3 & can't wait!'
Dear Bill & steamboating colleagues:
I agree with Franz and others in expectation for the next 'installment' of your well written, thoughtful experiences and insights. If it 'takes a village to tell the story' then you've moved to the head of the class.

A suggestion. Get this all down now on paper and expand your text as events progress with these interesting business insights. *As it is you're automatically set with Copyright (c) from your moment of creation. Just make it official and file formally.

I've been a cyclist for years [Scars/broken bones to prove it] but no experience with tandem bikes.

Well, what do I know?

Coal Haven Landing, Ohio River.

Bill McCready 02-02-2009 12:12 AM

Could the Delta Queen survive? Like many of you, by the middle of 2007 I had become emotionally invested.

In addition to tracking events through this forum, I also followed google news accounts, AMIE investor message boards and AMIE’s quarterly conference calls (where the CEO summarized results and plans; and answered tough questions from shareholders). Additionally, as I was still working with the Delta Queen’s owners to hammer out a charter on the Columbia River, I had access to knowledgeable AMIE insiders.

[In case anyone is confused, the Delta Queen was purchased in 2006 by Ambassadors International, Inc., whose stock is listed as AMIE. Since 2007 the various river boats owned by Ambassadors International have been operated by a wholly owned subsidiary named Majestic America Lines. Since AMIE is easier to type, I’ll typically use it instead of the more-accurate monikers].

The inside scoop at AMIE towards the end of 2007 was that an additional Delta Queen exemption had been placed out of reach---and was no longer worth pursuing. As if that wasn’t bad enough, some expressed doubts that AMIE would continue to operate the Delta Queen even if an exemption was granted. Filling the bigger Mississippi boats would be the priority---and it was with this newer product that AMIE planned to succeed.

In my August 23, 2007 e-mail to a friend at AMIE's Seattle headquarters for Majestic America, the line I typed directly below my signature was “PS: Who is PO’d about the Delta Queen’s demise.” While I intended my line to be read as a statement (i.e. Bill is unhappy!), my friend interpreted these words as a question (i.e. Does anyone care?). The unexpected next-day response… “Answer to your PS – Only one person in the Seattle Office.” …left me in a state of complete despair. With the passage of time, however, I came to accept the “hopeless” situation. Here’s why:

Imagine if you will, a company that operates a half dozen modern limousines plus one old Rolls Royce. (Or a charter airline company with a fleet of jets plus a single DC-3). Because my hypothetical company needs to promote its newer and more numerous assets in order to survive and make payroll, the solitary older stable-mate ends up being a bit of a distraction.

Was the DQ that different from the other boats? By 2007 the Mississippi Queen was in the process of being rebuilt with fewer but larger rooms. I actually saw the MQ’s plans and color renditions, and can report that she would have outshone the American Queen. The Columbia Queen and Empress of the North were already at a higher-than-AQ standard. The Queen of the West was to receive its upgrades by 2011. By then, the least desirable contemporary boat would be the American Queen. The Delta Queen? Because, the DQ is impossible to upgrade, how could she be integrated into AMIE’s “luxury” program?

AMIE bought their three Mississippi boats for a single lump-sum. For this price they received “pink slips” for the DQ and MQ, plus the AQ’s “take over payments” coupon-book with most of its stubs stamped “paid.” I am told that neither the seller nor the buyer ascribed individual equity values to the three vessels. It later turned out that one of these three boats, because of an unrenewable license, was a “lemon.” Fortunately (for shareholders), the lemon was the smallest boat AND the only one that couldn’t be upgraded to the desired corporate standard. Because the Delta Queen had never been given a value, AMIE’s sense of loss may have been abstract. While a few of us might view the DQ as the crown jewel of the Mississippi, others (including AMIE officers and shareholders) might reasonably view her as the smaller and older boat that came as a free bonus.

Why not sell the “lemon”? AMIE’s entry into the cruise business was via the Columbia River. It bought cheap because on this once highly-profitable river two estimable competitors had fought to a draw by defeating each other! The lesson was clear. If you have a profitable operation and can’t meet demand; you’ll create new competition. Prices and profitability will then drop to the point that the next downturn will drive both competitors out of business. AMIE’s unique solution was to buy up ALL of America’s operable riverboats at fire-sale prices. The result was a market (American river cruises) where erstwhile competitors would not be able to find a used boat, or project a profit after building a new one. Selling the DQ to someone who might operate her would be an act of negligence --- and would invite an immediate lawsuit from disgruntled AMIE shareholders.

Given my possibly wrong interpretation, by the end of 2007 I had become extremely concerned that AMIE would need to find a way to scuttle the Delta Queen.

I am sorry to note that my saga with a hopeful ending has now grown to four installments. As I'll have less time to write during the coming work week, please be patient.

-Bill McCready

Shipyard Sam 02-02-2009 08:11 AM

This is some of the best stuff ever written on here. A real thriller. We're always talking about writing a book; what you are writing is an outline for one that could really be something. More! More!

Matthew Dow 02-02-2009 09:13 AM

I agree, wonderful stuff. And because it sums up what's been going on over the past few years in one post is incredibly helpful to anyone who wanted to know the real story. I cannot wait for the 4th installment!!

Jazzou Jones 02-02-2009 04:55 PM

Good to see you here, Bill! I remember your first charter with great fondness. It was unique and fun and so very well planned. Thank you for your excellent and thoughtful contributions here. Keep 'em coming. Best wishes, Jazzou


All times are GMT -5. The time now is 10:21 PM.

Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
Search Engine Friendly URLs by vBSEO 3.6.0 PL2
All content on this site is copyright protected and may not be re-used without written permission.