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A different (optimistic) view

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  • Jim Herron
    Seems to me the market is AMERICA and that should appeal to many Americans who are getting pretty tired of having so much international stuff hurled at them. Maybe a song such as "See the USA the Delta Queen Way" would help (sorry Chevy, I just had to do it).

    But to me, the Delta Queen IS the attraction. It doesn't matter where she's going on a trip, just so she's going. It's nice to visit the towns but they are secondary to the boat herself. I don't have any interest in visiting tourist traps in the Bahamas or anywhere else.I just like the DQ for what she is and for what she represents.

    Don't get me wrong here as I really like going to Europe but for pure relaxation there's nothing better than several days steaming along the rivers on the Delta Queen, listening to good live Jazz, watching the steam engines work, meeting folks and seeing the country from a perspective not available any other way. I think that is marketable. It has been to me. My wife says the DQ cruises are the most enjoyable vacations she's ever had because they are so relaxing yet we still see new and different things each time. I have to believe there are a lot of untapped people who are just waiting for this kind of experience. Yes, it is a niche and smaller market than that which fills the glitzy cruise ships but then, she's a boat not a ship and that is one of the things that should be emphasized, in my opinion.
    -Jim Herron

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  • Shipyard Sam
    Boiled Shirt

    Thanks for a very informative and entertainment thread that pretty-well boils down to Franz's last paragraph:

    ... it's possible to run the Delta Queen profitably. It just has to be managed in a very different way than it has been over tha last couple of years. A very specific approach for this special boat has to be taken. And managers with experience from Princess, HAL or Carnival will mess it up, no matter how good they are!

    To wit:
    ...has to be managed in a very different way
    What WAS, over all the years, starting with Tom Greene, the best management style(s) that made the DELTA QUEEN successful? Identify that style(s) and use it(them) as a model to operate the boat.

    A very specific approach for this special boat has to be taken.
    What specific approach is that? Myself, I see Mark Twain, steamboats, and a journey into an idealized America of a different and simplier era. The Boomers, entering their Gilded Years, will eat it up, and make this approach appealing to all those seeking a Mark Twain Mississippi River steamboat experience.

    ...managers with experience from Princess, HAL or Carnival will mess it up
    Cap'n Betty Blake, with the guidance of Bill Muster and the operational genius of Enrie Wagner, were arguably the most successful steamboat managers in history. They were steamboat people who understood their product and their markets. The DELTA QUEEN needs managers like that unbeatable team to operate successfully.

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  • Franz Neumeier
    I'd like to throw in two very different thoughts, though both are very relevant in my opinion:

    1) we had this (fruitless) discussion about rates before; problem is, we're more specilating thn knowing. There are many factors playing a role in defining yields, occupancy rates and "reaonable pricing" where we don't know the facts that it's useless to discuss this at all. We do know how much company x paid for the company, but we don't know how much depts they took over. We also don't know how much of the prices they paid were cash and how much of it has been financed by banks (hence: you have to add the interest for these depts to the overall cost!). etc. etc.

    2) If you compare the DQ to Princess (or any other ocean cruise line in that sector), don't only look at the prices. Don't forget that the first timer will not recognize things as advantages of the Delta Queen that we think are her greatest assets: small rooms, bunk beds, little entertainment, 3-piece-band instead of a whole orchestra in cruise ships, no pool, no spa, etc. etc. When trying to sell a cruise, all these "shortcomings" of the DQ are huge disadvantages on the cruise market. Only the repeat passenger acknowledges all this as advantages! and a lot of first times will not return because thes didn't see all this as advantages, depending on how much they learned from their travel agents about the DQ when booking. (another cost factor, by the way: training the travel agents to sell the DQ in an appropriate way; otherwise what ever advertizing you make, it costs yo a lot of money just to find disappointed one-time passengers ...).

    And one thing we DQ fans don't see but what is a huge problem for river cruising in the US in general (and, Jim, are you reading? this also might ben an answer to the question why river cruises in Europe are booming while they're not in the US): Look at the attractiveness of the port stops. Compare Evensville, IN, with Grand Caymen and tell me what you'd prefer (if you're not a repeat passenger on the DQ and are deciding between a ocean cruise and an US river cruise. LaCrosse, WI, vs. Glacier bay, AK; even Lake Barkley vs. Panama Canal. Check the itineraries of most of the cruises and you'll find out that ocean cruises are offering sensationally cool port stops every day while on some river cruises you'll have one small village after another with names some have never heard before. What about coming back home from a cruise and you're telling your friends where you've been: Diving with sting rays on Grand Cayman vs. visiting the local county museum at Nowhere, Alabama. Seeing an Alaska glacier calfing vs. the confluence of the Mississippi and the Missouri River. Having seen Rome, Naples, Malta, Barcelona and Monaco in a 7-day-cruise vs. having seen Alton, Hannibal, LaCrosse, Winona on a 7-day-cruise.

    To all us river fans, the river isn't unattractive at all. But think of all these people who don't know about the attractiveness of the rivers (and, let's be honest, Grand Cayman IS cooler than Winona, WI). We see it too much fron our perspective and fotget how incredibily difficult it is to convince a new customer to even think about choosing between Cayman and Winona ...

    One more point, then I'll stop ;-) Yes, the river might be closer to home for many; no flight required. But ocean cruise lines are offering this, too. There are Caribbean cruises out of Boston, New York, Baltimore for this very reason. So even this argument is not as strong as it seams.

    Finally, I still agree with Bill's optimistic view. Yes, I think it's possible to run the Delta Queen profitably. It just has to be managed in a very different way than it has been over tha last couple of years. A very specific approach for this special boat has to be taken. And managers with experience from Princess, HAL or Carnival will mess it up, no matter how good they are!


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  • Bill McCready
    For those who want to read carefully, you'll still need to read the preceding emotionally unreserved post three times before you understand that the author is not upset at me. Whew!

    [The referenced post was later removed by its author -Bill]

    Once you've read his post that many times, you'll also understand that he has done a fair job of proving one of my central themes. I'll return to this later.

    My "different view" is that the Delta Queen was doomed back in 2007, and has a bright future today. By my hypothesis the problem with obtaining a new exemption was NOT due to any of the various reasons I'd seen listed on this website (i.e. the Coast Guard, fire safety, a pair of small unions, or an unreasonable politician). Instead, the Delta Queen was hostage to bare-knuckle national politics. While Congressman Oberstar ran defense, other members of his party used the Delta Queen in closed-door solicitations to rake in millions of dollars for their November 2008 campaigns. Was this fair? Absolutely. It was also brilliant politics, especially when you consider that the owners of the Delta Queen were famous for their support of the opposing party.

    The other problem I saw back in 2007 was that the officers of AMIE (the corporation who would not be allowed to operate the Delta Queen after 2008) had a fiduciary duty to protect their river cruise monopoly. To perpetuate this monopoly the Delta Queen would need to be permanently disabled (i.e. scrapped or de-boilered). Was this fair? Certainly. The Delta Queen was property of corporate shareholders. To allow for her future operation by a competitor would have been grounds for a shareholder suit.

    A lesser concern of mine was that the Mississippi river cruise business has been unhealthy for years. My argument was that the balance of supply and demand on the Mississippi had been skewed to the point that three successive owners of the Trio of Queens lost money operating them. While it's fine to lay a huge portion of the blame on missteps of current and past owners, no one should assume that there is an unlimited supply of people, cash in fists, clamoring to pay full price for a cruise on the Ohio and Mississippi rivers.

    The emotional author of the preceding [now removed] post believes that capacity (the supply side of supply and demand) isn't the problem. He provides unsubstantiated break-even numbers for the three boats at "…a little under 79% full." While claiming that there are enough passengers, he tells us that his mailbox was flooded with 2 for 1 deals and offers for $99 per day cruises. Does he somehow think the "idiots" mailing him those cards were doing it because they liked "repeaters" better than passengers who would have paid full price for those same rooms? Actually the huge discounts were not only being offered to repeaters, they were being offered to anyone who typed the words "Delta Queen" into an internet search. The problem for the last three owners of the trio of Mississippi steamboats was not that they couldn't fill the boats to over 79% occupancy, but that they couldn't fill the boats to reach 79% of "yield." If a steamboat is 100% full of people who responded to a 2 for 1 offer, the yield is 50%---and an operator who needs 79% will soon be out of business.

    The same individual also expressed dissatisfaction at the ownership that sent out "last minute two-fer postcards to everybody and their uncle for the MQ and the AQ, but never, EVER for the DQ." His words prove my point. After the AQ was launched, the pair of big replica boats (with a capacity for over 400 passengers each) couldn't be filled without huge discounts. But the smaller and authentic Delta Queen, with capacity for less than 200 passengers, continued to attract enough full-fare customers to avoid drastic discounts.

    The GREAT NEWS FOR 2009 is that now that the 2008 elections are over, the Delta Queen is no longer valuable as a political pawn. Additionally, the monopoly-bent corporation that owned her has new plans; and now wishes to sell the Delta Queen to someone who will operate her. But after three successive failures of Mississippi River cruise boat operators (four if you count RiverBarge), will anyone take the necessary risk?

    My answer is YES. My optimism for the Delta Queen is fueled in part by the lay-up of all the other 1000+ berths on the Mississippi River. While this may be sad news for fans of the other boats, and horrible news for "repeaters" and others who thrived on below-cost deals, it's great news for an entrepreneur who is expected to put money at risk. At this unique time in history there is an economic vacuum that should cause someone to buy a steamboat to offer cruises on the Mississippi. The real steamboat race of the 21st century is which of three boats will resume service first.

    My favorite in this race is the Delta Queen.

    Does anyone else want to argue that my hypothesis is flawed?

    -Bill McCready

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  • Jo Ann Schoen
    We need a leader. Who wants to start the ball rolling? I know where you can get a good window washer and brass polisher cheap ;-))

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  • Casey Herschler
    Curious idea David…and not entirely beyond the realm of possibilities. It’s all a numbers game as that will be the only thing the bank is interested. If you can purchase the DQ at a fire sale price would be a good start. More importantly, one would also need to examine the DQ’s operating budget ….with the union wage scale. Without it, the current government more than likely will never reinstate the exemption.

    Any estimates on her operating costs? Yearly, quarterly and monthly?

    With the right numbers, the right business plan (controlling the competition) and a course to reinstate the exemption…attracting the right investor(s) is actually pretty easy. The harder part will be proving to a bank it will work after three companies have tried and failed. Using some of Bill’s information and logic on the ‘capacity’ of the river will be a good foundation.

    Any comments?

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  • David Dewey
    OK, I'll float this idea one more time--as dangerous as it is.
    What about forming a corporation to buy the DQ and operate it? Yes, we'd need more than the folks here to raise enough money, but I'd bet most of us would hawk something to buy stock in the new venture.
    Tilting at windmills out here in Californy
    David D.

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  • Bill McCready
    [The following answers were related to a post that was subsequently removed by its author. -Bill]

    1. From all reports I can agree that ACV's problems were due to expansion beyond the Mississippi. I can also imagine that the Mississippi must have been ACV's "cash cow"---at least until the American Queen entered service (why else would it have been launched?).

    I hasten to note, however, that there is a huge difference between full occupancy (all beds filled) and full yield (all beds filled at full price). A former sales manager for ACV told me that soon after the AQ was launched, they needed to use profit-killing "incentives" to fill their boats. As opposed to outright discounts, ACV's measures usually took the form of "free airline tickets" and/or "free extra hotel nights." If a cruise suffered from low initial demand, travel agents were given free trips, doubled commissions and generous advertising and mailing allowances. Additionally, repeaters like you and your wife would have been offered substantial "loyalty" discounts.

    2. The same exec told me that when Delaware North ("one of the world's largest privately held companies") took over, they had a "bold new plan" to fill otherwise empty staterooms on their three Mississippi boats. Within a few months, however, Delaware North discovered that only a tiny percentage of their many thousands of employees and vendors were interested in a Mississippi cruise. In addition to reviving ACV's earlier incentives, Delaware North mailed proposals to past customers who had used their facilities to host conferences (which explains how I received my 2003 "invitation" to host an event on the Mississippi). By 2004 Delaware North's year-round yield on the Mississippi was well below 60%---and far too low to be profitable. The one bright spot was the Delta Queen, which could be filled to capacity with fewer discounts and incentives. So while Delaware North's passenger counts might have provided the appearance of profitability, this was certainly an illusion. Why else would they have cashed out for 50 cents on the dollar?

    3. I also agree that Majestic America raised the Delta Queen's capacity from 174 to 176 by converting the "Riverlorian" cabin into a twin bunked stateroom. That's why my 2007 Delta Queen charter hosted 88 tandem teams instead of the 87 couples slated for 2006.

    The issue with the future of Mississippi cruises in general (and the Delta Queen in particular) is whether or not an operator can make a profit. I can state with some certainty that the supply of Mississippi cruises has exceeded the full-fare demand since the American Queen entered service. The two most recent owners of the three steamboats never turned a profit. Delaware North paid $80 million to buy the three boats in a bankruptcy auction, lost substantial amounts during 47 months of ownership, and then sold the fleet for less than $40 million.

    If that sounds bad, Majestic America threw in the towel after 32 months of losses, and is still looking for buyers.

    The good news is that the Delta Queen is not the problem. Although sales in 2007 and 2008 (when the MQ was laid up) prove that full-fare demand on the Mississippi is certainly less than 806 pax (the combined capacity for the AQ, DQ and River Explorer), full-fare demand is certainly higher than 176---even in the midst of the current economic meltdown.

    Assuming I wanted to enter the Mississippi cruise business (which I don't), I'd immediately reject the MQ and River Explorer due to their current condition and suitability. If times were better the AQ would be an easy choice. But for now, the Delta Queen has everything going for it except the required congressional exemption (which trumps the Coast Guard certificate). No one can build another one like her. The return of any combination of the other three Mississippi vessels can't take away the DQ's unique abilities to entice heritage buffs and cruise smaller tributaries.

    With one bold stroke a buyer can save the Delta Queen AND a 200-year history of Mississippi River Cruising!

    -Bill McCready

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  • Bill McCready
    Sorry for any confusion. I cannot confirm of the sale of the Mississippi Queen. Of the four vessels sitting in the sidelines, however, she is the least likely to re-enter the Mississippi cruise business. She is not only partially gutted, unlike the DQ she can be converted to another use (shops & museum, casino, or a hotel with competitively-sized rooms) for less money than creating a similarly-sized river-themed building from scratch.

    Although I realize that there are many who feel as strongly about the MQ and AQ as the DQ, it is impossible for me to imagine that anyone will ever again attempt to operate all three. If the MQs "retirement" to Madison Indiana falls through, her availability to be a competitor is not good news for those of us who are primarily interested in the continued operation of the Delta Queen.

    As for Judy's point, two independent sources have told me that the DQ has consistently turned a profit. Against her larger sisters she has three undeniable advantages. First, she travels through smaller locks and under shorter bridges to cruise hundreds of miles of rivers that her sisters can't get to. Second, she attracts an authenticity crowd that is uninterested in replicas (or a blue water cruise). Third, the Delta Queen can be profitable with a much smaller number of bookings.

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  • Bob Reynolds
    Has the sale of the MQ to Madison interests gone through? Any details?

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  • Judy Patsch
    sale of MQ

    Who bought the Mississippi Queen? Is it someone buying it for the scrap value?
    I don't see how you will get any 'blue flame' responses to your postings. They are so well-thought out, based on experience, and stated rationally without the emotion that many of us tend to include in our postings. Thank you for all of your time and for sharing with us. One question from this last posting - you seem to infer, as I have always believed, that the DQ alone could be a profitable venture. Am I reading you correctly? I don't think anyone would get fabulously rich running her, but I do think she would be profitable - she always has been. In the past ownerships, going way back to the 70s when the MQ idea was born, the DQ was expected not only to make a profit, but to fund the expansion of the company, be it the MQ, the AQ, the Cape boats, the ocean vessels never finished, lavish corporate offices, etc. If the DQ were expected to only make a profit for herself, that would be realistic, would you agree?

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  • Bill McCready
    Reasons to be Optimistic

    Hello all. I am back in town after leading a pair of tandem bicycle tours through Arizona and New Zealand.

    In a trio of previous posts I laid out why the Delta Queen's future looked hopeless (to me) a few months ago. Now the future of the Delta Queen looks much brighter.

    As a short synopsis I will remind readers that ever since the 1995 launch of the American Queen, the Mississippi River Cruise business has suffered from stateroom over-capacity. Three successive owners tried a number of different strategies to fill this trio of Mississippi steamboats without resorting to discounting. Their attempts were unsuccessful.

    Although most of us who follow this forum expect the owners of "our" boats to share our emotional attachment, this is naive. When faced with massive losses the corporate board members who made the tough decisions for American Classic Voyages (prior to 2001), Delaware North (2002-2006) and Majestic America (2006 through present) could not afford to be sentimental. It is interesting to note that Delaware North bought all 3 Queens for the less than the build price of the American Queen. Four years later Delaware North was happy to sell their entire fleet for about half of what they'd invested.

    Of the three owners, Majestic America was the only one with a thought-out strategy. Having already bought the Columbia River's "Queen of the West" out of bankruptcy, their plan was to buy up every other cruising riverboat in order to form an American riverboat monopoly. This would have allowed vigorous promotion without worrying about competition and the resulting price wars. Unfortunately, even with the Mississippi Queen sidelined for a room-reducing retrofit, they could not find a sufficient number of full-fare passengers to simultaneously fill the AQ and DQ---and this was months before the economy began to falter.

    In October 2007, while having dinner with one of Majestic America's executive sales managers, I was told that that the company was filling their boats at full price on the Columbia River, but was not finding nearly as many people who wanted to book a cruise on the Mississippi. I put forth the idea that the winning combination on the Mississippi would be the smaller and authentic Delta Queen plus EITHER (but not both) of her two larger sisters.

    Without further delay, here are some reasons to be optimistic:

    1. As I explained earlier, the Delta Queen's non-renewal was due to an unpredicted change in congressional leadership. After they came into power in 2006, Democrats could hardly be expected to grant a special favor to Majestic America, a company controlled by a famous Republican family. Instead, the Democrats willingly sacrificed the DQ as a "payback" for union contributions through 2006, AND to raise additional millions from unions to cement their congressional majorities in the elections of 2008. Now that their margin of control is safe, Democratic legislators have no compelling need to continue to vote against a renewed Delta Queen exemption. (As I explained earlier, the underlying issue was neither fire safety nor a few dozen union jobs.)

    2. In Spring 2007, when it became clear Majestic America would never get a congressional exemption, selling the Delta Queen to another operator was unthinkable as this would have destroyed Majestic America's carefully constructed river-cruise monopoly. But by mid-2008 Majestic America gave up on this strategy---and put all of their boats up for individual sale. While any new owner would have had some difficulty obtaining congressional approval prior to last November's elections, a path for a buyer to obtain just one boat plus a congressional renewal is now clear (with or without the help of a union).

    3. Still, given the current downturn of the economy, a prospective buyer for the DQ is unlikely to move forward without being able to forecast sufficient demand. But since the 2008 elections three additional events occurred that alter the balance of supply and demand. First, Majestic America returned the American Queen to the holder of its no-recourse loan (the National Government). While the Feds MIGHT find a buyer who wants to operate the AQ on the Mississippi, at this moment the American Queen remains out of the picture. Second, Majestic America appears to have found a potential buyer who wants the Mississippi Queen for a non-cruise operation---which would forever remove the MQ as a potential DQ competitor. Third, the Mississippi's River Explorer threw in the towel. While the River Explorer wasn't a direct competitor, it certainly drew some customers away from the Mississippi steamboats. Here's the resulting analysis: From 2003-2006 the Mississippi River hosted 4 cruising vessels with a combined overnight capacity for 1,222 passengers. After the MQ went out of service, Mississippi capacity for 2007-2008 dropped to 806 --- and was still too high! But in 2009 the cruising capacity on the Mississippi (for the first time in nearly 200 years) has been reduced to exactly ZERO. If someone buys the DQ and obtains the congressional renewal, filling 174 berths with full-fare passengers won't be a major problem. Of the three vessels still available for the Mississippi, as compared to the 436 passenger AQ (a non-authentic boat that operates on fewer miles of river) or the 196 passenger River Explorer (a towboat plus pair-of-barges lash-up that's more like a freighter than a cruise ship), the 174 passenger DQ clearly has the fastest and easiest path to profit. Although Congressional approval will take some time and effort, the fate of the two competing vessels is also in the hands of the federal government.

    4. New Orleans will again become a top tourist draw. The reason Delaware North sold its steamboat investment for (appx) 50 cents on the dollar was Katrina. After the company decided to pull out of New Orleans for all of 2006 (a huge mistake that caused me to charter buses to get my April '06 group from Baton Rouge to New Orleans), Delaware North soon realized that OVER HALF of their river cruise bookings had been tied to New Orleans tourism. Is New Orleans due for a comeback? You bet. Pre-Katrina tourists came to see the French Quarter and the Garden District. The Crescent City's newest draw is a huge area of devastation. Now that New Orleans is becoming "safe"---millions of tourists will feel compelled to visit a vast "neighborhood" that is far more visual than NYC's ground zero. I believe that New Orleans tourism can rebound to 150% of its pre-Katrina levels. If 1/100th of 1% of these tourists decided to combine their New Orleans visit with a Lower Mississippi steamboat cruise (to experience the nearby Bayous, Cajun Culture, Plantations and more); the DQ would never need to venture farther upriver than Memphis.

    5. Jobs. A few months ago a plea from Delta Queen employees didn't resonate in Washington. Today, however, congress is spending over a million dollars per person to create new jobs. When you add in office and home-port workers, re-certifying the Delta Queen will create 150 new jobs at no cost to taxpayers.

    6. Chattanooga. Although some have imagined an elaborate ruse, the officers and executives of Majestic America are unlikely to have gone to the trouble. Instead, they have found some rent money (instead of paying rent to the Port of New Orleans) and an eager caretaker (instead of paying security guards) without removing the Delta Queen's "FOR SALE" sign. Is the DQ still for sale? Sure. Since my last post the officers of AMIE (owners of Majestic America) named Stephens Inc. to take over the sale of all other assets while the company refocuses its attention on operating Windstar---the one asset they've decided to keep. Will Stephens find a buyer for the DQ? Does a salesman want to earn a commission?

    There are many reasons why the Delta Queen should return to service. The key ingredient at this juncture is new ownership. Because people out there will find and read this forum (as I did before signing charter agreements back in 2005), I join Franz in imploring you to refrain from continuing to write disparaging things that may turn-off those who have the wherewithal to save the Delta Queen.

    Bill McCready

    PS: I want to thank all of you for your kind words and patience with me. One final favor I ask. If you are now ready to flame me, please re-read what I've written first; so that you might improve your aim!

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  • Bob Reynolds
    Bill McCready, where are you??? WE have been eagerly awaiting that last installment....

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  • JLee Baer
    This is all very intresting from the perspective of why things a have unfolded the way they have. I have always been curious as to what was AMIE's motive for buying the boats in the first place? It is no secret that the boat business is not a high profit business to begin with.

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  • Jazzou Jones
    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

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