In the wake of the 2008 subprime mortgage crisis, the American Queen, the largest riverboat on the
Mississippi, was decommissioned after her operator, Majestic America Line, defaulted on her mortgage. But where the banks were content to maroon this jewel of American history, John Waggoner saw an opportunity not just to make money but to revitalize America’s great waterways.
For the preceding 20 years, Waggoner had run New Albany, Indiana-based Hornblower Marine Services (now HMS Global Maritime), which managed boats for casino and ferry operators. Purchasing the decadent Queen was an about-face for the lucrative business. “This was a departure for us,” he explains, “but the economics made sense. The demand for riverboats hadn’t gone anywhere, but the supply had basically been cut to zero.”
Taking on the Queen might have been a leap for the HMS board, but for Waggoner, owning a boat was something he’d envisioned since about the time he could walk. “Growing up on a farm, I loved fishing. Shortly after moving to San Diego in the fifth grade I’d discovered this leisure fishing boat at Fisherman’s Landing, but I didn’t have the money to go out. To pay my way, I agreed to scrub it head to toe. I fell in love with boats.”
Owning the world’s largest riverboat was an auspicious start to Waggoner’s fleet, and sweetening the deal, the U.S. Maritime Administration, who had held the mortgage on the Queen, was willing to cut Waggoner a bargain at $15 million—a fraction of the $100 million it would cost to construct a comparable boat. Waggoner cobbled together a loan from several small lenders. He laughs when he recalls the process: “One piece was a HUD loan for $9 million. They treated it like a house. I had to tell them, ‘Yes, the property is located in a floodplain, and yes, there is sometimes water in the basement, but we call it the bilge.”
He found the additional $15 million needed for renovations and an office in Memphis, which had started construction on an expensive new dock just before the 2008 crisis. “They had a dock, but no boats. So Mayor A C Wharton persuaded the city and several high-wealth individuals to make up the rest of the loan,” Waggoner says.
Vistage member since 2011
- Region: New Albany, IN
- Industry: Marine management, hospitality
- Program: Chief Executive
This allowed him to make the purchase, but he had to put up personal guarantees. “My wife honestly thought I was going to have a heart attack,” he recalls. “I couldn’t promise her we wouldn’t lose our house.”
The paddle wheel starts turning
Waggoner’s Vistage group, where he had been a member since 2011, helped him cope with the challenges associated with the new venture. “I’m a lifelong athlete, so I’ve always exercised. But my Chair, Michael Strickland, brought in speakers that really helped me focus on wellness and manage the stress,” he says. “And I got a lot of help with finance, with culture—hiring the right people—all of which helped tremendously.”
For two years, Waggoner and his team poured blood and sweat into the Queen. “My team and I took tremendous pride in the restoration. We saw to every detail, down to the mahogany handrails, brass outlet covers and matching screws. Even the engine room is pristine,” he says. The restoration was well-received, but HMS nonetheless lost $7 million during her first year back in operation. Wagonner didn’t lose faith. He asserts, “The elevator pitch was—and still is—really straightforward: We buy distressed assets at a distressed price and use our knowledge to revitalize them for an underutilized market.”
The paddles kept turning, and after that first rocky year, the money started flowing in. “People are hungry for nostalgia,” Waggoner explains. “One passenger might want to explore the old antebellum mansions along the river, while the highlight for a WWII vet might be talking shop over a coffee with the engine room crew.”
From captain to admiral
Waggoner’s success running overnight cruises prompted the Maritime Administration to offer HMS a second riverboat, the American Empress. After this venture proved successful, Waggoner set his sights on more new boats—and more ambitious restorations. “The Queen and Empress were already outfitted as dinner cruises. We had to completely gut the American Duchess, a casino boat, and we’ve cut the American Countess in half and added a 60 ft. midsection so she will carry enough passengers to be profitable when she’s launched in 2020,” he says.
Despite the proven success of the HMS business model, which today brings in more than $150 million in annual revenue and provides work to some 860 employees, Waggoner has had to personally guarantee new riverboat loans. He says this was stymying the company’s growth. Following the advice of his Vistage group, he recently took on an outside investor and feels new ownership offers HMS the best path forward. “Due to the influx of capital and credit, we can already project that HMS will double in size over the next three years,” Wagonner says.
Though HMS Global Maritime’s expanded fleet increasingly requires that Waggoner step back from operations and provide the oversight of an admiral rather than a deckhand, the CEO admits he has never quite outgrown the boy who scrubbed fishing boats. “Running HMS has never really felt like work,” says Waggoner. “It was my childhood dream to play with boats. I’m happy so long as I never have to get a real job.”