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Pictures & Logo Holland America Line Take a journey to reward your life HOME.

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Presentation on theme: "Pictures & Logo Holland America Line Take a journey to reward your life HOME."— Presentation transcript:

1 Pictures & Logo Holland America Line Take a journey to reward your life HOME

2 Agenda Situation Analysis Issues & Objectives Recommendations Financial Projections Conclusion HOME

3 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Company Profile Seattle-based cruise line Subsidiary of Carnival Corporation Leader in cruising market Premium type of cruise brand 90% of passengers are American Baby boomers are the main passengers Receives several awards & accolades HOME

4 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Financial crisis has led to a steep drop in consumption which affects the cruise industry. Consumer Behavior Consumer Behavior Economic Recovery Macro Assump. Macro Assump. Macroeconomic Assumption Lack of sufficient fund from government Financial system forced to shed asset and limit lending Undermine spending and investment 2 2 1 1 3 3 Fall in stock and housing prices Depress wealth and consumption Result in crippling banks 5 5 4 4 6 6 Lower of interest rate by Federal Reserve Result in impulsive lending from banks SevereRecessionSevereRecession 8 8 7 7 9 9 HOME

5 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Financial crisis has led to a steep drop in consumption which affects the cruise industry. Consumer Behavior Consumer Behavior Economic Recovery Macro Assump. Macro Assump. Macroeconomic Assumption $US GDP in trillion 14.51 Recession (2 yrs.) Trough (1.75 yrs.) Recovery (1.5 yrs.) 200820092010F2011F2012F2013F Year 14.28 HOME

6 The Government and the Federal Reserve play an important role in rescuing the U.S. economy. Consumer Behavior Consumer Behavior Economic Recovery Economic Recovery Macro. Assump. Macro. Assump. Recession Trough (U-Shape Recovery) Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Interest rate cut Tax cut Expansion of unconventional lending Injection of equity into banks Guarantee of bank debts Expand deposit insurance Money market starts to function again Restore consumer confidence in financial systems HOME

7 There will be some permanent changes of consumer behaviors after the financial crisis. Consumer Behavior Consumer Behavior Economic Recovery Economic Recovery Macro. Assump. Macro. Assump. The root cause of the financial crisis => HUMAN Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Unsustainable lifestyle Overspending Little savings High use of future cash Overuse of credit cards Unsustainable lifestyle Overspending Little savings High use of future cash Overuse of credit cards CHANGES More sustainable lifestyle More conservative Little use of future cash flow More savings Less spending on luxury items xxx xxx Changes in Consumer Behavior Conclusion HOME

8 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Now (2009) Future (2015) Issues Identification 90% of passengers are North American Declining revenue from Last minute booking Cutting prices to retain same sales growth from previous year Intense marketing efforts Expansion of customer base Passengers are various countries More sources of revenue Healthy revenues and profit growth HOME xxx

9 How can HAL maximize its customer satisfaction? How can HAL expand its customer base? How can HAL increase revenues without compromising its brand image? Issues To create new values for HAL services To implement Customer Experience Management To implement Customer Experience Management To expand to European countries Objectives Issues Identifications Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion HOME xxx

10 Rewarding Strategy Recommendations Satisfying Strategy Expansion Strategy PICTURE HOME

11 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion HAL can increase its revenues by establishing a value of the experience on cruises to customers. Rewarding Concept Take a journey to reward your life Old Values New Values Sustainability life Necessity item Happiness in life Overspending lifestyle Luxury item Fun and excitement HOME

12 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion HAL can increase its revenues by emphasizing on marketing promotional tools Special Concept GOAL: To raise prices back to pre-recession levels Ticket 50% of the ticket price Take someone special with you for a HALF PRICE ticket HOME

13 Rewarding Strategy Recommendations Expansion Strategy PICTURE HOME Satisfying Strategy

14 HAL can maximize customer satisfaction by implementing the Customer Experience Management (CEM). Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Satisfying Concept GOAL: To retain and maximize customer satisfaction on board New Exotic Themes 1 1 New Activities & Services New Activities & Services 2 2 Track Record of Customer Preferences 3 3 xxx HOME

15 HAL can maximize customer satisfaction by building a social networking via new innovative media. Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Networking Concept GOAL: To enable passengers to be socially connected to others xxx HOME Organize discussions or topics that target customers share same interests E.g. global warming & environmental issues Organize discussions or topics that target customers share same interests E.g. global warming & environmental issues

16 Rewarding Strategy Recommendations Satisfying Strategy Expansion Strategy HOME

17 We think that Europe is still the best market for HAL to expand its customer base. xxx Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Expanding Concept Decision CriteriaWeightEUMiddle EastEast Asia Industry Growth25%1048 Income distribution30%8106 Percentage of baby boomers15%8107 Lifestyles30%1086 TOTALS 100%9.17.96.6 DistributionChannelsDistributionChannels Strategic Alliance with major travel agents HOME

18 HAL should create a buzz when first entering into the European markets. Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Buzzing Concept GOAL: To create brand awareness among customers in EU First phase A Charity Cruise with Elton John Second phase TV Advertisements E.g. BBC, & Bloomberg TV Advertisements E.g. BBC, & Bloomberg Third phase Tournament Sponsor E.g. Soccer & Golf Tournament Sponsor E.g. Soccer & Golf HOME

19 HAL can maximize customer satisfaction by implementing the Customer Experience Management (CEM). Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Expanding Concept Customer Experience Customer Experience ContactPoint Online Website Our solution! GOAL: To enable people from EU to easily gather information from the HAL website HOME

20 Implementation Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Strategies Q2/09Q3/09Q4/092010F2011F2012F2013F 1 st Strategy Rewarding Special 2 nd Strategy CEM Social network 3 rd Strategy Strategic alliance Brand awareness Multilingual website HOME

21 Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Financial Justification Share of British Cruise Market After HAL Others Before xxx HOME

22 NPV = $98.88 Millions Initial investment = $900 Millions HOME Financial Justification Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion xxx A Worthwhile Investment for Expansion Strategy

23 xxx Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion Financial Justification $US in million Year $US in million Year CAGR =21.30% HOME

24 Conclusion Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion HOME How can HAL increase revenues without compromising its brand image? How can HAL maximize its customer satisfaction? How can HAL expand its customer base? Rewarding Strategy Satisfying Strategy Expansion Strategy

25 Q & A HOME

26 Slide Index Company Profile Situation Analysis Situation Analysis (1.1) Situation Analysis (1.2) Situation Analysis (2) Situation Analysis (3) Issues & Objectives Issues & Objectives (Now & Future) Issues & Objectives Strategies Strategy (1.1) Strategy (1.2) Strategy (2.1) Strategy (2.2) Strategy (3.1) Strategy (3.2) Strategy (3.3) Implementation Plan Implementation plans Financial Projection Financial Projections (market share) Financial Projections (Rev. & profits) NPV Conclusions General SWOT Analysis of HAL 13 Types of Baby boomer habits Competitive Analysis Strategy 3 Why not Far East Asian countries? Why not Middle East Asian countries? Why go to U.K.? (1) Why go to U.K.? (2) Why focus on Soccer and Golf? Why focus on BCC & Bloomberg? How can we compete with competitors? Financial Justifications Sensitivity Analysis Calculation Inputs

27 Strength: -Customer Loyalty -Quality Service -Large market share in North America -Large choices of destination and on-board services Weaknesses: -No customer base in Europe and other non-North America Opportunities: -Growth of aging population in North America and Europe -Small players are cheaper to buy at recession Threats: -Change in consumer behavior towards more frugal lifestyle Holland America Line HOME

28 13 Tips for Baby boomers in U.S. & EU HOME 13 truths about baby boomers 1.Boomers consider travel a necessity, not a luxury. 2.Boomers have traveled more than their predecessors. 3.Boomers see themselves as forever young. 4.Boomers want to have fun. 5.Boomers demand immediate gratification. 6.Boomers are not passive. 7.Boomers think they are special. 8.Boomers like creature comforts. 9.Boomers are time deprived. 10.Boomers will pay for luxury, expertise and convenience. 11.Boomers are skeptical of institutions and individuals. 12.Boomers like to associate with people like themselves. 13.Boomers are not homogenous.

29 Why not East Asian countries? Lifestyle difference-Cruise is still more popular in Europe than in Asia Spending more on children and save more of their earning Purchasing power is lower in Asia HOME

30 Why not Middle-East Asian countries? Baby-boomers aging population is low Not the right target segment for HAL HOME

31 Growth of aging population High purchasing power – top ten percent population hold majority of assets in the country Similar leisure activities to those in the US Why expand to U.K.? HOME

32 Table 4: Percentage of wealth held by the Top 10% of the adult population in various Western countries country wealth owned by top 10% Switzerland71.3% United States69.8% Denmark65.0% France61.0% Sweden58.6% UK56.0% Canada53.0% Norway50.5% Germany44.4% Finland42.3% Why expand to U.K.? HOME

33 How can HAL compete with competitors? Major Competitor: Royal Caribbean Cruise International Royal Caribbean Cruise International has a number of weaknesses on its services on board as in the next two slides

34 Weakness of RCI Caribbean have found limited selections in places to grab a bite to eat, with little available poolside and only a handful of eating areas to choose from. Also, while ice skating is a big hit on this cruise ship, the hours available for skating tend to be very limited and are often around the dinner hours. This makes it difficult to find a good time to indulge in this activity. Finally, many Royal Caribbean passengers may find that the service on Royal Caribbean is less attentive, probably due to the fact that the ships are so large. How can HAL compete with competitors?

35 Weakness of RCI The main weakness of a Royal Caribbean cruise is that it is not the kind of cruise line that a person who wants privacy should choose. The cruise ships are large, and as such many people will be on the ship, both in the form of guests, and in the form of staff.cruise ships For example, if you are the kind of person that likes to relax by yourself at the pool, you really should not go on a cruise, because the pool is the main attraction of the ship. As such, many people will be relaxing by the pool for most of the day. The only time you might get the pool almost to yourself is if you decide to not go on a shore excursion to one of the cruise stops. How can HAL compete with competitors?

36 Soccer is the most popular sports in Europe Golf is a prestigious sport played by many baby-boomers Why focus on golf and soccer? HOME

37 Target market is upper-middle baby boomers and executives who are interested in financial news and surrounding environment Why focus on BBC & Bloomberg? HOME

38 Sensitivity Analysis Occupancy 75%76%77%78%79%80%81%82%83%84%85% Cycles 35-80.61-69.68-58.76-47.83-36.91-25.98-15.06-4.136.7917.7228.64 36-57.20-45.96-34.72-23.48-12.25-1.0110.2321.4732.7043.9455.18 37-33.79-22.24-10.690.8612.4123.9635.5147.0658.6170.1681.71 38-10.371.4913.3525.2137.0748.9360.8072.6684.5296.38108.24 3913.0425.2137.3849.5661.7373.9186.0898.25110.43122.60134.78 4036.4548.9361.4273.9186.3998.88111.36123.85136.34148.82161.31 4159.8672.6685.4698.25111.05123.85136.65149.45162.24175.04187.84 4283.2796.38109.49122.60135.71148.82161.93175.04188.15201.26214.37 43106.68120.10133.53146.95160.37173.79187.22200.64214.06227.48240.91 44130.09143.83157.56171.30185.03198.77212.50226.24239.97253.70267.44 45153.50167.55181.60195.64209.69223.74237.78251.83265.88279.92293.97 Sensitivity Analysis HOME

39 Purchase = 3 ships -- $300m per ship Average capacity per ship = 1,500 persons Average ticket price = $1,300 per person per week Operating margin = 43% Cost of Debt = 7.5% Cost of Equity = 6.5% WACC is approximately 7% A cruise can be used for 30 years Calculation Inputs HOME


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