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Cruise Line Industry By: Daniel Novick, Spencer Roane, Vinamra Laddha and Wazir Browne.

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Presentation on theme: "Cruise Line Industry By: Daniel Novick, Spencer Roane, Vinamra Laddha and Wazir Browne."— Presentation transcript:

1 Cruise Line Industry By: Daniel Novick, Spencer Roane, Vinamra Laddha and Wazir Browne

2 Industry Background Value of industry 2012 Gross Revenue Forecast: $29 billion Barriers to Entry Capital Intensive “Big Five” and Others Market Share Growth/Trends

3 Barriers to Entry High cost of acquiring ships Necessity of place of port Finding and hiring qualified crew Captain, Chefs, etc. Government regulations and international tariffs High price of oil and energy to power ship

4 Legal Hurdles Each cruise ship must be registered to a specific country Creates issues for staffing (union vs. non-union) US law requires the ship to be built and staffed by Americans for it to be “flagged” to the US Ships are safety-inspected four times per year Captain has ultimate authority to enforce laws and policies Flags of Convenience

5 High Fuel Usage Cruise ShipWeight (tons)Passenger CapacityFeet/Gallon Queen Mary II148,5282,62040 MS Noordam85,2001,91852 Queen Elizabeth 270,3271,89250 RC Mariner of the Seas138,2793,11452 Disney Magic83,0002,40057 Disney Wonder83,0002,40057 Oasis of the Seas225,2825,40019 Navigator of the Seas138,2793,11451 RC Freedom of the Seas154,4073,63434 Allure of the Seas225,0006,29631

6 Fuel Usage by Capacity

7 Fuel Usage by Weight

8 Industry Functions Transportation Sleeping accommodations Dining accommodations AmenitiesEntertainment Off-ship excursions

9 Major Players: “Big Five” What is the Big Five? Carnival Royal Caribbean Norwegian MSC Cruises Disney Nights sold for each in 2007 (in millions): Carnival: Royal Caribbean: Norwegian: 8.44 Disney: 1.66

10 Company Profile: Carnival Corporation Founded: 1972 Based in: US and UK Brands: Carnival Cruise, Costa Cruise, Cunard Line, Holland America, Princess Cruises, Seabourn Cruise Revenues: $15.8B in 2011 Employees: 10,200 employees & 75,000 crew Size of Fleet – 103 Cruise Ships (209,420 passengers) Key facts: Ticker symbol: CCL 1.4 times the fleet of closest competitor

11 Company Profile: Royal Caribbean Founded: 1968 Based in: Florida, US Brands: Celebrity Cruise, Royal Caribbean Revenues: $5.21B in 2011 Employees: 5,700 Size of Fleet – 40 Cruise Ships (96,270 passengers) Key facts: Ticker symbol: RCL Operates 40 cruise ships to 400 destinations

12 Company Profile: MSC Cruises Founded: 1987 Based in: Geneva, Switzerland Brands: None Revenues: $1.98B in 2011 Size of Fleet – 12 Cruise Ships (27,750 passengers) Key facts: Fleet of 12 cruise ships increasing to 14 by % world market share

13 Company Profile: Norwegian Cruise Founded: 1966 Based in: Florida, US Brands: None Revenues: $2.31B in 2011 Size of Fleet – 11 Cruise Ships (25,280 passengers) Key facts: Filed with SEC for up to $250M IPO in July, ships in current fleet, two more to join over ‘13-14

14 Company Profile: Disney Cruise Founded: 1998 Based in: Florida, US Brands: None Revenues: Up 4% from 2010 Size of Fleet – 4 Cruise Ships(8,510 passengers) Key facts: Disney Cruise Line is considered a segment of Disney Parks and Resorts Fleet includes only four ships

15 Industry Competition – Solo Traveler Fred Olsen Spirit of Adventure P&O Cruises Hebridean Island Cruises Costa Cruises

16 Competition and Structure We can study the HHI by combining subsidiaries or by looking at individual cruise lines HHI with subsidiaries: 998 HHI without subsidiaries: 3091

17 Market Share by Number of Passengers

18 Market Share by Total Revenue

19 Royal Caribbean Carniva l 2012 World Wide Market Share

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22 Growth of Industry/Trends Increase in number of passengers (in thousands) (in thousands)

23 C apacity of the Major Markets in 2011

24 Age Demographics of U.S. Passengers

25 Income Demographics of U.S. Passengers

26 Race Demographics of U.S. Passengers

27 Customer Employment Status

28 U.S. Market Psychographic

29 Pricey Inexpensive Formal Relaxed Perceptual Map

30 Industry-wide price elasticity Lerner Index = ( )/1663 = (1/.63199) = 1.58 = elasticity (1/.63199) = 1.58 = elasticity

31 Pricing Strategies Temporal Pricing Time of Purchase Seasonal Pricing Third-Degree Discrimination Second-Degree Discrimination Overbooking Loyalty Programs

32 Temporal Pricing Inter-temporal Pricing Similar to airline Industry Last minute discounts Seasonal Pricing Price spikes in summer months and December

33 Temporal Pricing – Time of Purchase As the sail date approaches the price of tickets increases due to the increase in demand at the last moment However, within the last week it is possible to get cruise ticket discounts because Cruise Liners want to leave with full capacity and minimize the fixed cost/person

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39 Third-Degree Price Discrimination Different prices for ships Carnival Imagination 4 day trip 350 Carnival Victory 4 day trip 480 Room prices 7 day trip to Caribbean from Miami Interior 670 Suite 1,679 Early Saver plan

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42 Second-Degree Discrimination Two-Part Tariff Ticket Price to get on the ship Shopping on the boat For example Carnival Cruise Excursions Lobster Champaign and beach Excursion $120 Island Safari 4x4 Adventure $80

43 Overbooking Strategy Better than Hotels? Why? Captive Audience No business travelers No holdovers or early departures Packed ship important to the cruise ambience Cruises have big-time repeat customers Great package for less than $100 a day Great ties with travel agents Long booking periods

44 Loyalty Programs Many cruise lines have them However, they are not very publicized Have very limited benefits

45 Recommendations? Differentiate based on brand and ship experience Encourage citizens of all ports to tour the cruise ship Improve loyalty programs and market them more Allow passengers to stay at a destination and come back on another cruise Works for cruise destinations that are visited routinely


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