Cruise Marketing Management

What is the Cruise Ship A cruise ship or cruise liner is a passenger ship used for pleasure voyages, where the voyage itself and the ship's amenities are part of the experience. Cruising has become a major part of the tourism industry, with millions of passengers each year. The industry's rapid growth has seen nine or more newly built ships catering to a North American clientele added every year since 2001, as well as others servicing European clientele.

What is the Cruise Ship Smaller markets such as the Asia-Pacific region are generally serviced by older tonnage displaced by new ships introduced into the high growth areas. Cruise ships operate mostly on routes that return passengers to their originating port. In contrast, dedicated transport oriented ocean liners do "line voyages" and typically transport passengers from one point to another, rather than on round trips. Some cruise ships also engage in longer trips which may not lead back to the same port for many months (longer round trips)

History of Cruise Ship Industry Early years The first vessel built exclusively for this purpose was the Prinzessin Victoria Luise, designed by Albert Ballin, general manager of Humburg-America Line. The ship was completed in 1900. The practice of cruising grew gradually out of the transatlantic crossing tradition, which never took less than four days. In the competition for passengers, ocean liners added many luxuries — the Titanic being the most famous example — such as fine dining and well-appointed staterooms.

History of Cruise Ship Industry Early years In the late 19th century, Albert Ballin, director of the Hamburg-America Line, was the first to send his transatlantic ships out on long southern cruises during the worst of the winter season of the North Atlantic. Other companies followed suit. Some of them built specialized ships designed for easy transformation between summer crossings and winter cruising.

History of Cruise Ship Industry Modern days The 1970s television show The Love Boat, featuring Princess Cruises’ since-sold ship Pacific Princess, did much to raise awareness of cruises as a vacation option for ordinary people in the United States. Initially this growth was centered around the Caribbean, Alaska, and Mexico, but now encompasses all areas of the globe. Today, several hundred cruise ships ply routes worldwide. And even larger vessels are on the horizon. Plans are set for at least two cruise ships that will be 220,000 gross tons and hold 5,400 passengers each.

Global Cruise Industry “ The modern cruise industry was established in North America in the late 1960’s. The cruise industry operates across two sectors of commerce, transportation and hospitality. The cruise lines sell and operate ships which transport guests to scheduled ports of call, primarily for pleasure. An inherent part of the experience is the variety of hospitality services offered onboard such as well appointed accommodations, upscale dining, bars, casinos, spa treatments, shopping and land tours. ” Small but Growing Segment of Vacation Market Approx. 20 Million Passengers More than 360,000 Berths 260 Ships All Regions Remain Under-Penetrated Measured Growth in North America Accelerating Growth in Rest of the World

Global Industry Growth 7% CAGR Source: G.P. Wild (international Ltd) from PSA, CLIA, ECC and other sources 8

Array of Brands in the Marketplace 9

Evolution of the Industry 2009 2006 2003 Brands Celebirty Conde’ Nast top premium cruise 5 consecutive years Royal Travel Weekly best overall cruise line 4 consecutive years Growth North America flat to declining slightly. 06 – (1%), 07 – 1%, 08 - (5%) Europe growing 25% or more. 06 – 30%, 07 – 74%, 08 - 25% New Destinations rapid growth from small base. 08 – 150% Revenues/Yields Record yields in 2007 and 2008 guidance Resilience through many challenges – Gulf War I, 9/11, SARS & Norwalk, Iraq War, Today’s Consumer Slowdown Costs Keep net fuel net cruise costs per APCD below inflation. 06 – 1.5%, 07 – 0.9%, 08 – around 1% 1990 1980 1970

Worldwide, the cruise industry 2013 World Wide Market Share: The total world wide cruise industry is estimated at $36.2 billion (a 4.5% increase over 2012) with 20.9 million annualized passengers carried (a 3.3% increase over 2012). Has an annual passenger compound annual growth rate of 7% from 1990 – 2017. Growth strategies to date have been driven by larger capacity new builds and ship diversification, more local ports, more destinations and new on-board/on-shore activities that match demands of consumers.

Worldwide, the cruise industry The industry is also expanding rapidly internationally. These activities help increase penetration in a core North American market that still has growth potential. Only 53% of the target North American market (or 24% of the whole U.S. population) have ever taken an ocean cruise. All the cruise ships in the entire world filled at capacity all year long still only amount to less than ½ of the total number of visitors to Las Vegas

Shipbuilding Summary A total of 6 new ships were added in 2013 with a total passenger capacity of 14,074. From 2014 to 2015, a net of 13 more new cruise ships will come online adding 39,297 lower births, or 8.7% to passenger capacity. The ships from 2014 to 2015 will add $3.2 billion in annual revenue to the cruise industry.

. 2014-2015 New Ships Line Ship Date Lower Berths Princess Regal Princess Spring 2014 3,600 NCL Norwegian Getaway 4,000 Tui Cruises Mein Schiff 3 2,500 Viking Ocean Cruises Unnamed 888 Royal Caribbean Fall 2014 4,100 Costa Cruises 3,000 P&O Cruises Spring 2015 3,611 AIDA Cruises 3,250 Mein Schiff 4 Holland America Fall 2015 2,660 Breakaway Plus Winter 2015 4,200 Total 39,297 .

Desirable Operational Conditions for Cruise Ports Clean, safe and secure port facilities Ports that can handle today's larger ships Operational capabilities to handle volume Reasonable cost structure Great shore excursions at reasonable prices Professional port services

Growth pf New Cruise Regions Historically, the focus on the cruise lines has been to develop the North American cruise market and much of the total growth in the 1970’s, 1980’s and 1990’s originated from this market. The global appeal of cruising and the compelling holiday value proposition it offers was beginning to be recognized by a wider audience in the late 1990’s particularly in European markets and cruise companies started to invest heavily in the European arena. In the past decade, Asia is a fast emerging market that many cruise lines are very keen to expand into the region. China and India, in particular are immensely promising, given the rise in income levels and overall population size. 17

Cruise Market Size In 2010, the estimate cruise market size in Asia is close to that of Europe in 1997. It is expect that Asia cruise tourism will experience a similar growth pattern in the next decades. Cruise Market Growth By Region North America Europe Asia Latin America 18

Cruise Industry in Asia As the cruise tourism starts to take shape in Asia, there are many factors and development that stakeholders such as Government bodies, port authorities, tourism bureau, travel agents, airlines, etc are paying more attention and directing resources towards the emerging industry. 19

Cruise Hubs & Deployment Due to the worldwide nature of the cruising industry and the mobility of the assets, the deployment of the ships is highly variable. Year-round cruise destination mainstays include the Caribbean, Bahamas and Mexico. Seasonal markets include the Mediterranean, Alaska, Baltic and South America. In the recent years, more cruise lines are starting to deploy ships in Asia on a year round or seasonal deployment. The three regional cruise hubs are Shanghai, Hong Kong and Singapore. There are also secondary homeports emerging in Asia such as Tianjin, Xiamen, Yokohama and Busan. 20

Cruise Industry in Asia As the cruise tourism starts to take shape in Asia, there are many factors and development that stakeholders such as Government bodies, port authorities, tourism bureau, travel agents, airlines, etc are paying more attention and directing resources towards the emerging industry. Below are some of the key topics highlighted in this presentation : 21

Cruise Industry in Asia Economic benefits of a cruise industry and homeports in Asia : Significant economic impacts to a country associated with the cruise industry. When a cruise ship visits a port, each ship requires a variety of services such as : Tours for guests, bunkering, supplies & provisions, and port agency service. Hotel accommodation for pre/post-cruise, flights for fly-cruise guests, land transportations, Merchandise shopping, and various retail business patronized both by cruise guests & also the ship crews. Homeports with reputable shipyards can also benefit from ship repair and vessel refurbishment business. Large number of Asian crews working onboard cruise ships all around the globe

Cruise Infrastructure The infra-structure development and investments in the port cities : Infra-structure investment by the Governments or the local port cities is needed to accommodate the needs of the cruise ships of today and tomorrow. It is important for cruise lines and all the local stakeholders to work together to layout the blueprint for cruise lines’ growth in Asia. Deployment decisions are often done years in advance before the ships are actually deployed. Thus, there will be sufficient time for ports to enhance its facilities and even construct new terminal buildings to handle large cruise ships.

Cruise Terminal Development New cruise terminals in key turn ports in the region: - Tianjin Cruise Terminal (2010) - Shanghai Wusongkou/Baoshan Cruise Terminal (2011) - Singapore International Cruise Terminal (2012) - Hong Kong Kai Tak Cruise Terminal (2013) New / expanding cruise terminals in key ports of call in the region: - Nagasaki (2010) - Jeju (2011) - Busan (2013) - Incheon (2014)

Partnership Considerations The role of Government, ports, travel trade and suppliers in the success of building sustainable cruise tourism. In order for the cruise tourism to grow in Asia, it is important how the government & authorities will treat the cruise industry. The cruise concept is a hybrid & combination of marine transportation, lodging & accommodation, and tourism all roll into one. Passenger shipping legislation and taxation is a key factor for cruise company, planning to achieve a successful and profitable entrance to the Asian cruise market. Other important issues and concessions include the maritime law & policy, relaxed visa requirements, reasonable head tax and port charges, expedited clearance procedures in ports.

Outstanding Destination Outstanding Destinations Source: UNWTO World Tourism Barometer June 2008 26 26

Royal Caribbean Cruises Ltd.

Royal Caribbean Cruises Ltd. Second Largest Cruise Company Six Brands Ships / Berths In 2012: 43, 102,000 Over 4 Million Guests Annually 55,000 Employees Visit Over 430 Destinations Worldwide Let’s start off by telling you about “Who we are”. We are the world’s second largest company with 27 ships, with a total of 58, 268 berths. We operate our cruise ships through two cruise brands. RCI (which operates in the contemporary/premium segment) and Celebrity Cruises (which operates in the premium segment). Our combined market share in 2002 is 30%. We have a modern tour company and we are a global operator, and we call upon approximately 200 destinations worldwide. We are currently in our third fleet expansion program, our combined fleet has an average age of approximately five years. We believe we have been leaders in developing technology in the cruise industry. This technology has improved our; sales management, booking capabilities and yield management, which enables us to better maximize revenues while achieving better cost efficiencies. Our Technology development includes: Our sophisticated pricing and yield management programs. Our on-line travel agent booking tools; and Our extensive web sites for both brands. Just to name a few.

Worldwide Distribution Network 2008 Frankfurt, Germany Genoa, Italy Oslo, Norway Singapore, Singapore Shanghai, China Stockholm, Sweden Barcelona, Spain Madrid, Spain London, U.K. 2009 Gosford, Australia Sydney, Australia Beijing, China Guangzhou, China Sao Paulo, Brazil Manchester, U.K. + France for CDF Blue – 16 Global Corporate Offices Green – 48 International Representatives (GSAs)

Summary Cruise industry is a sun-rise industry Asia holds incredible potential as a cruise destination Under penetrated cruise market Partner with government to improve infrastructure is important for destnation development Stable and consistant operating conditions are important for future growth Partner with travel industry to create cruise awareness is a trend Profitability is remarkable