d u s t r y

Li n e I n
Cru is e r Roa ne,
S pen ce
icke
,
l No v z i r owne
B r
n i a
By: Da Laddha and W
i n am ra
V
Industry Background
Value of industry
2012 Gross Revenue Forecast: $29 billion
Barriers to Entry
Capital Intensive
Big Five and Others
Market Share
Growth/Trends
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
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
 High Fuel Usage
Passenger
Cruise Ship Weight (tons) Capacity Feet/Gallon
Queen Mary II 148,528 2,620 40

MS Noordam 85,200 1,918 52

Queen Elizabeth 2 70,327 1,892 50

RC Mariner of the Seas 138,279 3,114 52

Disney Magic 83,000 2,400 57

Disney Wonder 83,000 2,400 57

Oasis of the Seas 225,282 5,400 19

Navigator of the Seas 138,279 3,114 51

RC Freedom of the Seas 154,407 3,634 34

Allure of the Seas 225,000 6,296 31

Fuel Usage by Capacity
Fuel Usage by Weight
Industry Functions
Transportation
Sleeping accommodations
Dining accommodations
Amenities
Entertainment
Off-ship excursions
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: 36.32
Royal Caribbean: 19.66
Norwegian: 8.44
Disney: 1.66
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
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
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 2013

5.8% world market share
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, 2011
11 ships in current fleet, two more to join over 13-14
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
Industry Competition
Solo Traveler
Fred Olsen

Spirit of Adventure

P&O Cruises

Hebridean Island Cruises

Costa Cruises
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

Market Share by
Number of Passengers
Market Share by Total
Revenue
2012 World Wide Market Share

Royal
Caribbean

Carniva
l
 Growth of Industry/Trends

Increase in
number of
passengers
(in thousands)
Capacity of the Major
Markets in 2011
Age Demographics of
U.S. Passengers
Income Demographics
of U.S. Passengers
Race Demographics
of U.S. Passengers
Customer Employment
Status
U.S. Market
Psychographic
 Perceptual Map
Formal

Inexpensive Pricey

Relaxed
Industry-wide price
elasticity
Lerner Index = (1663 - 612)/1663 = .63199

(1/.63199) = 1.58 = elasticity

Pricing Strategies
Temporal Pricing
Time of Purchase
Seasonal Pricing
Third-Degree Discrimination
Second-Degree Discrimination
Overbooking
Loyalty Programs
Temporal Pricing
Inter-temporal Pricing
Similar to airline Industry
Last minute discounts
Seasonal Pricing
Price spikes in summer months and December
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
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
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
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
Loyalty Programs
Many cruise lines have them

However, they are not very publicized

Have very limited benefits

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