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

2. Industry Background Value of industry Barriers to Entry
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 Ship Weight (tons) Passenger 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
Disney Magic
83,000
2,400 57
Disney Wonder
Oasis of the Seas
225,282
5,400 19
Navigator of the Seas 51
RC Freedom of the Seas
154,407
3,634 34
Allure of the Seas
225,000
6,296 31

6. Fuel Usage by Capacity

7. Fuel Usage by Weight

8. Industry Functions Transportation Sleeping accommodations
Dining accommodations
Amenities
Entertainment
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: 36.32
Royal Caribbean: 19.66
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 2013
5.8% 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, 2011
11 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. 2012 World Wide Market Share
Royal Caribbean
Carnival

22. Growth of Industry/Trends
Increase in number of passengers
(in thousands)
Graph from cruising.org

23. Capacity 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. Perceptual Map
Formal
Inexpensive
Pricey
Relaxed

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

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

32. Temporal Pricing Inter-temporal Pricing Seasonal 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

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

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