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
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
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
RC Mariner of the Seas
Fuel Usage by Capacity
60
50
Feet/Gallon
40
y = -0.0071x + 67.333
R² = 0.6634
30
20
10
0
1000
2000
3000
4000
Passenger Capacity
5000
6000
7000
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 $250M IPO in July, 2011
11 ships in current fleet, two more to join over ‘13-14
Company Profile:
Disney Cruise
Founded: 1998
Based in: Florida, US
Brands: None
Revenues: Up 4% from 2010
Size of Fleet – 4 Cruise Ships(8,510 passengers)
Key facts:
Disney Cruise Line is considered a segment of Disney Parks
and Resorts
Fleet includes only four ships
Industry Competition –
Solo Traveler
Fred Olsen
Spirit of Adventure
P&O Cruises
Hebridean Island Cruises
Costa Cruises
Competition and Structure
We can study the HHI by combining subsidiaries
or by looking at individual cruise lines
HHI with subsidiaries: 998
HHI without subsidiaries: 3091
Market Share by Number
of Passengers
Market Share by Total
Revenue
2012 World Wide Market Share
Royal
Caribbean
Carniva
l
Market Share by Total Revenue in 2011 excluding Carnival and RC
3,500,000,000
All Leisure Holidays
Celebration Cruise Line
3,000,000,000
Classic International Cruises
Cruise & Maritime Voyages
Total Revenue ($)
2,500,000,000
Crystal
Discovery World Cruises
Disney
2,000,000,000
Fred Olsen
Hapag-Lloyd
Hurtigruten
1,500,000,000
Louis Cruises
MSC Cruises
1,000,000,000
Norwegian*
Ocean Star Cruises
Oceania Cruises**
500,000,000
Paul Gauguin (PGC)
Pearl Seas Cruises
Phoenix Reisen
0
-100,000 100,000 300,000 500,000 700,000 900,000 1,100,0001,300,0001,500,0001,700,000
Number of Passengers
Ponant Cruises
Regent Seven Seas**
Market Share By Total Revenue (Zoomed in)
500,000,000
All Leisure Holidays
Celebration Cruise Line
Classic International Cruises
400,000,000
Cruise & Maritime Voyages
Total Revenue ($)
Crystal
Discovery World Cruises
Fred Olsen
300,000,000
Hapag-Lloyd
Louis Cruises
Ocean Star Cruises
Oceania Cruises**
200,000,000
Paul Gauguin (PGC)
Pearl Seas Cruises
Phoenix Reisen
Ponant Cruises
100,000,000
Regent Seven Seas**
Saga Cruises & Sprit of Adventure
SeaDream Yacht Club
0
0
50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
Total Passengers
Silversea
Star Clippers Cruises
Growth of Industry/Trends
Increase in
number of
passengers
(in thousands)
Capacity of the Major
Markets in 2011
0.61
Asia/Pacific
6.55
Europe
North America
10.97
0
5
10
15
Millions
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
Pricey
Inexpensive
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