Royal Caribbean Cruises, Ltd
Karen Pelletier, Geneice Bassue, James Lowe, Lee Dubois
Overview
Introduction
Company History
Who We Are
Mission/Vision (Current and Revised)
External Analysis and CPM
Internal Analysis, Financial Statements, Ratios, Net Worth and Stock
Performance.
Matrix Analysis – IE, SPACE, QSPM, EPS/EBIT, BCG, GSM
Strategies & Reccomendations
Implementation & Evaluation
Questions
History
1968 Royal Caribbean international was founded by Anders Wilhelmsen & Company,
I.M. Skaugen & Company and Gotaas Larsen, which are all Norwegian Shipping
companies.
1970 - the Song of Norway set sail for its maiden voyage this was the first ship of the
fleet.
1971&1972 - two more ships entered the fleet the Nordic Prince and the Sun Viking.
1978 - the Song of Norway was the first passenger ship to be lengthened
1980 - the Nordic Prince was also lengthened.
1982 - the Song of America was introduced to the fleet
1986 - Royal Caribbean purchased a costal property on the north coast of Hispaniola it
is now called Labadee
1988 - Royal Caribbean merged with Admiral Cruises they launched the Souverign of
the Seas which was considered the lasrget passenger ship at the time
1990 - the Sun Viking begins sailing to Europe, Sandanavia and Russia. Also in this year
the Nordic Empress and Viking Serande joined the fleet and began services.
History
1991- the Viking Serande undergoes a complete refurbishment, increasing its
capacity to 1,500 guests and begins short crusies to the West Coast.
1992 - Royal Caribbean sold its two Admiral Cruise ships.
1993 - Royal Caribbean went public selling on the New York Stock Exchange under
the symbol “RCL”.
1994 - Royal Caribbean finished the construction of a second six-story office buliding
in the Port of Miami and the Nordic Price was replaced by a new vessel called Legend
of the Sea.
1995 - Royal Caribbean celebrates its 25th anniversary
1996 - the 69, 130 ton, 1800 passenger ship Splendour of the Seas is introduced in
Europe.
1997 - the 78, 491 ton, 2000 passenger ship Rhapsody of the Seas entered service
in Alaska. Royal Caribbean agrees to buy Carnival cruises.
1998 - Vision of the Seas was added to the fleet and begins service in Europe.
1999 - Voyager of the Seas, enters service at 142 000 tons holding 3114 guests
History
2000 - Explorer of the Seas, voyager class ship entered into service.
2001- Radiance of the Seas (90 090 tons, 2100 guests), the first of the Royal
Caribbean radiance class ships entered into service
2002-2004 - three new ships entered service they were the Brilliance of the Seas,
Seranade of the Seas and Jewel of the Seas.
2005 - Fredom of Seas is under construction and the Viking Crown Lounge already
sports is logo
Who We Are
Stock Symbol: RCL
Royal Caribbean International is the second largest cruise compnay in the
world with 29 cruise ships and 60,590 berths.
Royal Caribbean has 5 different Classes of ships.
Freedom Class
Voyager Class
Radiance Class
Vision Calss
Soverigin Class
Royal Caribben International operates two brands:
Royal Caribbean Internationl which operates 19 cruise ships with 44,136
berths
Celebrity Cruises which operated 10 cruise ships with 16,454 berths
Rankings
#3 Largest water transportation companies by sales in 2000 (out of 10)
#2 Top Hotel, Restaurant, and Leisure Activity Stocks by Price Change, 2002-2003 with 81% (out of
21)
#3 Most Profitable Hotel, Restaurant, and Leisure Companies, 2002 with $351.3 million (out of 23)
#2 Largest Water Transportation Companies by Sales, 2002 with $3,145,250,000 (out of 50)
#1 Top Foreign Stocks on the Oslo Stock Exchange (Oslo Bors) by Market Capitalization, 2003 with
NKr15 billion (out of 5)
#2 Largest Water Transportation Companies by Sales, 2004 with $3,784,249,000 (out of 48)
#2 Largest Water Transportation Companies by Employees, 2005 with 38,870 employees (out of 48)
Current Mission
We always provide service with a friendly greeting and a smile.
We anticipate the needs of our customers.
We make all effort to exceed our customers’ expectations.
We take ownership of any problem that is brought to our attention.
We engage in conduct that enhances our corporate reputation and
employee morale.
We are committed to act in the highest ethical manner and respect the
rights and dignity of others.
We are loyal to Royal Caribbean and Celebrity Cruises, and strive for
continuous improvement in everything we do.
Revised Mission
Royal Caribbean’s mission is to always put the customers first(1), exceed
their expectations, all with a friendly greeting and a smile. We strive to
anticipate customer needs(1) and take ownership of any problem that is
brought to our attention. We are committed to being a good corporate
citizen(8) by acting in the highest ethical manner and respect the rights and
dignity of others. We incorporate the latest technology(4) for both our
business and for our customers to ensure efficiency and customer
satisfaction. We feel that the success of Royal Caribbean is not just
dependent on our growth, revenues or profits, but also on the employees(9)
that serve the front lines every day.(6) Because of this philosophy we are
confident that RCL will grow(5) to become the leading cruise line(2) in the
North American market(3). We feel that we have the ability to surpass any
competitor by what we have to offer for our customers (7).
Current Vision
Our vision is to empower and enable
our employees to deliver the best
vacation experience to our guests,
thereby generating superior returns to
our stockholders and enhancing the
wellbeing of our communities.
Revised Vision
Our vision is to continue being a
pioneer in the cruise industry
while providing everyone an
opportunity to take a worldclass vacation.
External Analysis
Opportunities:
29 million adults are expected to cruise by 2008
Cruisers are highly influenced by external promotions & marketing
strategies
Large percentage of US adults have never taken a cruise (84%)
The average cruise customer has an income of approx. $99,000
High growth in the 2-5 day cruise category
North America is the world’s largest cruise market
Europe is one of the world’s fastest growing cruise markets
External Analysis
Threats:
Terrorist attacks have a large impact on travel including cruise lines (9/11)
Norovirus (stomach virus)
Rising cost of fuel
Inclement weather
Impact of tax laws and regulations
Vacation industry competition
EFE
Key External Factors
Weights
Rating
0.0 to 1.0
1 to 4
Weighted Score
Opportunities
29 million adults are expected to cruise by 2008
0.08
2
0.16
0.1
3
0.3
84% percent of US adults have never cruised
0.08
2
0.16
The average cruise customer has an income of approx. $99,000
0.04
3
0.12
High growth in the 2-5 day cruise category
0.05
3
0.15
0.1
2
0.2
0.08
3
0.24
Cruisers are influenced by external promotions & marketing strat.
Europe is one of the world's fastest growing cruise market
North America is the world's largest cruise market
0
0
Threats
Terrorist attacks have large impact on travel(9/11)
0
0.1
2
0.2
0.06
2
0.12
Rising costs of fuel
0.1
3
0.3
Inclement weather
0.05
2
0.1
Impact of tax laws and regulation
0.08
2
0.16
Vacation industry competition
0.08
3
0.24
Norovirus (stomach virus)
0
0
Totals
1
2.45
CPM
Internal Analysis
Weaknesses:
Does not report financial data by cruise line or segment
Has significantly less revenues compared to Carnival (50%)
Does not specifically cater to all segments
Higher expenses due to large amount of ships
Low employee wages and salaries compared to industry average.
Internal Analysis
Strengths:
High Market Share
World’s 2nd largest cruise line
High occupancy rates
Steady revenue growth
Large number of ships that are constantly being updated
Many amenities including cell phone service
Large berth capacity(60,590 in 2005)
Several brand partnerships to enhance the quality of its onboard services.
IFE
Key Internal Factors
Weights
Rating
0.0 to 1.0
1, 2, 3 or 4
Internal Strengths
Weighted Score
3 or 4
High market share
0.1
4
0.4
World's 2nd largest cruise line
0.1
3
0.3
High occupancy rates
0.1
3
0.3
Steady revenue growth
0.1
4
0.4
0.06
4
0.24
0.1
4
0.4
Large berth capacity (60,590 in 2005)
0.06
3
0.18
Several brand partnerships to enhance the quality of its onboard services
0.06
3
0.18
Large number of ships that are constantly being updated
Many amenities including cell phone service
0
0
Internal Weaknesses
1 or 2
Doesn’t report financial data by cruise line or segment
0.04
2
0.08
Has significantly less revenues compared to Carnival(50%)
0.08
2
0.16
0.1
1
0.1
Higher expenses due to large amount of ships
0.05
2
0.1
Low employee wages & salaries compared to industry average
0.05
2
0.1
Does not specifically cater to all segments
0
0
Totals
1
2.94
Statement of Operations
Balance Sheet
Financial Ratios
Financial Trending
Net Worth Analysis
Stockholders Equity + Goodwill
5,083,081
Net Income X 5
2,373,455
Share price = $ / EPS (Net Income)
10,812,626
# Shares Outstanding X Share Price
109,533
Method Average
4,594,674
Stock Performance
Matrix
Analysis
SWOT Matrix
•
•
•
•
SO Strategies
Increase promotions that focus on
the many amenities & products
RC has (S6, S8, O2)
Expand RC’s presence into
Europe (O7, S5, S2)
Increase promotions & marketing
in North America specifically
(O3, O2, S8, S6)
Look into possible acquisitions &
alliances to enter into European
market (O7, S4, S8)
WO Strategies
• Increase promotions & marketing
to people who have never cruised
to generate more revenue (W2,
O2, O3, O1)
• Offer budget cruises to pricesensitive cruisers (W3, O3, O1)
• Offer cruises that are catered
specifically to families (W3, O1,
O5)
SWOT Matrix Cont.
•
•
•
•
ST Strategies
Obtain ships that are efficient to
save money on fuel (S5, T3)
Make cruisers aware that in 2004
only 1% of cruisers were
affected by norovirus & the
precautions RC uses (T2, S5)
Offer discounts when people less
likely to cruise (T4, T1, S3)
Promote various marketing
alliances & products available on
cruises to gain a competitive
advantage & to make up for
increased taxes (T6, T5, S6, S8)
•
•
•
WT Strategies
Use fuel swap agreements to
reduce costs (T3, W2, W4)
Sell old ships that are not as fuel
efficient (W4, T3)
Start reporting financial data by
cruise line/segment to use for
evaluation to strengthen RC
against competition (W1, T6)
IE Matrix
SPACE Matrix
SPACE Matrix
QSPM
EPS / EBIT Analysis
BCG Matrix
Leading cruise line in terms of market share: Carnival Cruises with about
45% share.
Data based on average annual growth rate of about 8.5%
RCL carries about 35% of cruise line market share – around 28% of which
comes from Royal Caribbean’s ships and the other 7% coming from Celebrity
Cruises.
Points represent strictly RC ships and strictly Celebrity ships – not a
combination of the two.
RCL does not report financials by cruise line or segment, so data is slightly
limited.
BCG Matrix
Grand Strategy Matrix
Strategy #1
Increase European presence
RCL currently has 3 ships serving the fast-growing European cruise market. Given the
rapid growth in this industry in Europe, RCL could add a few more ships to their European fleet to
gain more revenues, as well as increase marketing there. Given that the IE matrix recommends RCL
“hold and maintain” their current status, it would be good for this expansion to be minimal.
This is an example of Market Development
Estimated cost of this expansion: $1,500,000,000 (based on 2 cruise ships, 2,000
employees, cost of furnishing the ships, advertising, etc)
Strategy #2
Customer segmentation and targeted marketing/advertising.
4 typical cruise segments – budget, contemporary, premium and luxury.
84% of U.S. adults have never taken a cruise vacation.
Many of these are families, lower to mid middle-class, and people who just haven’t
had the time or haven’t thought about taken a cruise vacation.
RCL should increase their marketing and advertising efforts to all segments, primarily
the budget and contemporary segments to better serve the middle-class market. This
would
involve doing research as to which geographical segments have the least amount
of
people taking cruises, what their incomes are, etc, and doing television
advertisements,
online ads (especially on travel sites), travel agent
marketing, etc.
Offer discounts to first time cruisers, set up a loyalty program for repeat cruisers, etc
This is an example of Market Penetration
Estimated costs of this strategy: $100,000,000 (based on previous advertising and
marketing efforts).
Strategy #3
Increase marketing and continually improve and upgrade Celebrity cruise ships in an attempt to gain
increased market share.
Celebrity Cruises, owned by RCL, has very low market share, less ships and less capacity
than many other cruise lines.
Seeing as North America and Europe are two large markets for cruises, it would be in
RCL's best interest to increase marketing and eventually expand Celebrity Cruises.
This would include improving and increasing advertising across various media (online,
television, radio, print, etc) for celebrity cruises for the eventual expansion of the line.
This would be an example of Market Penetration
Estimated costs of this strategy: $100,000,000 (based on previous marketing and
advertising efforts)
Goals and Objectives
Strategy #1 – Increase European Presence
We hope to increase revenues by at least 50% in the European segment - if we add 2 more ships to the European fleet this should not be a
problem.
Strategy #2 – Customer Segmentation and Targeted Marketing/Advertising
With this strategy we hope to get a better feel for where our money and
customers are coming from, to be better able to evaluate our
effectiveness. We wish to increase our revenues by 10% per segment
using increased marketing efforts.
Strategy #3 – Increased Marketing for Celebrity Cruises
We wish to increase Celebrity’s market share by at least 3% (they are
currently around 7%). This strategy will increase popularity of Celebrity
Cruises and aid in the eventual expansion of the line.
Evaluation of Strategies
Reporting based on cruise segment and cruise line:
Evaluate revenues and profits from each cruise ship every year to
get a better understanding of where income is coming from (in terms
of RC ships and Celebrity ships).
Do the same evaluation on U.S. based ships vs. Europe based ships.
Also, evaluate revenues and profits based on cruise segment – who’s
taking the luxury cruises vs. who’s taking budget cruises, etc.
This evaluation will be the basis for implementing and formulating
strategies.
Each department should experience steady growth based on a growth
percentage – each department not meeting or exceeding this growth
goal will either be changed in some way or perhaps consolidated.
future
Evaluation of Strategies
Customer surveying:
Have as many cruise customers as possible take a survey to not only
evaluate their experience with RCL but also to tell about what
convinced them to take a cruise – where they heard about it from, etc.
These surveys will also be used to formulate future strategies.
Implementation
These strategies will be implemented over a two-year period.
We will start off attempting to segment our customers and increase marketing
for those segments. We will launch a series of online ads on travel sites, then
print media, then depending on their successes, launch TV ads targeted
towards families, budget travelers, etc. We will place these ads on TV
networks that people from each segment are most likely to watch.
Next we will attempt to gain market share for Celebrity cruises by increasing
marketing for that cruise line (in general) through online ads, TV ads, print
media, etc, for the eventual expansion of that line.
After gaining increased revenues and profits from these strategies, as well as
choosing a financing option, we will purchase two new ships to serve the
European market.
References
•Royal Caribbean Cruises, Ltd.- 2005 Case Notes
•http://library.corporate-ir.net/library/10/103/103045/items/194542/2005AR.pdf
•http://cruise-information-center.com/cruise_industry_overview.htm
•http://www.worldcruise-network.com/features/feature617/
Questions?