Royal Caribbean Cruises, LtdKaren 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 fleet1986 - 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 time1990 - 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 anniversary1996 - 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 ClassRadiance ClassVision CalssSoverigin 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 world-

class vacation.

External Analysis

Opportunities:

29 million adults are expected to cruise by 2008 Cruisers are highly influenced by external promotions & marketing strategiesLarge percentage of US adults have never taken a cruise (84%)The average cruise customer has an income of approx. $99,000High growth in the 2-5 day cruise categoryNorth America is the world’s largest cruise marketEurope 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 fuelInclement weatherImpact of tax laws and regulationsVacation industry competition

EFEKey External Factors Weights Rating Weighted Score

  0.0 to 1.0 1 to 4  

Opportunities      

29 million adults are expected to cruise by 2008 0.08 2 0.16

Cruisers are influenced by external promotions & marketing strat. 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

Europe is one of the world's fastest growing cruise market 0.1 2 0.2

North America is the world's largest cruise market 0.08 3 0.24

      0

      0

Threats     0

Terrorist attacks have large impact on travel(9/11) 0.1 2 0.2

Norovirus (stomach virus) 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

      0

      0

Totals 1   2.45

 

CPM

Internal Analysis

Weaknesses:

Does not report financial data by cruise line or segmentHas significantly less revenues compared to Carnival (50%)Does not specifically cater to all segments Higher expenses due to large amount of shipsLow employee wages and salaries compared to industry average.

Internal Analysis

Strengths:

High Market ShareWorld’s 2nd largest cruise lineHigh occupancy ratesSteady revenue growthLarge number of ships that are constantly being updatedMany amenities including cell phone serviceLarge berth capacity(60,590 in 2005)Several brand partnerships to enhance the quality of its onboard services.

IFEKey Internal Factors Weights Rating Weighted Score

  0.0 to 1.0 1, 2, 3 or 4  

Internal Strengths   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

Large number of ships that are constantly being updated 0.06 4 0.24

Many amenities including cell phone service 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

      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

Does not specifically cater to all segments 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

      0

      0

Totals 1   2.94

Statement of Operations

Balance Sheet

Financial Ratios

Financial Trending

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

Net Worth Analysis

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 price-sensitive 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/AdvertisingWith 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 CruisesWe wish to increase Celebrity’s market share by at least 3% (they are

currently around 7%). This strategy will increase popularity of CelebrityCruises 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 toget a better understanding of where income is coming from (in termsof 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’staking the luxury cruises vs. who’s taking budget cruises, etc.

This evaluation will be the basis for implementing and formulating future strategies.

Each department should experience steady growth based on a growthpercentage – each department not meeting or exceeding this growth goal will either be changed in some way or perhaps consolidated.

Evaluation of Strategies

Customer surveying:Have as many cruise customers as possible take a survey to not onlyevaluate 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.

•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/

References

Questions?