Royal Caribbean Cruises Ltd

Royal Caribbean Cruises Ltd. : Royal Caribbean Cruises Ltd. Megan Dow, Kristin Belanger Angèle Bourgoin


Overview of Royal Caribbean : Overview of Royal Caribbean Overview of WAL-Mart History Stocks Stock Information The Divisions BCG Their Mission and Vision Statement New Mission and Vision Statement External Opportunities and Threats CPM EFE Internal Strengths and Weaknesses IFE Analysis SWOT Matrix SPACE IE Matrix Grand Strategy Matrix Key Ratios Different Strategies QSPM Decisions EPS/EBIT Analysis Implementation Evaluation Update! References Questions?


Overview : Overview Operates 26 ships under two brands Royal Caribbean International Celebrity Cruises Over 200 destinations Caribbean North America South America Europe


History : History 1968 Three Norwegian shipping companies Anders Wilhelmsen & Company I.M. Skauge & Company Gotaas Larsen 1970 First Royal Caribbean Ship sails 1971 Concept of air/sea vacations Fly guests to Miami from all over N.A. 1972 Three ships offer 7 and 14 night cruise vacations from Miami to Caribbean 1978 Passenger boat was split and mid-section was added – from 700 passengers to 1,000


History Cont. : History Cont. 1986 Labadee, Royal Caribbean’s own exclusive destination, opens cost of Hispaniola 1988 Royal Caribbean and Admiral Cruises merge A 73,192-ton ship for 2,350 guests sets sail as Royal Caribbean triples in size 1991 CruiseMatch 2000 – a fully automated cruise vacation reservations system with access to over 29,000 travel agents 1993 Royal Caribbean goes public under ticker symbol “RCL” 1995 25th Anniversary 1997 Royal Caribbean Cruise Lines changes name to Royal Caribbean International Celebrity Cruises merges with Royal Caribbean Cruises Ltd.


Important Facts : Important Facts It is the 51st consecutive quarter Royal Caribbean's Board of Directors has voted to declare a dividend to shareholders. April 28th they decided to give a dividend of 15 cents. Royal Caribbean executive nets $6.6M in sale of shares. A new ship is going to sale soon, Freedom of the seas. Only 10% of vacationing public in the United States.


RCL : RCL Services: Sector Industry: General Entertainment Full Time Employees: 111,690 Index Membership: NYSE


RCL : RCL


RCL vs. Industry : RCL vs. Industry


RCL Competitors : RCL Competitors


RCL Historical : RCL Historical


Organizational Structure : Organizational Structure


Important Facts : Important Facts


Their Mission Statement : Their Mission Statement Royal Caribbean Cruises LTD. Strives to: Compete principally on the basis of quality of ships, quality of service, variety of itineraries, and price. Improve our competitive position with respect to the quality and innovation of our on-board product and state-of-the-art cruise ships. Serve markets and provide itineraries worldwide Value its employees as the company’s most valuable asset. They are counted on to represent the company professionally and do the utmost to serve the company’s customers. Value the environment and remain committed to protecting and preserving environmental resources and preventing pollution. Maintain strong relationships with travel agencies, the principal industry distribution system. Participate in and make grants to numerous community charity organizations with priority to those helping children and families and education and the environment.


Their Vision Statement : Their Vision Statement Royal Caribbean Cruises LTD. will build on its reputation of an unwavering commitment to service and a desire to deliver the best cruise vacation possible. Our 27,300 employees are singularly focused on one goal: providing the highest level of service and the best vacation experience on land or sea.


New Mission Statement : New Mission Statement Royal Caribbean International is for everyone ranging from active adults to families who are vacation enthusiasts interested in exploring new destinations and seeking new experiences. We serve markets and provide itineraries worldwide, which we plan to expand more in, as well as capital expansion. Our new technological software will make our operations run better in keeping our unwavering commitment to service and a desire to deliver the best cruise vacation possible. Employees are of great significance to the companies well being. We value being environmentally safe and helping out the communities by donating to charities.


New Vision Statement : New Vision Statement To be the leading Cruise Line and leader in market share by providing the highest level of service and the best vacation experience both on land or sea.


Fleet Deployment (2003) : Fleet Deployment (2003) Domestic Baltimore, MD Boston, MA Charleston, SC Fort Lauderdale, FL Galveston, TX Honolulu, HA Jacksonville, FL Los Angeles, CA Miami, FL New Orleans, LA New York, NY Philadelphia, PA Port Canaveral, FL San Diego, CA San Francisco, CA Seward, AK Tampa, FL International Barcelona, Spain Buenos Aires, Argentina Dover, England Ensinada, Mexico Hamburg, Germany Harwich, England Oslo, Norway Rome, Italy San Juan, Puerto Rico S. Hampton, England Stockholm, Sweden Valparaiso, Chile Vancouver, B.C. Venice, Italy


Issues : Issues Global Capital Expansion Issues Passenger Safety Issues Finance Issues Marketing Issues eCommerce Issues Economic Issues Suppliers’ Issues Natural Environment Issues Capacity Issues


Global Issues : Global Issues AAA increase in vacationers driving to destinations Adding more and new itineraries departing in different locations Expanded itineraries in Alaska and Europe Offered land-tour programs Motorcoach or rail with railcars in Alaska and Canadian Rockies


Capital Expansion Issues : Capital Expansion Issues Driving revenue growth Purchase new and larger ships Expanding the ships average size Expanding Celebrity Cruise Line


Passenger Safety Issues : Passenger Safety Issues Safety, health, security risks Accidents, illnesses, and other incidents War, terrorist attacks, hostilities Heightened security 100% screening of luggage, carry-ons 100% photo identification of passengers and crew Passengers are prescreened Certain areas on boat restricted


Passenger Safety Issues cont. : Passenger Safety Issues cont. Aboard Magic – 100 people aboard contracted Norwalk virus Amsterdam 450 passengers on four cruises suffered flu Boat was sanitized by Center for Disease Control


Finance Issues : Finance Issues Prices for cruise lines depends on luxuries Destination, cruise length, cabin style, time of year Revenue from each passenger per day in 2002 was $190 Suffered a 9% decrease in net income Due to weak U.S. economy & Middle East conflicts


Marketing Issues : Marketing Issues Contemporary segment 7 days or shorter Out of season vacationers Premium Segment 7 to 14 days Celebrity Cruises Families eager to explore new destinations/experiences Spent $97.9 million on advertisement in 2002


eCommerce Issues : eCommerce Issues Online booking Virtual tour capabilities Electronic documents for passengers Online access to shore excursion CruiseManager Software packages Pricing, inventory, marketing actions First company in industry to develop automated booking system


Economic Issues : Economic Issues U.S. economy recession in 2001 U.S. inflation rates in 2003 – low Unemployment steady at 6% Hurts cruise industry Lower operating margins and profits Fuel costs Rising about 60% Better euro-dollar exchange


Suppliers’ Issues : Suppliers’ Issues Suppliers include Travel agency commissions Food and related items Port facility utilization Airfare advertising, Fuel Hotel supplies Products related to guest accommodations Shipyards Sometimes make poor quality, delay in ships, mechanical problems


Natural Environment Issues : Natural Environment Issues Environmental groups Stringent regulations on ships Environmental and health and safety regulations Could increase costs of compliance Instituted Safety and Environment position EPA – studies on waste water Annual award program Financially supporting ocean conservation groups


Capacity Issues : Capacity Issues Increased 9% over 2002 Top 10 cruises carried over 2 million passengers on 932 North American cruises


Slide31 : External Factors


Opportunities : Opportunities Expansion of fleet has allowed RCCL increasing amount of destinations, itineraries, and markets Flexible strategy, moving their fleets throughout the year to meet the seasonal demand RCCL operates the websites with customer booking capabilities for both Royal Caribbean and Celebrity Cruises Offers competitive price on goods and services offered from suppliers in packaged deals. Demand for cruises has increased and is predicted to continue to increase


Threats : Threats Terrorism Viral outbreaks Decreased tourism since 9/11 Challenging U.S. economy Environmental lobbyists Illnesses aboard cruise ships Reports of physical attacks while on board Carnival Corporation


EFE : EFE


CPM : CPM


Internal Factors : Internal Factors


Strengths : Strengths Increase net revenue yields Revenues growing Capital expansion of Celebrity Cruise Line Expanding passenger capacity deal sign Finland’s Kvaerner-Masa Yards to build bigger Ultra Voyager ships with capacity of 3,600 Using latest information technology software to manage operations


Weaknesses : Weaknesses During 2002 & 2003 RCCL experienced weaker margins due to pricing pressure caused by a weak U.S. economy, traveler safety concerns, and increasing capacity Net income falling Higher marketing costs due to reduced demand because of weak economy and ongoing conflict in the Middle East RCCL financed recent shop acquisitions by issuing debt Highly leveraged with LT debt-to-equity ratio of 1.31


IFE : IFE


SWOT Matrix : SWOT Matrix


Space Matrix : Space Matrix


IE Matrix : IE Matrix


Grand Strategy Matrix : Grand Strategy Matrix


Matrix Analysis and SWOT Summary : Matrix Analysis and SWOT Summary


Key Ratios : Key Ratios


Key Ratios con. : Key Ratios con.


Key Ratios con. : Key Ratios con.


Different Strategies : Expanding fleet by two boats with larger capacity for passengers Capital expansion to increase the amount of revenue to surpass the larger competitor Carnival Cruiseline Different Strategies


QSPM : QSPM


QSPM cont. : QSPM cont.


Decisions : We have decided to add two other boats to the entire fleet and they will be finished by May 2006 and 2008. Decisions


EPS/EBIT Analysis : EPS/EBIT Analysis Amount needed = $ 10 Million Stock Price = $41.89 (on May 2, 2003) EBIT Range = $5 to $8 Million Tax Rate = 32% Interest rate = 5% # Shares Outstanding = 195.6 (million)


EPS/EBIT Analysis Royal Caribbean LTD. : EPS/EBIT Analysis Royal Caribbean LTD.


Implementation : We will do debt financing on both the high and low because the numbers were equally the same and they were the best all around option. Implementation


Evaluation : Annual reports Quarterly reports Stock prices Key Ratio’s Progress of ship Average number of passengers per cruise Evaluation


In The News… : In The News… George Smith IV, a 26 year old man, tragically disappeared while on his honeymoon from the Brilliance of the Seas sometime in the early morning hours on July 5, 2005. The ship was sailing the Mediterranean Sea on a 12 day cruise to Turkey. The reason for his disappearance is still being investigated by the FBI


Update! : Update! Is still the second largest cruise line. As of December 31, 2005, it operated 19 cruise ships with approximately 44,350 berths. (rooms) A new ship is going to sail Freedom of the Seas, and will be the world’s largest cruise ship. Will occupy 3,634 passengers. Royal Caribbean believes that bigger is better, and ordered to have bigger ships built that can occupy 5,400 in the future.


References : http://www.rcl.com http://finance.yahoo.com http://biz.yahoo.com Business & Resource Premier Strategic Management Concepts and Cases References


Questions? : Questions?