Carnival Cruise Lines 1998

1. Carnival Cruise Lines1998 Case Analysis By RU Consulting Nick Morgan Laura Pynn Jenna Ramberg Brenna O’Regan James Morrison

2. Mission Statement • Carnival Cruise Lines is the largest, most popular, and most profitable cruise line in the world. The leader in the contemporary cruise market, Carnival operates 11 "Fun Ships", including the world's largest, Carnival Destiny. Carnival ships sail to the Bahamas, the Caribbean, Mexico, the Panama Canal, Alaska, and Hawaii. The company's customer base is divided up into three different target audiences. They are: the contemporary segment which is served by the seven days or shorter cruise and features a casual ambiance, the premium segment which is served by the seven-day-and longer market, and the luxury segment which caters to the experienced cruiser for seven-day-and-longer sailing. Carnival has the unique ability to provide customers with a wide range of vacation choices that appeal to any taste, interest, lifestyle, or budget. With a mission to surpass customer expectations, Carnival offers leisure travelers vacation experiences equal or superior to those at the world's most popular travel destinations. Carnival wants to remain the leader and innovator in the cruise industry and intends to do this with sophisticated promotional efforts and to gain loyalty from former cruisers by refurbishing ships, varying activities and ports of call, and being innovative in all aspects of ship operations.

3. History • In March 1972, Mr. Ted Arison purchased an aging trans-Atlantic Ocean liner from Canadian Pacific Empres, refurbished it from bow to stern, and renamed it the Mardi Gras. This was an ill-fated journey as it ran aground in Miami Harbor with 300 invited guests aboard. • 1974 Arison bought out AITS, Inc. For $1 cash and the assumption of $5 million in debt. Which began the “Fun Ship” theme. • 1975 Began turning profits and operating above 100% capacity. • 1980’s maintained growth rate of ~30% • 1987 Arison sold 20% of his shares in CCL and generated over $400 million for expansion.

4. History Cont’d • 1990 Arison relinquished the company over to his son, Mickey. Who still runs the company today. • 1990’s Carnival took delivery of its first 2 Superliners, the Fantasy and the Ecstasy • 1991 Carnival attempted to purchase Premier Cruse Lines but it was never consummated also took on its 3rd superliner known as the Sensation, later in the year they contracted the fourth superliner which was to be named the Fascination • 1993-1995 addition of the Imagination for CCL, and the Ryndam for Holland America Lines • 1997 attempted to buy Celebrity Cruise Lines for $525 million, but was overtaken by the inside ties of Royal Caribbean to Celebrity. • June of 1997 CCL purchased an Italian cruise company by the name of Costa for $141 million.

5. Largest Vacation Company in the world • Publicly traded since 1987 on both the NYSE and the London Stock exchange • Carnival is the only company in the world to be included in both the S&P 500 Index in the United States and the FTSE 100 Index in the United Kingdom. • Headquartered in Miami, Florida, U.S.A. and London, England • 75,000 employees worldwide. Operates a fleet of 81 ships, and another 20 vessels scheduled for delivery by 2011. • With approximately 144,000 guests and 60,000 crew members, there are over 200,000 people at sea with Carnival at any given time.

6. Global Brands

7. Major Competitors: Celebrity Cruises Norwegian Cruise Lines Disney Cruise Lines Princess Cruises Royal Caribbean Cruise Lines Other Competitors: American Hawaii Cruises Club Med Commodore Cruise Line Cunard Line Dolphin Cruise Line Radisson Seven Seas Cruises Royal Olympic Cruises Royal Cruise Line Industry Competitors

8. The contemporary leader in North America, Miami-based Carnival Cruise Lines is the world’s most popular and profitable cruise line. Operating 22 “Fun Ships,” Carnival appeals to a wide range of passengers by offering affordable, high-quality vacations and guest-pleasing innovations, all in a memorable shipboard environment. www.carnival.com Based in Santa Clarita, California, Princess Cruises is a leader in the premium market, operating 15 modern ships renowned for stunning interiors, design innovations and wide array of choices in dining, entertainment and amenities, along with exceptional customer service. The new Emerald Princess and Royal Princess join the fleet in 2007. www.princesscruises.com Seabourn Cruise Line epitomizes luxury cruising aboard each of its three all-suite ships targeted primarily to North America. The Yachts of Seabourn are lavishly appointed with virtually one staff member to every guest. www.seabourn.com Headquartered in Seattle, Windstar Cruises offers North American consumers an experience that is “180 Degrees from Ordinary.” It’s 3 sailing yachts accommodate 148- 312 guests, offering all ocean view staterooms, pampering five-star service, and cuisine by celebrity chef Joachim Splichal. www.windstarcruises.com Seattle-based Holland America Line operates a fleet of 13 five-star ships, including its newest ship, ms Noordam, which debuted February 2006. Exquisitely appointed ships, delectable cuisine, and impeccable service has enabled Holland America Line to earn its position as a premium cruise leader. www.hollandamerica.com Brands Around the World

9. Cunard Line features cruising’s only modern transatlantic ocean liners, Queen Mary 2 and Queen Elizabeth 2. Epitomizing luxury travel, the British-based cruise operator is defined by its White Star ServiceSM, a special standard that has served royalty and celebrities for decades. Queen Victoria joins the Cunard fleet in December 2007. www.cunard.com Britain’s leading cruise line, P&O Cruises combines innovation, professionalism and unrivalled experience to offer passengers the most stylish and contemporary holidays afloat. Ventura, the largest ship built for the British market, launches in 2008 and another new build is set to debut in 2010. www.pocruises.co.uk Free-spirited and unconventional, Ocean Village is a far cry from traditional cruising. Created for 30- to 50-somethings who like to explore new places and try new things, an Ocean Village holiday is a heady mix of pulse-racing action and chilled-out relaxation. www.oceanvillageholidays.co.uk Headquartered in Italy, Costa Cruises is the number one cruise line in Europe and South America. Cruising for nearly 60 years, the Genoa-based cruise line operates in the contemporary market offering state-of-the-art ships with Italian ambience to an international clientele. www.costacruise.com Based in Rostock, Germany, AIDA is the best-known brand in the fast-growing German cruise market, catering to a young, active clientele through its distinctive “club ship” concept. AIDAdiva, the latest addition to the fleet, is the first in a new generation of ships for this rapidly expanding contemporary operator. www.aida.de P&O Cruises Australia pioneered Australian cruising in 1932, offering festive seagoing holidays for Australian and New Zealand passengers aboard its contemporary fleet. The company will expand this year with the introduction of the Pacific Dawn, Australia’s first super liner. www.pocruises.com.au Brands Around the World, cont’d

10. Corporate Business Level Strategy • To explore destination development opportunities in the Turks & Caicos Islands • Continue ship-building in an attempt to stay industry leader • Expand ultra-luxury segment of North American cruise business (tailor to rich) • Double Seaborne capacity (Yacht luxury liner) • “We're perfectly happy to be the Wal-Mart of the cruise industry.” - Terry Thornton, VP Marketing Planning

11. Strengths: Global Presence Brand Equity Strong Consumer Demand in Europe In 2006, all operating companies achieved ISO 14001 Standards Diverse Staff Tons of entertainment aboard all fun ships Weaknesses: Hurricanes and Other Bad Weather Rising Cost of Fuel Less disposable income available Shifts in Currency Exchange Rates SWOT Analysis

12. Opportunities: Expand Luxury Liners Offer more destinations Expand presence in China Expanding into Alaskan rail road market & Motor Coach market for sightseeing and tourism Threats: Competition: Royal Caribbean Cruise Lines Star Cruise Lines Less patronage on cruise ships due to unpredictable hurricane seasons SWOT Analysis

13. Huge Gains • In 2004, Carnival Cruise Lines turned the highest profit it has ever had: $1.03 billion, up 40% from 2003 • CEO Micky Arison stated the jump was mainly from the 2003 merger with P&O Princess Cruises • Other contributing factors: Rising prices with constant demand, factors in the global economy (specifically, the declining value of the US dollar), record increases in ship building, and an effort of cruise lines to create more innovative vessels

14. Marketing Strategy • They promote the cruise as an alternative to land based vacations • The ship is an experience in and of itself • They use ports of call as an added bonus to the cruise experience • In 2005 their new marketing campaign: "A Million Ways to have Fun!" Carnival Cruise Campaign

15. CCL Today • 2005 Hurricane Season was very detrimental to the Cruising industry as a whole. • 2006 ship fires and equipment failure along with Noro-Viruses (food born virus) present aboard the ships. • 2007 marks the 35th anniversary of Carnival Cruise Lines, the flagship brand of the company. • 2007 is the 20th anniversary since the company went public. They had 7 ships and $150 million in income. • Today they have $2.408 billion and currently operate 81 ships, totaling more than 144,000 berths with 15 ships scheduled to be delivered between March 2007 and Spring 2010.

16. Stock Quotes CCL: Carnival Cruise Lines Stock Report • Stock Quote: CCL (NYSE) Apr 10, 2007 1:59 p.m. Current Price: $46.25 Change: -0.24/0.5% Volume: 1,604,600 • Growth over past 5 years: • Sales: 21.1% • Income:19.7% • Dividend Rate: 19.54% • Dividend Yield: 1.50% RCL: Royal Caribbean Cruises Ltd.

17. Recommendations • Buy stock moderately

18. Sources • “Annual Report.” (2006). Carnival Corporation & plc. (2,3,33). • Carnival Scrubs Ship After Virus Sickens Nearly 700 Passengers. Wall Street Journal. (Eastern Edition). New York, N.Y. November 20, 2006. • Passengers Injured When Cruise Ship Rolls Sharply at Sea. Wall Street Journal. (Eastern Edition). New York, N.Y. July 19, 2006. • Carnival: CCL Stock Quotes. (2007) Morningstar.com. http://quote.morningstar.com/Quote/Quote.aspx?ticker=CCL • Royal Caribbean Cruise Ltd. (2007) Morningstar.com. http://finance.yahoo.com/q?s=RCL • “Cruise Lines Hit High Water Mark with Record Sales.” (2007) Courier.org. http://www.courier.org/corgcms/content/view/141/2/ • Melvin R. Mattson. Marketing Management: Case Analysis by Teams. McGraw-Hill Companies, Inc. (2005). Pgs. 196-212. • Carnival Cruise Lines Official Website: www.carnival.com