External Analysis of the Cruise Line Industry

Contained in this document is an analysis of the cruise line industry
prepared by us as per your request. With a focus on the key success
factors, we analyze the industry as a whole. Additionally, we go more
in depth in specific company analyses of the industry’s largest
companies, Carnival Corporation & plc and Royal Caribbean Cruises
Ltd.
The key success factors of this industry are proven by support from
• The Current State of The industry
• Market Presence and Control
• Analyses and comparisons of individual companies
The findings in this report are supported by evidence discovered from
credible articles, databases, and company data. In addition to this, our
findings are supported in our appendices, which include a PEST and
porters 5 forces analysis for the industry, a SWOT analysis for the two
companies, as well as business model canvases, financial statements,
and ratios for both Royal Caribbean and Carnival.
We are available to discuss this report and its conclusions with you at
your request. We thank you for your confidence in selecting us to
prepare this comprehensive report
Team 6 Cohort 107
Ohio University College of Business
February 9, 2015
Copeland & Associates Managers:
Nadège Levallet
Tom Marchese
Luke McElfresh
Tammy Reynolds
Dear Managers,
Sincerely,
Team 6
Rachel Bernstein
Nicole Bick
Evan Harcourt
Xin Qian
David Rothstein
Memo of Transmittal

Prepared for:
Copeland Managers
Prepared By:
Copeland Associates:
Rachel Bernstein
Nicole Bick
Evan Harcourt
Xin Qian
David Rothstein
Cohort 107
Team 6
College of Business
Ohio University
External Analysis of the Cruise Line
Industry

Overview
From our research of the Cruise Line industry we have been able to identify
three key success factors and have used them to analyze both Carnival
Corporation & plc and Royal Caribbean Cruises Ltd. These factors include
capturing growing global markets, generating on board revenue, and
establishing relationships with travel agencies. After comparing Royal
Caribbean and Carnival against these factors, we found that Carnival is better
positioned in the industry. We have provided three recommendations for
Royal Caribbean in order for them to improve their stance in the Industry.
Industry Analysis
The current state of the cruise line industry is heavily concentrated with great
growth opportunities. Royal Caribbean and Carnival, who account for 73
percent of the total market, primarily control the industry. These companies
have controlled the United States cruise market, which accounts for 56.1
percent of the global market, but have recently set their sight on capturing
newer markets developing in Asia, Europe, and Australia. This, along with
other key success factors we have identified, have allowed us to analyze
Royal Caribbean and Carnival’s potential success in the industry.
Key Success Factors
Our research of the cruise line industry has led us to identify three key success
factors. First, our research proves that a cruise line must be able to capture
growing global markets. With the United States market becoming saturated,
markets developing in regions such as Asia, Europe, and Australia are
essential for success. Also, a cruise line must be able to provide their
customers with the newest onboard innovations in order to generate revenue.
These alternative sources of revenue account for approximately 30 percent of
cruise’s total revenue, making this essential for their success. Finally, we have
found that a cruise lines’ relationship with travel agencies greatly affect their
success because the agencies help promote and sell the cruises to their
customers. Using these factors, we have analyzed Royal Caribbean and
Carnival and have provided recommendations for Royal Caribbean.
Analysis of Carnival Corp.
Carnival is the top cruise line in the industry based on their financial position,
information systems, market environment, and strategies. The company’s
favorable financial position and positive performance proves their success.
The multiple information systems that Carnival uses are also an essential
feature that has helped their success within the industry. In relation to the
industry’s market environment, Carnival takes advantage of the diverse
markets and targets a wide range of locations and costumers. Overall the
company's segmentation, targeting, and positioning strategies are what
structure all the operations and lead to the success of the company.
Executive Summary

Executive Summary cont.
Analysis of Royal Caribbean
This section shows that Royal Caribbean is the second most successful cruise
line within the industry. They make use of capitalizing on growing global
markets, generating onboard revenue, and partnering with travel agents in
order to achieve their competitive stance in the industry. They use various
information systems to give them a competitive edge over their competition.
They also market to a wide demographic of customers in various ways in
order to increase their sales and improve consumer relations. We have
identified numerous opportunities for growth and have provided
recommendations for them.
Recommendations for Royal Caribbean
In order for Royal Caribbean to improve their position in the cruise line
industry we recommend that they invest more in Europe, use less debt and
more equity in financing their operations, and increase their social media
presence. It is important for Royal Caribbean to target the European market
because Europeans have twice the vacation time as Americans. In order to
capture this segment, we recommend that Royal Caribbean offer more cruise
options and ports to their European Customers. Next, we recommend that
Royal Caribbean should use less debt and more equity for financing in the
next 5 years. With a much higher debt ratio of 58.1 percent, as compared to
Carnivals debt ratio of 38.56 percent, we believe lowering its ratio will lead to
a more sustainable operation. Finally, we recommend that Royal Caribbean
increase their social media presence. By doing this, Royal Caribbean can
capitalize on a new marketing platform as well as use social media to better
connect with their customers. By doing so they can assess customer feedback,
advertise to new customers, and compare themselves to their competition
through consumer reviews. Through the use of these recommendations we
believe that Royal Caribbean can achieve growth within the industry.
Conclusion
After conducting an analysis of the cruise line industry our team has identified
three key success factors. These factors include a cruise line’s ability to
capture growing global markets, provide customers with the latest onboard
innovations in order to generate revenue, and be able to successfully partner
with travel agencies in order to attract more customers. In evaluating Carnival
and Royal Caribbean we have found that Royal Caribbean is lacking in these
categories and we have provided recommendations for them to improve in
these areas. We recommend that Royal Caribbean invest more heavily in
Europe, use less debt and more equity to finance their activities, and increase
their social media presence. If these recommendations are implemented, we
expect Royal Caribbean to grow and succeed in the industry.

Table of Contents
Partnering with Travel Agents……………….......…
Overview…………………………....………
Why this is Important………………...…….
The Future…………………………………..
Benchmark Against Key Competitors…………………...
Carnival Corporation & plc Analysis……………………
Overview……………………………………………..
Financial Position, Performance and Market Value….
Key Information Systems………………………….....
Market Environment…………………………………
Segmentation, Targeting and Positioning Strategies…
Evaluation against Key Success Factors……………..
Key Takeaways………………………………………
Royal Caribbean Cruise Ltd…………………………….
Overview…………………………………………….
Financial Position, Performance and Market Value….
Introduction………………………...…………………...……....
Industry Overview………………………...…………………....
Current State………………………...…………………….
Market Presence/Control………………………………….
Future Outlook……………………………………….……
Growth…………………………………………………….
Key Takeaways……………………………………………
Key Success Factor Analysis…………………………………...
Capitalizing on Growing Markets………………………...
Overview…………………………………………
Asia……………………………………………....
Europe……………………………………………
Australia………………………………………….
Ability to Generate Revenue from Onboard Sources……..
Overview…………………………………………
Why this is Important……………………………
Breakdown of Onboard Revenue Generators…....
Ways to Further Generate Onboard Revenue…….
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Table of Contents cont.
Key Information Systems………………………………
Marketing Environment………………………………...
Segmentation, Targeting, Positioning Strategies……….
Evaluation against Key Success Factors………………..
Key Takeaways…………………………………………
Recommendations for Royal Caribbean…………………....
Recommendations………………………………………
Investing Heavier in Europe…………………………...
Explanation and Rational……………………...
How to Implement…………………………….
Financial Impact………………………………
Limitations of these…………………………...
Using Less Debt and More Equity ……………………
Explanation and Rational……………………..
How to Implement…………………………….
Financial Impact………………………………
Limitations of these…………………………...
Increase in Social Media Presence……………………..
Explanation and Rational……………………...
How to Implement……………………….
Financial Impact…………………………
Limitations……………………………….
Conclusion………………………………………………
References………………………………………………
Appendices……………………………………………...
Appendix A: Pest Analysis……………..…………
Appendix B: Porters Five Forces……..…………..
Appendix C: Royal Caribbean SWOT Analysis..…
Appendix D: Royal Caribbean Business Model
Canvas……….........................................................
Appendix E: Carnival SWOT Analysis……....……
Appendix F: Carnival Business Model Canvas…...
Appendix G: Royal Caribbean Income Statement...
Appendix H: Royal Caribbean Balance Sheet….…
Appendix I: Royal Caribbean Financial Analysis....
Appendix J: Carnival Financial Statements……….
Appendix K: Carnival Financial Analysis…..…….
Appendix L: KSF Ranking System………………..
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List of Illustrations
Figures Page
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5.2 …………………………………………………………..12
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6.3 …………………………………………………………..15
7.1 …………………………………………………………..17
7.2 …………………………………………………………..18
7.3 …………………………………………………………..19

The purpose of this report is to analyze the cruise line industry as
a whole and establish the key success factors with a focus on
Carnival Corporation and Royal Caribbean. It will establish that
Carnival is more successful, why that is, and provide
recommendations for Royal Caribbean to improve. This global
industry is driven by three key success factors that enable it to
accumulate billions of dollars in revenue each year. Carnival
Corporation and Royal Caribbean are the industry’s leaders that
make best use of the three key success factors. The key success
factors in order of most importance are as follows: capitalizing
on growing global markets, ability to generate revenue from
onboard sources, and partnering with travel agents. With each of
these factors being applied effectively, these industry leaders and
other industry competitors are likely to succeed. This already
large market will continue to grow and expand in many countries
and regions across the globe. With a simultaneous increase in
performance, this industry’s growth is not expected to stop
anytime in the near future.
Introduction
Key Success
Factors
Percentage of
Importance
Royal Caribbean
Cruises Ltd.
Carnival
Corporation & plc
Capitalizing on
Growing Global
Markets
40% 8/10 10/10
Generating on board
revenue 30% 9/10 8/10
Partnering with
Travel Agents 30% 9/10 9/10
Weighted Score
100%
8.6/10
(86%)
9.1/10
(91%)
1
Figure 1.1
Introduction > Industry Overview > Key Success Factors > Benchmark > Carnival > Royal Caribbean > Recommendations > Conclusion

Current State
The cruise line industry is heavily concentrated, “Carnival
and Royal Caribbean are the two main cruise lines and
account for 73 [percent] of the market” (Rodrigue, 2015).
Although cruise lines have a presence throughout the world,
the most popular markets are “the Caribbean and the
Mediterranean which are account for about 70 percent of the
global annual deployment” (Rodrigue, 2015). Because the
market is heavily concentrated and requires high start-up
costs it is difficult for new players to enter. In 2014 the
industry as a whole generated more than 37.1 billion dollars
in revenue (Statista, 2014). Carnival had the greatest income
in 2013 with 15.46 billion dollars as shown in (Figure 2.1).
Industry Overview
2
(Cruise Market Watch, 2014)
Background:
The first Cruise ship with the sole
purpose of transporting passengers
was in 1852. In 1970 the cruise line
industry took off with overnight
luxury cruises. The Cruise Industry is
now successful, growing, and able to
adapt to the social and economic
changes that occur. These ships offer
luxury vacationing with
technological advancement and a
competitive cruising market.
Major Effects on the Market:
There are a variety of different variables that
greatly influence the cruise lines industry.
First off, the economic climate greatly affects
the industry by driving price due to an excess
or lack in consumers’ disposable income.
“Because cruises can be relatively expensive
vacations, demand often declines during
economic downturns. The late 2000s
recession limited consumer spending on
travel; resulting in fewer cruise bookings,
lower cruise prices, and fewer customer
purchases on ships” (Cruise Ships, 2014).
Figure 2.1
Competition
Cruise lines are constantly in competition with one another
to gain the most business. In order for cruise lines to fill
their ships they have to compete against not only each
other, but with the hotel and tourism industry. The main
way cruise lines compete against one another is by
branding in ways that each allow each brand to offer
personalized services that a consumer would be inclined to
choose (Hotel, Resort & Cruise, 2012). Cruise lines gain
competitive advantages by offering various packages,
destinations, and prices.
$15.46
$7.96
$2.57
$1.46
$1.25
$0.85
Carnival
Corporation
Royal Caribbean
Norwegian
Cruise Line
MSC Cruises
Prestige Cruise
Holdings
Disney Cruises
Cruise Lines Ranked by Revenue Worldwide in 2013
Revenue (in billions)

Market Presence/Control
The cruise industry makes up 51.4 percent of all ocean and
costal transportation (Soshkin, 2014). The largest cruise
market, accounting for 56.1 percent of the industry, is the
United States (Brennan, 2014). This is because Miami,
Florida is a major hub for cruises that travel to the
Caribbean. The United States play a large role in controlling
the market due to the fact that it not only provides a major
port for ships to dock but also provides the industry with the
majority of its’ consumers. The market is primarily
controlled by Carnival and Royal Caribbean who account
for 73 percent of the total industry which can be seen in
(Figure 2.2)
Industry Overview cont.
Future Outlook
The future looks strong for the cruise line industry. Sales in 2014 were up 26 percent
per agency from the previous year and 2015 advanced bookings were also up 44
percent (Cruising into, 2014). The cost of cruises are also expected to increase 3.5
percent from 2014 with a forecasted price of 1,779 per person (Cruise market watch,
2015).
Growth
A large number of new ships are expected for the future, "according to the Florida-
Caribbean Cruise Association there will be an expected 30 new ships by 2016"
(Shipbuilding, 2014). In result of all the upcoming advancements and opportunities,
the cruise line industry's revenue is estimated to increase 2 percent each year on. With
consumer spending to rise 2.6 percent per year on average through 2019, revenue is
expected to reach 38.2 billion dollars.
Key Takeaways
As the economy continues to improve and disposable income expected to grow 1.4
percent in 2015, the cruising industry will continue to thrive (Soshkin, 2014). There
are many new opportunities growing in China, Europe, and Australia where
companies are always aiming to capture growing markets. In order for a company to
become and stay successful within the industry it is important for them to follow the
key success factors provided. Per capita disposable income is expected to increase 1.4
percent annually over the next five years until 2015 (Soshkin, 2014).
3
Figure 2.2(Cruise Market Watch,
2013)
Market Share of Companies
Carnival Cruise Lines
(49.2%)
Carnival (21.1%)
Costa Cruises (7.2%)
Princess (6.4%)
AIDA (4.4%)
Holland America(3.7%)
Other (6.4%)
Royal Caribbean Lines
(23.8%)
Royal Caribbean(17.0%)
Celebrity (4.7%)
Other (2.1%)
Others
(27.0%)
Norwegian (7.1%)
MSC Cruises (5.8%)
Disney (2.9%)
Star Cruises (1.8%)
Other (9.4%)
China
China is now considered the industry’s largest market for growth (Palmeri, 2015).
Royal Caribbean has begun to add ships preparing to sail out of Shanghai beginning in
2015. Carnival has “signed agreements with China State Shipbuilding Corp. in regards
to construction of new vessels for the Chinese market.

Key Success Factor Analysis
Capitalizing on Growing Global Markets
Overview
Capturing developing global markets is essential for success in the cruise
line industry. With the North American market becoming saturated by
major players in the industry, new markets are beginning to develop in
Europe, Asia, and Australia. Cruise lines are now beginning to focus in
on these markets in order to gain a larger global market presence in an
industry where North America reigns supreme. The distribution of these
markets in the industry can be seen in (Figure 3.1 and 3.2)
Asia
The cruising industry in Asia is young with only 6-7 percent of cruise
passengers coming out of the region, according to the release
(Shankman, 2014). According to Royal Caribbean’s report, Chinese
passengers increased from 25,000 to 100,000 between 2011 and 2012.
Asians currently take about 1.5 million cruises a year, similar to the 1.4
million in U.S. 30 years ago and this region’s growth is expected to
mirror that of the United States’ (Hu, 2013). Carnival expects at least 7
million cruise passengers to come from Asia by 2020 (Shankman,
2013). This market potential hasn’t gone unnoticed by major players
4
Figure 3.1(Statista, 2014)
$1.13
$1.27
$1.80
$11.59
$21.21
Australia and New…
South America
Asia
Europe
North America
Market Size of the Global Cruise
Industry in 2014, by Region
Market Size (in billions of dollars)
in the industry. In the southeastern city of Xiamen, more than 16
billion yuan were earmarked for 10 projects that include construction
of a 100,000-ton luxury liner, a cruise terminal and a shipping
business center (Yap, 2013). In fact, in Shanghai and Tianjin, the
combined investment in cruise infrastructure has topped 12.3 billion
yuan, Royal Caribbean International estimates (Yap, 2013). Capturing
a growing market such as Asia is essential for any cruise line that
intends to grow in the future.
Share of World Wide Passengers
Company % of passanagers
Carnival Corporation & plc 48.10%
Royal Caribbean Cruises Ltd. 23.10%
Norwegian Cruise Line 10.40%
Disney Cruises 2.80%
Star Cruises 0.10%
(Cruise Market Watch, 2015) (Figure 3.2)

Europe
Another market that has potential to grow is
Europe. As of January 22, 2013, European
brands represented 39 percent of Norwegian
Cruise Lines total passenger capacity. As of
January 22, 2013, five ships are under
construction and have been designated for
their Europe brands, with three for AIDA and
one each for Costa and P&O Cruises.
(Norwegian Cruise Line Holding Ltd, 2012)
This is important in capturing the European
market where approximately 6.2 million
European-sourced passengers took cruise
vacations for two or more consecutive nights
in 2011. Additionally, it is estimated that about
6.4 million European-sourced passengers took
a cruise in 2012 (Royal Caribbean, 2012).
Europe has experienced a compound annual
growth rate in cruise guests of approximately
7.6 percent from 2008 to 2012. (Norwegian
Cruise Line Holding Ltd, 2012) This trend
shows how the European market is continuing
to grow and exemplifies why being able to
capitalize on these growing markets are
essential for major players in the Cruise Lines
Industry.
Key Success Factor Analysis cont.
Australia
According to “The 2013 Cruise Industry Source Market Report”, Australia’s market
growth has become a stable market. The 2013 statistics revealed that a record 833,348
Australians took an ocean or river cruise over the last year, up from 694,062
passengers in 2012 (Cruisecritic, 2014). In 2013 the number was just 153,781
passengers (Cruisecritic, 2014). It’s predicted by 2016, that figure will leap to 1
million as more ships set sail in Australian waters. Moreover, the percentage of
Aussies who choose to spend their holidays cruising surpassed that of North
5
Figure 3.3(International Cruise Council, 2013)
Destination Growth from 2012-2013
DESTINATION 2012 2013 VARIANCE
Europe 57719 77308 34.00%
South Pacific 252555 330670 30.90%
Asia 34732 44382 27.80%
River Cruising 39275 49122 25.10%
Other Americas 17236 20612 19.60%
Other 5927 7023 18.50%
Caribbean 17316 19054 10.00%
New Zealand 95562 98914 6.90%
Australia 140361 148527 5.80%
Alaska 22844 24121 5.60%
World Voyages 13535 13615 0.60%
total 694062 833348 20.10%
Americans. In 2013, the
equivalent of 3.6 percent of
the Australian population took
a cruise, compared to 3.3
percent of the North
Americans. Australia is still a
relatively young cruise
market, yet the number of
Australians taking a cruise has
grown by an average of 20
percent a year over the past 11
years. It’s more than doubled
other key markets including
Germany and France, which
grew 9 percent, the US was 3
percent and the UK and
Ireland at 1 percent (Crouch,
2014).

Ability to Generate Revenue from Onboard Sources
Overview
It is essential for a successful cruise line to generate revenue not only
through the sale of tickets, but also through products and services provided
onboard. Products and services provided by the company include things
such gambling, shore excursions, and, food and beverages. Things such as
retail shops, spa services, art auctions, and Internet services are managed
through contracts with third-party concessionaires where the company
receives a fixed percentage of the gross sales.
Why this is Important
According to the Norwegian Cruise Line Holding Ltd.’s 10-K, passenger
ticket sales only account for approximately 70 percent of their operating
revenue. The other 30 percent is generated onboard through the variety
of goods and services the cruise provides. This can be seen in (Figure
3.4) from Norwegian Cruise Line’s 10-K form. According to Brian
Sozzi, “Royal Caribbean's on-board revenue increased 4.25 percent in
the first quarter, following a 7.34 percent gain in the same period a year
earlier (Sozzi, 2014). Royal Caribbean said it continued to see benefits
from "fleet upgrades and on-board revenue management
initiatives." Carnival's on-board revenue rose 4.27 percent for the six
months ended May 31”. This data shows how important generating
onboard revenue is to the success of the cruise line industry.
6
Percent of Revenue Generated by Ticket and Onboard Sales
Year Ended December 31
2013 2012 2011
Revenue
Passenger Ticket 70.60% 70.50% 70.40%
Onboard and other 29.40% 29.50% 29.60%
Total revenue 100% 100% 100%
(Norwegian, 2012) Figure 3.4

Ability to Generate Revenue from Onboard Sources
Breakdown of Onboard Revenue Generators
Figure 3.6 shows a breakdown of what products and services the average cruise
line customer purchases and how they generate revenue for the company. Cruise
lines now are able to offer many more products and services, furthering their
ability to capitalize on onboard revenue.
Ways to Further Generate Onboard Revenue
Figure 3.5 provides information collected from cruise passengers
about what onboard amenities they have paid for while on a cruise
ship and what they would potentially spend more on if certain
accommodations were provided. This is important because it is
consumer feedback to cruise lines about how they can further
promote their generation of onboard revenue. According to the
cart, Internet access and spa services are the most common areas
of onboard revenue generation. Some of the areas where cruise
lines could potentially increase their onboard revenue generation
include use of “adult only” areas, priority boarding/ disembarking,
and celebrity meet-and-greets.
7
Figure 3.5(Mintel, 2013)
12%
12%
16%
18%
23%
26%
32%
34%
17%
23%
16%
23%
25%
22%
33%
33%
Shipboard lectures/ education
Priority boarding/disembarking
Exercise/fitness classes
premium entertainment seating
Laundry service
Alternative restaurant dining
Spa services
Internet Acccss
Percent of Passengers that Paid and Would be
Willing to Pay Extra for an Amenity
Would be willing to pay extra for Have paid extra for
$61.00
$40.00
$81.00
$222.00
$415.00
$1,304.00
All other on board spending
Spa(onboard)
Shore Excursions
Casino & Bar (onboard)
Total Onboard Spending
Ticket
Average Cruise Revenue per Passenger by
Spending Category in 2014
Average revenue in U.S. dollars
Figure 3.6(Cruise Market Watch, 2014)

Partnering with Travel Agents
Overview
In many areas of tourism and hospitality travel agents have
become obsolete, yet they continue to thrive in the cruise line
industry. In 2014 cruise lines perceived by most agents as trade
friendly placed even more value on there partnerships, since they
would get the most referrals from agents (Cruise Ships, 2014).
When booking through a travel agent there are perks that include
amenities that are not available through direct booking (Dunbar,
2011). Cruise lines are taking agents on board giving them the
full experience of what it is like to vacation on their ships. There
are also travel websites such as Expedia and Priceline, which
allow consumers to compare prices like never before. Much of
the Cruise Line Industry’s success is attributed to their symbiotic
relationship with travel agencies. Travel agents have dual
agency status, meaning that a travel agent is both an agent of the
cruise line and of the customer (Cameron, 2013). Their job is to
help both the customer and the cruise line, which is why it is
important for a cruise line to strongly encourage travel agents to
help them out. Travel agents are helping over thirty eight percent
of customers purchase their tickets, (as shown in Figure 3.7). It
is key that cruise lines partner with travel agencies to be
successful, so that these agencies and agents will have an
incentive to recommend those that use their services to a
particular cruise line. Cruise Lines work hard to maintain their
8
38%
38%
11%
13%
Common Cruise Booking
Methods
Through Travel Agent
Directly from Cruise
Line
Third Party Broker/
Consolidator
Other
existing partnerships by offering incentives and rewards to the agents that help
them the most. It is crucial to maintain strong partnerships in order to
distinguish themselves. Many cruises are similar in price and style making
these partnerships even more crucial for increasing sales.

The Future
Travel agencies have taken quite a few surveys and in one of them they
report a 36.5 percent higher demand for luxurious river cruises (CLIA,
2010). Travel agents will also be promoting cruises to other developing
regions in the cruise line industry such as Europe and China. Cruise lines
with the help of partnering travel agents are trying to encourage early
bookings to compete with other travel industries. This will allow for better
deals and more time to fill up all the berths of a cruise ship (Hayhurst,
2010). The success of this industry will continue to rely heavily on travel
agencies and their contributions.
Why this is a Important
Maintaining a strong relationship with travel agencies will give a particular
cruise line a strong competitive advantage. Many already successful
companies have the ability to offer perks that include amenities that are not
available through direct booking (Dunbar, 2011). The most successful
company, Carnival Corporation and its many brands have programs to
promote their products and services to travel agents (Carnival Corp, 2012).
In addition, Royal Caribbean has made it one of their operational strategies
to try and maintain strong relationships with travel agencies (Royal
Caribbean, 2012). These partnership strategies are critical for increasing
sales and getting people to book earlier than ever (See Figure 3.8). Due
primarily to the influences of travel agencies people are now booking
farther in advance than ever (Hayhurst, 2010).
Partnering with Travel Agents
9
Percent of Passengers' booking methods
All
Royal
Caribbean
Carnival
Cruise
Lines
Norwegian
Cruise Line
Disney
Cruise
Line
Celebrity
Cruises
Princess
Cruises
Base: Internet users aged 18+ who have taken a
cruise in the past five years or will in the next 12
months
513 268 368 207 196 167 181
Booking Methods:
I booked direct with the cruise line 38% 36% 38% 43% 37% 52% 49%
I booked through a travel agent 38% 36% 39% 36% 43% 28% 28%
I booked through a third-party cruise broker /
consolidator (eg Expedia, Cruise Direct, etc)
11% 10% 10% 5% 5% 4% 4%
Don't know / someone else booked the cruise / I
haven't booked it yet
13% 19% 14% 16% 15% 16% 19%

Generation of Onboard Revenue
NCL generates the highest percentage of their total revenues from onboard revenues in
the industry (Based on Figure 4.1). Since most of their earnings are from this and they
are at the top of the scale, we rank Norwegian Cruise Lines a 10/10.
Benchmark Against Key Competitors
Norwegian Cruise Line Holdings Ltd. is a leader in
capitalizing on growing global markets. They have done this
recently through their acquisition of Oceania Cruises. This
company calls on more than 330 ports across Europe,
Australia, New Zealand, South Pacific, Asia, Africa and the
Americas (GlobeNewswire, 2014). For a small cruise line, the
have capitalized on many growing global markets. Based on
our scale we rank them a 6/10. Star Cruises is another
growing brand, specifically in the Asia-Pacific. If we were to
rank them they would receive a 1/10 based on our scale even
though they take advantage of the largest growing market,
they do not focusing on any others. They have six ships
exclusive to this region, that’s more than any other company
(Star Cruises, 2015). Disney only has cruise ships and trips to
the most popular destinations, North America and some in
Europe (Disney, 2015). Based on the scale they earn a 2/10,
the lowest score of the major companies.
10
Figure 4.1(Griffin, 2011)
Cruise Line Revenues Fares On board (1) (2)
Carnival Corp & PLC $11,084 $3,385 30.5%
Royal Caribbean Cruise $4,909 $1,844 37.6%
NCL Corporation $1,393 $620 44.5%
Total, Top Three $17,386 $5,840 33.6%
(1) Includes miscellaneous extra air ticket sales in some cases (2) On board revenues
expressed as a proportion of original fare revenues
On Board Spending As A Proportion of Fares Paid In 2010 (in millions)
Partnering With Travel Agencies
When it comes to partnering with travel agencies, Disney has proportionately the highest
sales through travel agents (Based on Figure 3.8). There are travel agents that specialize
in only Disney vacations, since Disney has many other resorts and theme parks, they can
offer much more to travel agents, strengthening their relationships (Mousesavers, 2015).
Being a multifunctional company with numerous travel options, unlike most major cruise
lines, they have a significant competitive advantage when it comes to partnering with
travel agencies. Disney is ranked a 10/10 in regards to this key success factor with their
percentage of sales through travel agents being at the top of our scale..
We used the following graphs and data (Figure 4.1) to set a
benchmark in order to compare Royal Caribbean and
Carnival Corp. to other players in the industry. Based on our
analysis we have provided a 1-10 score for both companies
depicting their success in these specific areas. A scale for
these ranking can be seen in appendix L.

Key Information Systems
Carnival has multiple information systems implemented on their
ships in order to manage and interpret information efficiently. Some
of the systems that each ship is equipped with include Advanced
Passenger Information System (APIS), Safety Management System
(SMS) and Environmental Management System (EMS). One of
Carnival's Strategies is to form a safe, healthy, and secure
environment for passengers (Carnival Corp, 2014). For Carnival
to use this strategy in full force, information systems are
Carnival Corporation &Plc Analysis
Overview
Carnival Corporation is the top cruise line in the world based off its
financial position, information systems, market environment and
strategies. With ten successful brands targeting a wide range of
cruisers and locations, Carnival has gained a large amount of the
market share. Key information systems and constant onboard
innovation have also had a huge impact on the company's success.
Financial position, performance and market value
According to our research Carnival is currently pursuing a stability
strategy. They use more equity to finance their operations because it
causes increased cash flows and less liabilities. Their ability to
generate significant operating cash flows allows them to finance all
their capital investments and also have a substantial amount of
remaining cash flow (Carnival Corporation, 2015). As seen in figure
5.1, with a profit margin of 7.78% in 2014 resulting in a $1.07M net
profit, Carnival has a high performance and financial position. The
companies show financially stable ratios with ROA at 3.13% and
ROE at 5.09% in 2014. All these financial aspects have led to
Carnival holding 49.2% of the market share (Cruise Market Watch).
(Carnival Corp, 2014)
Market Environments
Carnival's market environment focuses largely on cruiser's demographics
including regions, age, and lifestyles. The top regions that carnival operates
with are North America, Australia, and the UK. Carnival targets these locations
based on the industry’s number of annual cruise passengers as a percent of their
total populations of 3.4 percent in North America, 2.7 percent in Australia, and
1.4 percent in central Europe. Carnival also targets middle age cruisers based
on the industries average age ranging from 40 to 60 years old (Carnival Corp.,
2015). Lifestyle and preferences are also a large factor in the market
environment, which is why multiple ship styles and sizes are available. Carnival
offers a diverse range of ship styles including contemporary, premium, and
luxury categories (Carnival Corp, 2015).
11
Figure 5.1
Operating Income (in thousands)
2014 2013 2012
Royal Caribbean $941,859 $789,148 $403,110
Carnival
Corporation
$1,792,000 $1,352,000 $1,642,000
essential. The APIS categorizes and organizes all passenger information saving
time for the company and employees when information needs to be accessed
(Keynote, 2013). The SMS manages pollution, inspections, regulations and
policies for each ship. This makes it quicker and easier for Carnival to regulate
its ships based on the ISM Code. Each ship is also linked with an EMS which
helps manage the environmental impacts of the ships’ processes, products and
services (Carnival Corp, 2012).

Segmentation, Targeting and Positioning Strategies
Carnival has many strategies for segmentation, targeting, and
positioning that promote their success within the industry. The
market Carnival is targeting includes families, seniors, kids and
couples. Since they generally target everyone, Carnival's strategy is
to offer a wide range of products and services to suit cruisers of
many ages, backgrounds and interests (Griffin, 2012). Classifying
the different cruise brands as contemporary, premium and luxury is
also a strategy for the business. For their segmentation strategy, they
divide their ten cruise brands and aggregate them to operate in North
America and Europe, Australia, and Asia (The EAA). Even though
Carnival has expanded into different regions, there is a large
opportunity to expand into more growing markets around the world.
Since almost 60 percent of cruise passengers in the world are from
North America, Carnival has four out of its ten brands operating
there as shown in (Figure 5.2) (Carnival Corp, 2015). In order for
Carnival to position themselves as a fun and memorable cruise line,
they spend a large amount of money on onboard innovations to
make the ship more entertaining for the cruisers.
cont.
12
Figure 5.2
Passenger
Capacity
Number of
Ships
Primary Markets
61968 24 North America
North America Cruise Brands 124358 61
EAA (Europe, Australia Asia)
31720 14 Italy, France and Germany
AIDA Cruises ("AIDA") 16442 9 Germany
14636 7 UK
6672 3 UK and North America
4780 3 Australia
4176 3 Spain and South America
78426 39
202784 100
North America
Totals
Seabourn
Holland America Line
Princess Cruises ("Princess")
Carnival Cruise Lines
Cruise Brands
Segmentation of Brands within Markets
Costa
P&O Cruises (UK)
cunard
P&O Cruises (Australia)
Ibero Cruises ("Ibero")
EAA Cruise Brands

cont.
Evaluation of Key Success Factors
Carnival Corporation, through its many brands, has the most ships in
regions outside of North America. With 39 ships used primarily in
other continents, they are the leader in capitalizing on growing global
markets and 48.1 percent of the share of world wide passengers, they
earn a ranking of 10/10. Carnival quantitatively generates the most
onboard revenue of any of its competitors. However this accounts for
only 30.5 percent of their total revenue, proportionately the lower of
the other two top competitors (See Figure 5.3). The percentage that
they take in is important, but seeing as they still bring in the most they
are given a rank of 8/10 for generation of onboard revenue. The third
most important key success factor is one that carnival does extremely
well and it is partnering with travel agents. For this they are ranked
9/10 based on our scale with 39 percent of sales, from their
partnerships with travel agents, only slightly below Disney. (See
Appendix L)
Key Takeaways
Carnival is the top cruise lines in the cruise industry based on their
financials, information systems, market environment, and strategies.
The companies’ strong financial position and positive performance
show the success in the company's financial aspects. The information
systems that Carnival uses are also an essential feature that has helped
the success within the company. In relation to the industry’s market
environment, Carnival also takes advantage of the diverse market and
targets a wide range of locations and costumers. Overall the company's
segmentation, targeting and positioning strategies are what structure all
of their operations and lead to the success of the company.
13
Figure 5.3
Key Success
Factors
Percentage
of
Importance
Royal
Caribbean
Cruises Ltd.
Carnival
Corporation
& plc
Capitalizing on
Growing
Global Markets
40% 10/10
Generating on
board revenue 30% 8/10
Partnering with
Travel Agents 30% 9/10
Weighted
Score 100%
9.1/10
(91%)

Overview
Royal Caribbean Cruises Ltd. makes use of many different business
practices in order to maintain its position as a major player in the
cruise line travel industry. This global company owns Royal
Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club
Cruises, and CDF Croisières de France along with 50 percent of TUI
Cruises. Each of these brands targets a different region or target
market (see Figure 6.1). All together, these six brands operate a total
of 42 ships that go to approximately 480 different ports and
destinations across the seven continents (Royal Caribbean, 2015).
ROYAL CARIBBEAN CRUISES LTD.
Trend analysis over 3 years (in percentage)
The DuPont Identity 2014 2013 2012
Return on Equity (ROE) =Net
Income/Total Equity
9.22% 5.38% 0.22%
Return on Assets (ROA) =Net
Income/Total Assets
(3.69%) 4.21% 0.16%
Profit Margins =Net Income/Sales 9.46% 5.95% 0.24%
Debt Ratios =Total Liabilities/Total
Assests
60.00% (56.12%) 58.10%
Asset Turnover =Sale/Total Assets (38.98%) 39.65% 38.77%
Equity Turnover =Sale/Total Equity 97.46% (90.37%) 92.53%
Equity Multiplier =Total
Assets/Stockholder's Equity
250.03 (227.89) 238.64%
ROE = Net Income / Total equity 9.22% 5.38% 0.22%
Royal Caribbean Cruises Ltd.
Analysis
14
Figure 6.1
Financial Position, Performance and Market Value
Royal Caribbean is currently pursuing a growth strategy. This is apparent
due to their use of debt instead of equity to finance their operations. They
do this because by financing their capital investments using debt, there is
a lower overall cost than if done with equity. This is shown by (Figure
6.2) having a debt ratio trend of 56.12% in 2013, to 60% in 2014. They
also had increasing liabilities of $11,264,682, and then $12,428,831
respectively. Royal Caribbean’s ROE has risen from 2012 to 2014 due to
an increase in their net profit margin. In 2013, the profit margin was
5.95%, which then increased to 9.46% in 2014, demonstrating
improvements in cost control. From 2013 to 2014, the company's total
revenue's trend increased.
Figure 6.2(Cederholm, 2015)
Royal Caribbean's Six Strong Brands
Deliver the WOW to the Global Cruiser
Modern Luxury Focused on North America,
United Kingdom and Australia
Latin Cruising Experience Focused on Spain
and Latin America
Destination Immersion for the Up- Market
French Cruising Experience
Premium German Cruise Experience

Key Information Systems
Much of Royal Caribbean’s success is attributed to their use of information
systems. They are continuously updating their infrastructure to facilitate
growth and keep up with constant advancements in technology. Since 2012
Royal Caribbean has been using CA Technologies IT management
solutions to enhance its efficiency. CA Technology provides Royal
Caribbean with multiple systems including application performance
management, infrastructure management, automation, and project and
portfolio management systems. The benefits from CA include resolving
potential problems before they cause disruptions for guests and also helping
run the entire company more easily and efficiently (CA Technologies,
2013). All of these systems help Royal Caribbean be the family friendly
vacation that they have positioned themselves at.
Analysis cont.
15
The Marketing Environment
Royal Caribbean has a very broad market environment that targets a wide
range of cruiser's demographics. Even though the market includes all age
ranges, according to the MRI Consumer Research, the 25-54 age range is
the age group that is most likely to go on a cruise. For their region market,
Royal Caribbean sources internationally in the United Kingdom, Germany,
Italy, Spain, China, Brazil, Australia and more (Royal Caribbean, 2010).
Since the market includes a wide range of ages and regions, a broad range
of lifestyles are also included in the market environment. With majority of
cruise goers married with children ages 6-17, Royal Caribbean focuses
mostly on lifestyles of a typical family. They target various regions as well
(see Figure 6.3). Figure 6.3(Royal Caribbean, 2012)
2012 2011 2010
Passanger ticket revenues:
51% 51% 55%
49% 49% 45%
Distribution of Passanger Ticket Revenue from 2010-2012
United States
All Other Countries
Segmentation, Targeting, Positioning Strategies and Opportunities
Royal Caribbean segments, targets, and positions through many different
strategies. Though mainly focused on North America, Royal Caribbean has
expanded in a few locations in Europe, Asia and Australia by building more
ships and advertising internationally. With such large target market including
almost all ages and demographics, Royal Caribbean also focuses on provided
a wide range of products and services on board to target every cruiser (Royal
Caribbean, 2010). However, an opportunity for Royal Caribbean to focus
more attention on one market would targeting baby boomers. In order to
raise awareness of these products and services, Royal Caribbean advertises
through travel agents, commercials, direct mailing and social media. Their
targeting strategies also overlap with their positioning strategies. Royal
Caribbean has positioned itself as a family fun vacation that includes
entertainment, food, leisure, and exploration all in one place for any age
(Royal Caribbean, 2013). This includes some of the same targeting strategies
of offering an extensive amount of options that will please all cruisers.

Evaluation Against Key Success Factors
Royal Caribbean is capitalizing on the growing global market, specifically
the Asian market in China and other areas for potential growth such as
Australia and South America. They earned an 8/10 for this key success
factor based on their share of world wide passengers. Royal Caribbean has
two ships in South America, four in Australia and three in Asia (Allen,
2014). In addition, Royal Caribbean ranked second in the industry for most
annually generated onboard revenue with an average of 1.8M or 37.6
percent (Figure 6.4), giving them a ranking of 9/10. About half of the
respondents of a survey conducted by Mintel stated that meals, drinks, and
entertainment are amongst their top priorities (O’Donnell, 2013).Travel
agents are also an important factor in the cruise industry and Royal
Caribbean ranks a 9/10. This ranking is based on Royal Caribbean only
having 36 percent of its costumers booking through a travel agent, just
behind Carnival’s 38 percent and Disney with 43 percent (Figure 6.4). To
insure sales, Royal Caribbean partners with many travel agencies by
ensuring commission rates and incentive structures that are competitive in
the market (Royal Caribbean, 2012). (See Appendix L)
Analysis cont.
16
Key Takeaways from this Section
The main purpose of this section is to show that Royal Caribbean is the
second top cruise line in the industry. They make use of capitalizing on
growing global markets, generating onboard revenue, and partnering with
travel agents in order to gain their stance in the industry. They use various
information systems to give them a competitive edge over their
competition. They have wide demographics for which they can target in
various ways to increase their sales and improve consumer relations.
Key Success
Factors
Percentage of
Importance
Royal
Caribbean
Cruises Ltd.
Carnival
Corporation
& plc
Capitalizing on
Growing Global
Markets
40% 8/10 10/10
Generating
onboard
revenue
30% 9/10 8/10
Partnering with
Weighted Score
100%
8.6/10
(86%)
9.1/10
(91%)
Figure 1.1

Investing Heavier in Europe
Specific Strategic Recommendations
for Royal Caribbean Cruises Ltd.
Intro to Recommendations
After comparing both Carnival Corporation & plc and Royal Caribbean Ltd.
we have found Royal Caribbean to be less favorable than Carnival. To grow
in the industry we recommend investing heavier in Europe, to use less debt
and more equity to finance operations, and to increase their social media
presence.
Explanation and Rationale
In 2008 less than 2 percent of Europeans went on a cruise versus the 15
percent of Americans who have (Royal Caribbean, 2008). Europeans twice
the average amount of vacation time than Americans. Due to this, the cruise
industry has potential for growth in this region. In order to increase revenue,
Royal Caribbean needs to provide more ships to Europe. Also, adding more
ports throughout Europe will increase accessibility for potential clients. Royal
Caribbean must establish connections with European travel agents in order to
build a reputation around Europe.
How to Implement
There has been over a 5 percent increase of ship deployment to Europe in
2014 (CLIA, 2014). By creating new ports, there are opportunities to add
more ships and create a higher revenue stream. In order to receive bookings in
Europe, there needs to be a better marketing campaign to European customers.
By working with Travel Agents they will be able to recommend Royal
Caribbean to these customers.
Financial Impact
Initially, there will need to be an investment made to implement a
marketing plan and add more ships and ports throughout Europe. While
there are high costs, we project a positive ROI from investing in growing
global markets.
Limitations
These recommendations require a large amount of capital investment.
There are also already companies investing in the growing cruise market
present in Europe. Star Cruises is the “first global cruise line with a
presence in the Asian-Pacific, North American, South American, and
European market” (Kamery, 2008). By what is represented in (Figure 7.1)
the European market is the second largest market. With the market in
Europe growing, Royal Caribbean needs to make a presence now in order
to capture this market before it becomes overly saturated.
(Geography, 2015)
17
Figure 7.1
0% 3% 4% 9%
26%
59%
Middle East/
Africa
South
America
Austrailia Asia Europe North
America
Percent of Worldwide Cruise Passengers by
Source in 2015
Percent of Passengers

Limitations
The only possible limitations of this is if they need to make any large purchases and are unable to
finance through investors alone. They then will need to borrow more money, which will increase
their debt.
As seen in (Figure 7.2) Royal Caribbean has a debt
ratio of 58.1 percent compared to Carnival, who
has a debt ratio of 38.56 percent. We recommend
that once Royal Caribbean pays off their current
long-term debt, they should begin switching to
equity to finance their operations in order to
decrease their debt and create a more sustainable
strategy. If this is done, along with our other
recommendations, we believe that Royal
Caribbean will be able capitalize on their current
growth strategy in the short term and become more
stable in the long term.
Use more Equity for Financing in the Next 5 Years
Financial Impact
This will positively effect Royal Caribbean by decreasing their annual loan payments for long
term debt while transferring it to stock holders by using equity instead. Currently, Royal
Caribbean is trying to grow through the purchase of new ships. Once these loans are paid, we
believe using equity to finance will be more sustainable because it takes risk off them and puts it
on stockholders.
18
Return on Equity (ROE) =Net Income/Total
Equity
9.22% 5.38% 0.22%
Return on Assets (ROA) =Net Income/Total
Assets
(3.69%) 4.21% 0.16%
Debt Ratios =Total Liabilities/Total Assests 60.00% (56.12%) 58.10%
Asset Turnover =Sale/Total Assets (38.98%) 39.65% 38.77%
Equity Turnover =Sale/Total Equity 97.46% (90.37%) 92.53%
Equity Multiplier =Total Assets/Stockholder's
Equity
250.03 (227.89) 238.64%
How to Implement
With the recent purchase of their new ship,
Quantum of the Seas, Royal Caribbean has
devoted much of their financing through debt. In
order for them to lower their debt-to-equity ratio
and create a more sustainable strategy, it is
important that they focus on maintaining their
current ships and using their new ones to use for
expansion into growing markets.
Figure 7.2
(Royal Caribbean, 2015)

Brand Mentions
Percent of
Total
Mentions
Facebook
Page Likes
Carnival Cruise Lines 1,604,155 73% 2,237,639
Disney Cruise Line 454,876 21% 1,040,325
Royal Caribbean 42,147 2% 1,423,640
Princess Cruises 41,323 2% 1,138,572
Celebrity Cruises 24,422 1% 393,417
Norweigan Cruise Line 20,686 1% 557,765
Increase in Social Media Presence
Social Media is key to every business and is one of the most effective ways
to connect with consumers. By increasing social media presence on
Facebook, Twitter and other media applications there will be a new market
that become intrigued. By being able to analyze consumer feedback, Royal
Caribbean can make improvements to their current business model. Also,
social media provides a way for companies to connect and build a
relationship with their clients before and after they purchase a cruise. Using
effective social media promotions can make or break a company’s online
presence.
Royal Caribbean is drastically lacking in their social media involvement.
“Carnival Cruise Lines was the most talked about cruise line with 7 out of 10
online mentions” for every cruise related post (O’Donnel, 2013). By
increasing their social media presence, there will be an increase in online
chatter and consumer information Royal Caribbean can analyze.
Limitations
There are threats when investing into social media. Social media sites go
through trends of popularity and there is a possibility that certain social
media campaigns will not succeed.
How to Implement
Royal Caribbean needs to use social media in order to better segment and
target customers. Instead of general advertising targeting a wide range of
customers, Royal Caribbean needs to use social media to gather information
to better identify their target market. With the average cruise customer age
being roughly 50 years old, collecting data such as surveys and customer
feedback from this demographic through social media can help give Royal
Caribbean a better understanding of their primary customers.
Financial Impact
Marketers need to be trained in how to use social media. There are many
advertisement spaces that are available for purchase on websites. Tweets
can be promoted on twitter and everyone on Snapchat can see videos and
pictures from new ships that would have a lasting impression on people
about their cruises.
19
Figure 7.3(O’Donnell, 2013)

Conclusion
After conducting an analysis of the cruise line industry our team has
identified three key success factors. These factors include a cruise line’s
ability to capture growing global markets, provide customers with the
latest onboard innovations in order to generate revenue, and be able to
successfully partner with travel agencies in order to draw more customers
to their cruises. In evaluating Carnival and Royal Caribbean we have
found that Royal Caribbean is lacking in these categories and we have
provided recommendations for them to improve in these areas. We
recommend that Royal Caribbean invest more heavily in Europe, use less
debt and more equity to finance their activities, and increase their social
media presence. If these recommendations are implemented, we expect
Royal Caribbean to grow and succeed in the industry.
20
Figure 1.1
Key Success
Factors
Percentage of
Importance
Royal Caribbean
Cruises Ltd.
Carnival
Corporation & plc
Capitalizing on
Growing Global
Markets
40% 8/10 10/10
Generating on board
revenue 30% 9/10 8/10
Partnering with
Weighted Score
100%
8.6/10
(86%)
9.1/10
(91%)

Appendix A: Pest Analysis
25
Political
Governments have few restrictions on the cruise line industry but
still have an impact on travel restrictions, taxation, entertainment and
franchising laws. All governments that cruise lines travel to have
different regulations when it comes to tourism and customs. While
ships are in open waters there is no sales tax due to the loop hole in
the US tax code. Within jurisdiction of the coast of any country the
cruise ship must comply with all entertainment and alcohol
regulations of the host country. U.S. based companies still have to
follow the regulations by the Federal Trade Commission.
Social
Social factors that affect the cruise line industry include the average
age, niche markets and cultural norms. The industry attracts all ages
but with the baby boomer generation now at the age where they can
afford to take time off and buy cruises the industry expects to see a
continued growth. The most popular cruise lines are the large cruise
lines that cater to the majority. But there is an increase in niche
cruise lines including Disney, spring break and singles cruises. The
norms of the vast majority of cruises include beach attire, social
events, as well as casual and formal dinners.
Economical
The economic climate has a strong impact on the cruise line
industry. While the cruise line industry tends to mirror the stock
market tends to outperform it (Brennan, 2014). The stock market
proves that during an economic recession cruise lines suffer due to a
decrease in disposable income. Since the recession in 2009, stock
prices of cruise lines such as Carnival Corporation and Royal
Caribbean have been steadily increasing (Morningstar, 2015).
Technological
In an era with continuous technological advances in modern
technology, the cruise line industry is making accommodations to
bring these advances onboard. Technology is adding to the onboard
experience by providing travelers with amenities such as Wi-Fi,
Internet kiosks, and RFID technology use for keeping track of
children. The ships themselves have been following the
contemporary trend of “going green.” Newer ships are beginning to
use more eco-friendly waste, fuel, and water purification systems as
well as more energy efficient appliances onboard.

Appendix B: Porters Five Forces
Substitutes
Only a small percent of vacation goers go on cruises each year. With so many
other options it easy for a consumer to choose from a variety of substitutes
including resorts, theme parks, road trips, camping, etc. Many of these options
are less expensive; for that reason some consumers are tempted to choose a
substitute. With these other options available cruises have an incentive to
retain their previous customers while attracting new customers. For this to
happen cruises have to focus on brand loyalty.
Threat of New Entrants
The industry as a whole has low barriers to entry however, a high amount of
capital is required to start a new company. The threat of new entrants is low
because it is hard to raise billions of dollars in capital for ship construction,
advertising, maintenance, etc. Some new companies such as Star Cruises pose
little threat to the major players in the industry because they are in the Asia-
Pacific, an area where little of the current market is held. This could
potentially create a future obstacle if existing companies plan on expanding to
those areas. New entrants primarily pose a threat to smaller cruise lines with
few ships and a weaker market share.
Bargaining Power of Consumer
The bargaining power of consumers is low because consumers have little
negotiating power due to fixed prices, destinations, and accommodations.
Each ship is likely to be filled for each voyage, leaving the customers without
any leverage for negotiation. Consumers have the most bargaining power
when choosing between different cruise lines.
Bargaining Power of Suppliers
Retail, food, and drink suppliers onboard have very low bargaining power.
With so many different sellers each cruise line has a lot of options to choose
from, giving them the ability to pick the cheapest ones. The bargaining power
of suppliers who construct ships is high due to the low availability of
companies with the resources to build large, deep-sea cruise ships.
Competition
Most consumer comparisons are done through travel agencies prior to
booking. Cruise lines build relationships with Travel Agents to gain
customers. Consumers benefit through booking with Travel Agencies because
it allows them to easily compare rates between companies. This has
encouraged cruise lines to lower prices and add perks in order to stay
competitive. Another way the industry competes is through specialty cruises.
This allows companies to position themselves to target different niche
markets.
26

Strengths
•Six unique brands: Royal Caribbean International, Celebrity Cruises,
Azamara Club Cruises, Pullmantur brand which is tailored to serve
the market in Spain, Portugal and Latin America, CDF Croisieres de
france brand and a 50pecent joint venture with TUI cruises in
Germany (Royal Caribbean , 2012)
•42 Ships among the six brands (Royal Caribbean, 2015)
•Approximately 480 destinations and ports (Royal Caribbean, 2015)
•Cruise to 95 countries in all 7 continents (Royal Caribbean, 2012)
Weaknesses
•Struggle to obtain financing or capital for our needs or expectations
that are sufficient (Royal Caribbean, 2012).
•Rely to heavily on travel agencies for generating sales (Royal
Caribbean, 2012)
Opportunities
•Possibility of expanding into the smaller, faster growing European
markets (Royal Caribbean, 2012)
•The capacity for China’s market is projected to increase 66 percent
for 2015 (Royal Caribbean, 2015)
•Expansion into the Brazilian and Australian markets (Royal
Caribbean, 2012)
Threats
•The new market expansions may be unsuccessful if the markets do
not grow as anticipated (Royal Caribbean, 2012)
•Unforeseen events such as terrorism and natural disasters could halt
cruise sales (Royal Caribbean, 2015)
•Past economic downturn has slowed sales and a repeat economic
crisis is always a possibility (Royal Caribbean, 2012)
Appendix C: S.W.O.T. Analysis
27

•Variety of cruise brands
targeted to different
markets
•Values placed on couples
and families traveling with
children
•Positioned to attract new
customers and retain
previous ones (Royal
Caribbean, 2012)
•Ranked Second in overall
satisfaction within the
overall cruise industry
( JD Power, 2013)
•Maintain strong
connections with
travel agents (Royal
Caribbean 2012)
•Increase social media
for brand recognition
(Royal Caribbean,
2012)
•Strong focus on
exceeding customers
needs and expectations
•Service customer
preference by improving
technological capabilities
•Add greater value to ticket price by adding bundles and credits (Royal
Caribbean, 2015)
• Net Yields and Net Cost excluding Fuel are the most important
financial measures (Royal Caribbean, 2015)
•Debt agreements require a minimum net worth and debt to capital ratio
•Mobile Apps and websites
to allow customers to
change, personalize and
book reservations
•Consumer Outreach
department with 24 hour
vacation planers (Royal,
Caribbean, 2012
•Brand dedicated sales
representatives and travel
agencies work with
customers to secure travel
arrangement and needs
•Offering air
transportation to guests
through the Air
Transportation Program
•50% Joint Venture with
TUI Cruises (Royal
Caribbean, 2012)
• Social Media is key factor
for marketing strategy
•Constantly improving the
digital platform in order to
keep up with increasing
technology use (Royal
Caribbean,2012)
•On board revenue generated from specialty restaurants, casinos,
internet, unlimited alcohol packages and shore excursions
•Constantly offering guests more places to spend money
Appendix D: Business Model Canvas
28

Strengths
Appeal to Numerous Niche Markets
• Carnival has many different brands including budget minded,
contemporary, and luxury cruises.
Superior Profitability
• Their average income stands at 18.1% compared to the
industry average of 6.3. (Friesner 2014)
Efficiency
• Since 2007, fuel consumption has decreased by 25%. .
(Friesner 2014)
Weaknesses
Negative Media Attention
• Events such as the Costa Concordina ship crash in Italy on January
13, 2012 and the losing of two passengers in May of 2013 have
hurt their image. (National Post 2013)
Legal Proceeding on Pollution
• On August 28, 2013, the UK Maritime & Coastguard Agency
began an investigation into allegations that Caribbean Princess
breached international pollution laws.
• On December 28, 2014, the Egyptian Environmental Affairs
Agency began an investigation into allegations that Costa
neoClassica Breached Egyptian environmental laws. (Carnival
Corp. & PLC 2012)
Opportunities
Expansion to Underdeveloped Markets
• Europe
• Asia
• Rivers
Targeting the 45 – 60 Year Old Demographic
• Over the next 10 years the number of people projected to take
cruises is expected to rise by 17 million. (Levin 2012)
Threats
Government Closing Loopholes
• In 2009, the US government began discussions on closing tax
loopholes that Carnival Corp. were using. (Levin 2012)
Increasing Fuel Prices
• The EPA has changed laws in regards to reducing the sulfur
content used in fueling ships. (Carnival Corp. & PLC 2012)
• This increasing demand for low-sulfur fuel could potentially
rise fuel prices. (Carnival Corp. & PLC 2012)
Natural Disasters & Contagious Diseases
• These instances that threaten passengers’ health and safety
could have an adverse effect on sales and profitability.
(Carnival Corp. & PLC 2012)
Appendix E: S.W.O.T. Analysis
Carnival Corporation & plc
29

• Cargill (Food)
• Starboard Cruise
Services (Shipboard
Gift Shops)
• Steiner Management
Inc. (Shipboard Spa/
Beauty/ Fitness)
• Hasbro Inc. for
onboard
entertainment
• Innovate ways to
enhance guests’
onboard experiences
• Adding advertising
programs to promote
products
• Maintenance
• Best cruise line for
the value
• Fun and
Memorable
Vacation
• Provide fun
onboard
environment and
have friendly
service
• Friendly and
Reliable Service
• Quality
Products and
Entertainment
• Families
• Couples
• Singles
• Seniors
• Quality
Employees
• Food and Drink
Suppliers
• Variety of
destinations
• Retail, online and
home based agents
• Social Media and
digital marketing
• Television
• Mail
• Radio
• Largest Cost
• Fuel
• Food and Beverage
• Travel Agency Services
• Port Facilities
• Repairs and Maintenance
• Advertising and Marketing
• Largest Capital
Investments
• Construction of
New Ships
• Improvements to
Existing Ships
• Ticket sales account for 76% of total revenue
• Onboard revenue account for 24% of total revenue
Appendix F: Business Model Canvas
Carnival Corporation & plc
30

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) AND COMMON SIZE INCOME STATEMENT
(unaudited, in thousands, except per share data)
Passenger ticket revenues
Onboard and other revenues
Total revenues
Cruise operating expenses:
Commissions, transportation and other
Onboard and other
Payroll and related
Food
Fuel
Other operating
Total cruise operating expenses
Marketing, selling and administrative expenses
Depreciation and amortization expenses
Impairment of Pullmantur related assets
Restructuring and related impairment charges
Total operating costs
Operating Income
Other income (expense):
Interest income
Interest expense, net of interest capitalized
Extinguishment of unsecured senior notes
Other income (expense)
Total other income (expense)
Net Income
Earnings Per Share:
Basic
Diluted
2014 2013 2012
73.0% 71.9% 72.8%
27.0% 28.1% 27.2%
100.0% 100.0% 100.0%
17.0% 16.5% 16.8%
7.2% 7.1% 6.9%
10.5% 10.6% 10.8%
5.9% 5.9% 5.8%
11.8%11.7% 11.6%
13.3% 14.9% 15.0%
65.7% 66.7% 67.1%
13.0% 13.1% 13.2%
9.6% 9.5% 9.5%
5.0%
0.1% 0.7% _
88.3% 90.0% 94.8%
11.7% 9.9% 5.2%
0.1% 0.2% 0.3%
-3.2% -4.2% -4.6%
-0.1% -0.1%
0.9% -0.02% -0.6%
-2.2% -4.1% -5.0%
9.5% 6.0% 0.2%
$3.45 $2.16 $0.08
$3.43 $2.14 $0.08
Appendix G: Royal Caribbean Cruise Ltd.
Income Statement
31

Assets 2014 2013 2012
Current assets
Cash and cash equivalents 0.9% 1.0% 1.0%
Trade and other receivables, net 1.3% 1.3% 1.4%
Inventories 0.6% 0.8% 0.7%
Prepaid expenses and other assets 1.1% 1.3% 1.0%
Derivative financial instruments 0.4% 0.3%
Total current assets 3.9% 4.8% 4.5%
Property and equipment, net 88.0% 87.3% 88.0%
Goodwill 2.0% 2.2% 2.2%
Other assets 6.1% 5.8% 5.3%
Total assets 100.0% 100.0% 100.0%
Liabilities and Shareholders‘ Equity
Current liabilities
Current portion of long-term debt 3.9% 7.8% 7.7%
Accounts payable 1.6% 1.9% 1.8%
Accrued interest 0.2% 0.5% 0.5%
Accrued expenses and other liabilities 4.4% 2.8% 2.7%
Customer deposits 8.5% 8.3% 7.8%
Total current liabilities 18.6% 21.3% 20.5%
Long-term debt 36.9% 32.4% 35.2%
Other long-term liabilities 4.5% 2.4% 2.4%
Total liabilities 60.0% 56.1% 58.1%
Shareholders' equity
Preferred stock ($0.01 par value; 20,000,000
shares authorized; none outstanding)
Common stock ($0.01 par value; 500,000,000
shares authorized; 233,106,019 and 230,782,315
shares issued, December 31, 2014
and December 31, 2013, respectively)
0.01% 0.01% 0.01%
Paid-in capital 15.7% 15.7% 15.7%
Retained earnings 31.7% 30.2% 29.0%
Accumulated other comprehensive (loss) income
-4.3% 0.03% -0.7%
Treasury stock (13,808,683 and 10,308,683
common shares at cost, December 31, 2014 and
December 31, 2013, respectively)
-3.1% -2.1% -2.1%
Total shareholders' equity 40.0% 43.9% 41.9%
Total Liabilities and Shareholders equity 100.0% 100.0% 100.0%
CONSOLIDATED BALANCE SHEETS AND COMMON SIZE
BALANCE SHEET
(in thousands, except share data)
Appendix H: Royal Caribbean Cruise Ltd.
Balance Sheet
32

Return on Equity (ROE) =Net Income/Total Equity 9.22% 5.38% 0.22%
Return on Assets (ROA) =Net Income/Total Assets 3.69% 4.21% 0.16%
Debt Ratios =Total Liabilities/Total Assests 60.00% 56.12% 58.10%
Asset Turnover =Sale/Total Assets 38.98% 39.65% 38.77%
Equity Turnover =Sale/Total Equity 97.46% 90.37% 92.53%
Equity Multiplier =Total Assets/Stockholder's Equity 250.03 227.89 238.64
ROE = (Net Income / Total Asset ) * (Total Asset / Total Equity)
ROE = ROA * Equity Multiplier
3.69% * 250.03 4.21% * 227.89 0.16% * 238.64
ROE = (Net Income / Sales) * (Sales / Total Asset) * (Total Asset /
Total Equity) ROE = Profit Margin * Asset Turnover *
Equity Multiplier
9.46% * 38.98% * 250.03 5.95% * 39.65% * 227.89 0.24% * 38.77% * 238.64
Appendix I: Royal Caribbean Cruise Ltd.
Financial Analysis
33
Positive
Negative
Key
Operating efficiency - as measured by profit margin.
Asset use efficiency - as measured by total asset turnover.
Financial leverage - as measured by the equity multiplier.
Royal Caribbean's ROE goes up from 2012 to 2014 due to an increase
in the net profit margin. This is a positive sign for the company. In
2013, their net profit margin was 5.95%, meaning the company is
better controlling costs compared to 2012. The profit margin again rose
to 9.46%, in 2014; Meaning Royal Caribbean has done a lot to control
their cost.
In 2012, the company's asset turnover was 38.77%, and it increased to
39.65% in 2013. This means that for every $1 worth of assets, $39.65
worth of revenue was made. In 2014, their asset turnover decreased to
38.98%, meaning the company gained less revenue in 2014 in regards
to their assets. From 2012 to 2014, the company's total revenue's trend
increased, which could be a sign that the company was "overinvested"
in assets. The company's cash and cash equivalents was $281,421 in
2012, $259,746 in 2013, and $261,392 in 2014. Inventories were
$146,295, $151,244, and $123,490 respectively. This might mean the
company had assets that are doing nothing, such as cash sitting in the
bank and inventory that isn't selling.
An equity multiplier shows how much leverage a company is using to
fund its assets and shows the relationship between the value of a
company's assets and the value of its shareholders' equity. The
company's equity multiplier in 2012 was 238.64. This decreased in
2013 to 227.89, but increased to 250.03 in 2014. Too much leverage
can lead to financial trouble, which can reduce a company's stock price.
From 2012 to 2014, the company's liabilities increased
from11,519,181, to 11,264,682, and 12,428,83. Their company's equity
was 8,308,749, 8,808,265, and 8,284,359; the companies with higher
leverage are thought to be more risky because they have more liabilities
and less equity.

Carnival Corporation & Plc Consolidated Balance Sheets (USD $) and
Common size balance sheet
In Millions, unless otherwise specified
Assets 2014 2013 2012
Current assets
Cash and cash equivalents 0.8% 1.2% 1.2%
Trade and other receivables, net 0.8% 1.0% 0.7%
Insurance recoverables 0.4% 1.0% 1.2%
Inventories 0.9% 0.9% 1.0%
Prepaid expenses and other 0.8% 0.8% 0.6%
Total current assets 3.8% 4.8% 4.7%
Property and equipment, net 82.9% 82.0% 82.1%
Goodwill 7.9% 8.0% 8.1%
Other Intangibles 3.2% 3.2% 3.4%
Other Assets 2.2% 1.9% 1.8%
Total assets 100.0% 100.0% 100.0%
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings 1.7% 0.15% 0.1%
Current portion of long-term debt 2.7% 3.5% 4.3%
Accounts payable 1.6% 1.6% 1.4%
Dividends payable 0.5% 1.5%
Claims reserve 0.7% 1.1% 1.4%
Accrued liabilities and other 3.2% 2.3% 2.2%
Customer deposits 7.7% 7.6% 7.9%
Total current liabilities 17.5% 16.8% 18.7%
Long-term debt 18.6% 20.2% 18.3%
Other long-term liabilities 2.4% 1.8% 1.8%
Total liabilities 38.6% 38.8% 38.9%
Commitments and contingencies
Shareholders' equity
Additional paid-in capital 21.2% 20.8% 21.1%
Retained earnings 48.7% 46.8% 47.2%
Accumulated other comprehensive (loss) income -1.6% 0.4% -0.5%
Treasury stock, 59 shares at 2014 and 2013 of
Carnival Corporation and 32 share at 2014 and
2013 of Carnival plx, at cost
-7.8% -7.7% -7.6%
Total shareholders' equity 61.4% 61.2% 61.1%
Liabilities and Equity, Total 100.0% 100.0% 100.0%
Carnival Corporation & Plc
Consolidated Statements of Income (USD$) and Common size income
statement
In millions, except Per Share data, unless otherwise specified
Passenger ticket revenues
Onboard and other revenues
2014 2013 2012
74.8% 75.4% 75.8%
23.8% 23.3% 22.8%
Tour and other 1.4% 1.4% 1.4%
Total revenues 100.0% 100.0% 100.0%
Cruise operating expenses:
Commissions, transportation and other 14.5% 14.9% 14.9%
Onboard and other 3.3% 3.5% 3.6%
Fuel 12.8% 14.3% 15.5%
Payroll and related 12.2% 12.0% 11.3%
Food 6.3% 6.4% 6.2%
Other ship operating 15.4% 16.8% 14.5%
Tour and other 1.0% 0.9% 1.0%
Total cruise operating expenses 65.5% 68.7% 67.1%
Selling and administrative expenses 12.9% 12.2% 11.2%
Depreciation and amortization expenses 10.3% 10.3% 9.9%
Ibero goodwill and trademark impairment 0.1% 1.1%
Costs and Expenses 88.7% 91.3% 89.3%
Operating income (loss) 11.3% 8.7% 10.7%
Nonoperating (Expense) Income
Interest income 0.05% 0.07% 0.07%
Interest expense, net of interest capitalized -1.8% -2.1% -2.2%
(Losses) gain on fuel derivatives, net -1.7% 0.2% -0.05%
Other income (expense), net 0.03% 0.05% -0.05%
Nonoperating (Expense) Income, Total -3.4% -1.81% -2.2%
Income Before Income Taxes 7.8% 6.94% 8.5%
Income Tax (Expense) Benefit, Net -0.1% 0.04% -0.03%
Net Income 7.8% 7.0% 8.4%
Earnings Per Share:
Basic $1.59 $1.39 $1.67
Diluted $1.59 $1.39 $1.67
Appendix J: Carnival Corporation
Financial Statements
34

Carnival Corporation & Plc
Return on Equity (ROE) 5.09% 4.39% 5.42%
Return on Assets (ROA) 3.13% 2.69% 3.31%
Profit Margins 7.78% 6.97% 8.44%
Debt Ratios 38.56% 38.77% 38.90%
Asset Turnover 40.18% 38.54% 39.28%
Equity Turnover =Sale/Total Equity 65.40% 62.94% 64.28%
Equity Multiplier =Total Assets/Stockholder's Equity 162.76 163.32 163.65
ROE = (Net Income / Total Asset ) * (Total Asset / Total
Equity) ROE = ROA * Equity
Multiplier
3.13% * 162.76 2.69% * 163.32 3.31% * 163.65
ROE = (Net Income / Sales) * (Sales / Total Asset) * (Total
Asset / Total Equity) ROE = Profit Margin *
Asset Turnover * Equity Multiplier
7.78% * 40.18% *
162.76
6.97% * 38.54% *
163.32
8.44% * 39.28% *
163.65
Appendix K: Carnival Corporation
Financial Analysis
35
Operating efficiency - as measured by profit margin.
Asset use efficiency - as measured by total asset turnover.
Financial leverage - as measured by the equity multiplier.
In 2013, Carnival's profit margin was 6.97%. it decreased from 2012,
meaning the company didn't do good on cost-control. In 2014 that
changed and they controlled their cost better which increased to 7.78%.
In 2012, the company's asset turnover was 39.28%. It decreased to
38.54% in 2013, showing they generated less revenue from each
dollar's worth of assets. In 2014, their asset turnover increased to
40.18%, meaning the company gained more revenues for their amount
of assets in 2014. From 2012 to 2014, the company's total revenue's
trend increased. This could be a sign that the company were
"overinvested" in assets. The company's property and
equipment was 32,137 in 2012, 32,905 in 2013, and 32,773 in 2014;
this means the company added capacity in fixed assets meaning more
equipment isn't being used.
An equity multiplier shows how much leverage a company is using to
fund its assets and shows the relationship between the value of a
company's assets and the value of its shareholders' equity. The
company's equity multiplier in 2012 was 163.65, 163.32 in 2013, and
162.76 in 2014. From 2012 to 2014, the company's liabilities were
15,232, 15,548, and 15,244 respectively. Also, the company's equity
was 23,929, 24,556, and 24,288. The companies with higher leverage
as determined by a leverage ratio are thought to be more risky because
they have more liabilities and less equity. A lower equity multiplier
indicates lower financial leverage, which means the company is relying
less on debt to finance its assets.
Positive
Negative
Key

Appendix L Key Success Factors Ranking
Scale
Based off of share world wide passengers
1. > 2%
2. 2-3%
3. 4-5%
4. 6-7%
5. 8-9%
6. 10-15%
7. 15-19%
8. 20-29%
9. 30-39%
10. > 40%
Generating On Board Revenue
Based off percentage of onboard revenue per
original fare revenue
1. < 1%
2. 1-4%
3. 5-9%
4. 10-14%
5. 15-19%
6. 20-24%
7. 25-29%
8. 30-34%
9. 35-39%
10. > 40%
Partnering With Travel Agencies
Based off of percentage of bookings through
travel agents
1. < 1%
2. 1-4%
3. 5-9%
4. 10-14%
5. 15-19%
6. 20-24%
7. 25-29%
8. 30-34%
9. 35-39%
10. > 40%
36

External Analysis of the Cruise Line Industry