The Cruise Ship Industry

EXECUTIVE SUMMARY

          Cruise Ship Industry dates back from 1970s upon the growth of North American Industry. Since then the Cruise Ship industry has increasingly popularized as a major part the tourism segment. It has reached a world-wide level of enormous significance as an economic factor. The modern Cruise Ship industry has been a good example of globalization having an increased number of destinations and ports of call around the world. The Cruise Ship industry has got multinational clients who come from every continent giving it a historical reputation. It has got very important environmental, legal, social and economic implications. There has been crisis-resistant industry which has a diversified modernized port and an offer of airlift options that have opened up a vacation alternative for cruising hence helping in increasing the number of clients who are well convinced that the place is exciting, relaxing, and eventful for passengers from all over the world.


The Cruise Ship industry has so far been growing and having more clients since 1980s. It has developed new markets and nearly 90 million passengers since then.  This growth has not shown any signs of slowing as in 2008 and 2009 there were 13 million passengers as compare with 2007 where it had 12 million passengers. 40 new Ships were created in the 1980s and put in service. Along 1990s the industry built 80 more vessels making it have a tremendous growth. It has faced several competitors some of them including the Disney and Star travel. These companies have had a great effect to the industry’s entry to market. The industry is continuously coming up with new markets so that it can operate successfully.

TABLE OF CONTENTS
Executive summary………………………………………………………………………………..2
Introduction……………………………………………………………………………………......4
Nature of Cruise Ship Industry……………………………………………………………………4
Overview of Two Major Cruise Corporations…………………………………………………….6
Carnival corporation ……………………………………………………………….6
Royal Caribbean Cruises……………………………………………………………7
Impacts of Cruise Industry to the US Economy…………………………………………………..8
Overview of Holland America Line………………………………………………………………8
Holland America Line’s Five-Star Fleet…………………………………………….8
International Competition…………………………………………………………………………9
Barriers to Industry’s Entry to Market…………………………………...………………………10
Strategies to be used in beating the market………………………………………………………10
Conclusion..............................................................................................................................…...11
References……………………………………………………………………………………….12
INTRODUCTION

Cruise tourism has received ascendancy in the past decades and is currently the fastest growing travel sector globally. A cruise may be defined as making a trip by sea through a liner for pleasure, often involving docking in more than one port. In this case the sheep is more of a floating mobile resort, transporting passengers from one destination to another. Cruise companies are slowly positioning and promoting their brands so as to attract customers whose demand has also risen over the past one decade. The growth of the cruise ship tourism market is phenomenal with most of the reviving in the industry taking place in the last four decades. Currently, this industry forms part of the young but growing tourism industry worldwide. Some of the characteristics of a cruise ship include the passengers being able to visit various destinations, self-contained ships, quality services, and one day vacation for every passenger among others. Generally a cruise ship will have accommodation, transportation, tour guides and attractions altogether.
THE NATURE OF CRUISE SHIP INDUSTRY

The cruise ship industry is a very dynamic segment of global tourism that has since received recognition in most hospitality and tourism literature (CLIA, 2015). It is notable that the key cruising areas include the Caribbean, Alaska and Europe. Globally the annual rate of growth of cruise tourism has been estimated to be at 7.4% annually (Brida & Zapata, 2010). This is a representation of about 940 million international passengers touring the whole world (Dowling, 2006). The cruise ship industry has been forecasted to grow owing to the rising demand and the fact that only a small portion of people have taken a chance to enjoy this form of tourism (Dowling, 2006). Cruise tourism accounts for 2% of the global tourism (CLIA, 2015). According to Cruise Line International association (2010) compared to the year 2008 when the number of cruise tourist were 13 million, in 2015 the number exceedingly doubled to 30 million passengers (CLIA, 2015). Just like any other form of tourism, cruise ship industry also depends on the economic and legal factors of a country (CLIA, 2015). However, within the industry the operation of cruise ships require less infrastructure compared to stop over tourism (Dowling, 2006).
The cruise ship industry categorizes the ships based on their size, number of passengers, and the state of the rooms within the ships (Cruise Lines International Association, 2010; Dowling, 2006). Based on these three parameters, ships can be micro; accommodating 200 passengers, or megaships that accommodate over 2000 passengers, plus the supplies. The passengers aboard the cruise ships spend about $200 each day including the ticket costs and other additional services on-board. The number of passengers is forecasted to increase to 23 million by the end of 2015 with forecasted revenue amounting to $40 billion with respect to all the cruise ship companies world-wide. The increasing demand has caused most of the companies to invest in new ships annually so as to offer quality services and respond to the ubiquitous shift in demand.

The total revenue generated by cruise industry worldwide stands at $ 40 billion (Statista, 2015). In Europe alone, the total number of passengers carried amounts to 6.57 million (Statista, 2015).  On the other hand, North America seems to be doing well as the total expenditure and market volume of its cruise industry stands at $18.29 and $17.46 respectively (Statista, 2015). Additionally, in North America about 14.19 million passengers are carried in the cruises. The number of North American ships in the industry is 185 (Statista, 2015). Some of the major companies involved in the cruise ship industry include Carnival Corporation with revenue of about $15.88 billion and Royal Caribbean Cruises with revenue of about $8.7 billion. The other key player that is also dominating the cruise industry is the Star cruises Group (Papathanassis, Lukovic & Vogel, 2012).

Climate and environmental factors are the major determinants of the destinations and the success of the cruise ships (Papathanassis, Lukovic & Vogel, 2012). The major shipping grounds include Central and North America, Europe, Australia, New Zealand, Asia, Alaska and the Caribbean among other destinations (Florida-Caribbean Cruise Association, 2013). Some of the key challenges likely to affect the global cruise industry and thus cruise tourism include environmental degradation as well as safety and security (Gibson, 2012). The shift in climate resulting from global warming has made some destinations unfavourable (Florida-Caribbean Cruise Association, 2013). This causes inconvenience to the passengers due to relocation of the passengers (Gibson, 2012). Additionally, the global escalation in cases of terrorism and safety issues in the sea has also considerably affected the flow of tourists all year out (Florida-Caribbean Cruise Association, 2013).

OVERVIEW OF TWO MAJOR CRUISE CORPORATIONS
CARNIVAL CORPORATION

Carnival Corporation is the largest player in the cruise ship industry with a reputation worldwide (Mancini, 2011). The cruise industry giant dates back to the year 1972, when it was created as Carnival Cruise Line and later renamed in the year 1994 (Carnival Corporation, 2015). The company went public in the year 1987 and since then a number of acquisitions have kept the company soaring at the international level. Carnival Corporation provides specialist brands and mass market as well as luxury and contemporary brands (Carnival Corporation, 2015). Additionally, the company also offers U.S and Australian brands (Mancini, 2011). The company has a portfolio of the world’s leading brands that include Holland American Line, Carnival Cruise Line, Princess Cruises, Fathom and Seabourn all which are in North America; Cunard and P&O Cruises operate in the UK; Costa Cruises that operate in Southern Europe; and AIDA Cruises that operates in Germany (Carnival Corporation, 2015). The company also has tour companies that act as complements to the cruise operations (Carnival Corporation, 2015).

The tour companies include Holland America Princess Alaska Tours that is based in Alaska and the Canadian Yukon, that both attract 10 million guests annually (Carnival Corporation, 2015). The company is known for its wide range of products that have exceptional experience and outstanding value (Carnival Corporation, 2015). The company is marked as the most profitable in the industry with it stocks dually listed in both the New York Stock Exchange and London Stock Exchange under the symbol CCL (Carnival Corporation, 2015). The company boasts on the fact that it’s the only company with inclusion in FSTE 100 and S&P 500 indices in UK and US respectively. The headquarters of the company is in Miami, Florida and Southampton in England.

The company has over 150 ships with seven state of the art ship scheduled to be launched between 2015 and 2017 (Carnival Corporation, 2015). The company has 77000 ship staff to attend to the 200,000 guests that are served by the company. The mission of the company is: “to take the world on vacation and deliver exceptional experiences through many of the world’s best known cruise brands that cater  to a variety of different geographic regions and lifestyles, all at an outstanding value unrivalled on land or at sea” (Carnival Corporation, 2015). The company has a sound corporate social responsibility and sustainability programs that are well adhered to (Carnival Corporation, 2015). The company also has a website where the necessary information is contained and allows the customers to interact with the employees for necessary support services.

ROYAL CARIBBEAN CRUISES

Royal Caribbean Cruises is the world’s second largest cruise corporation after Carnival Corporation (Mancini, 2011). Royal Caribbean Cruise Line was founded in 1968, going public in the year 1993. The company merged with Celebrity Cruises in the year 1997adopting the current name. In the year 2002, Royal Caribbean Cruises and First choice Holidays jointly created Island cruises in the UK (Papathanassis, Lukovic & Vogel, 2012). The company acquired Spanish tour operator; Pullmatur, and launched Azamara Cruises in 2006 and 2007 respectively.

The company has a clear vision and mission that states that it is anchored in excellence. Just like Carnival Corporation, Royal Caribbean Cruises has a sound corporate social responsibility and sustainability practices (Royal Caribbean, 2015). Additionally, the company is founded on integrity and is committed to high ethical standards when undertaking any of its business operations (Royal Caribbean Cruises Ltd, 2015). The company has 22 state of the art ships with latest innovations, calling on more than 270 destinations (Royal Caribbean, 2015). Royal Caribbean Cruises has a number of brands including Pullmantur, Celebrity Cruises, Azamara Club Cruises and CDF Croisieres de France brands, which together have 40 ships with a passenger capacity of 94 thousand (Royal Caribbean Cruises Ltd, 2015).

The company operates in 72 countries in six continents and also offers peculiar cruise tour land packages to various tourist destinations (Royal Caribbean, 2015). The destinations include Alaska, Canada, Europe, Dubai, New Zealand, and Australia. The company has unique services including the award-winning family programming, entertainment, and a variety of signature on-board amenities (Royal Caribbean, 2015). The company has a 40 year rich history that makes it reputation good among customers as well as gives it positive publicity. In the Travel Weekly Readers’ Choice Awards, Royal Caribbean Cruises has been voted nine times as the best cruise line overall (Royal Caribbean, 2015). The company intends to unleash 3 more ships into the fleet by the end of 2015 (Royal Caribbean, 2015).

IMPACT OF CRUISE INDUSTRY TO THE US ECONOMY

The cruise industry has had much impact to the economy of the United States and to any other country that the Ships visit. The Cruise Ship Industry creates jobs for many people hence having an opportunity to contribute in job creation in the economy. Each new Cruise Ship that gets to the port represents a $250 million annual income to the US economy. This shows that the Cruise industry is an important economic contributor by creating jobs and supporting businesses across America. In 2013, the Cruise Ship industry produced more than $44 billion to the US economy and created approximately 363,133 jobs to the US economy.
 
OVERVIEW OF HOLLAND AMERICA LINE

Holland American Line has over 140 year’s reputation as a leader in cruising. The cruise industry has exotic destination for its guests all over the world (Hollandamerica.com, 2015). The company has a fleet of 15 elegant mid-sized ships that tour all the seven continents annually, accounting for 500 sailings annually (Hollandamerica.com, 2015). The cruise destinations include Alaska, Caribbean, Europe, Mexico, South America, Australia, Panama Canal, New Zealand and Asia. Holland America is ISO 14001certiied and is thus a leader in environmental leadership (Hollandamerica.com, 2015). The five star fleet and capacity are as shown below. This includes the ones to be unleashed such as TBD (Hollandamerica.com, 2015).

HOLLAND AMERICA LINE’S FIVE-STAR FLEET

 Ship Name
Delivery
Passenger Capacity

ms Nieuw Amsterdam
2010
2,106

ms Eurodam
2008
2,104

ms Noordam
2006
1,972

ms Westerdam
2004
1,916

ms Oosterdam
2003
1,916

ms Zuiderdam
2002
1,916

ms Prinsendam
2002
   835

ms Amsterdam
2000
1,380

ms Zaandam
2000
1,432

ms Volendam
1999
1,432

ms Rotterdam
1997
1,404

ms Veendam
1996
1,350

ms Ryndam
1994
1,260

ms Maasdam
1993
1,258

ms Statendam
1993
1,260

TBD
2016
2,648

(Hollandamerica.com, 2015)
Table 1.1

The company has invested widely in technology and state of the art fleet. Additionally, just like any other cruise company, the company is dedicated to sustainability and corporate social responsibility practices (Hollandamerica.com, 2015). The company has invested in a good website, not only for its marketing but also to provide necessary information to the potential and the loyal customers as well. The company’s mission is: “Through excellence we create once-in-a-lifetime experiences, every time” (Hollandamerica.com, 2015). Holland American Line has received a number of international accolades as well as awards making it a leader in the cruise tourism industry at its own level (Hollandamerica.com, 2015). The services provided are of high quality and have an outstanding value as well.




INTERNATIONAL COMPETITION

Competition is a vital thing when it comes to businesses, once other industries or companies begin to offer the same services as the industry one is running, there competition begins. Competition can bring great effects to an industry depending on how it will be taken. Cruise ship industry has some few competitors, which still offer the same services. Some of these competitors include; Disney travel, Star and Carnival (Brida & Zapata, 2010). Although there is a big competition that is brought Disney Travel, the Cruise Ship Industry has got an added advantage of having Ships that can travel abroad. Disney travel on the other hand, has got limited number of locations that its Ship can travel and hence more people would rather use the Cruise Ships over the Disney Travel. Having this advantage, The Cruise Ship Industry has got the potential to watch the competition closely so as to prevent any future threat (Brida & Zapata, 2010).

BARRIERS TO INDUSTRY’S ENTRY TO MARKET

The size of the market can also be considered when the industry configures the barrier of entry and exit. A good Luxurious Cruise Ship is quite expensive when comparing with other possible Ships, which would still offer the same services. Such a Ship in the Cruise Ship Industry costs around $300,000,000. Such a high costs offers the Industry a threat in the entry and exit to the market because it is hard for someone to raise such amount in order to be in a position to buy a Cruise Ship. Another major thing that the industry would consider while in the market is the high cost of maintaining the Cruise line. This is because the high cost has a decisive influence on strategies and the diverse aspects that are related to management and organisational issues (Brida & Zapata, 2010).

STRATEGIES TO BE USED IN BEATING THE MARKET

Having such a great competition that poses a barrier in entry to the market, the industry would have to come up with factors that would help in lowering the competition that exists. Some of these factors which need to be considered includes; lowering the costs of selling a Ship. The high cost is one of the reasons as to why people would rather not buy a Cruise Ship. The Industry having a good reputation on good Ships that are comfortable to travel with, it should consider lowering the sale cost so as to attract more customers. Another important factor that the company need to consider is how to lower the cost of Cruise line maintenance. Once these two factors are considered and dealt with, The Industry will be in a good position to enter widely into the market (Brida & Zapata, 2010).
CONCLUSION

The cruise ship industry is one of the industries that are expected to have a positive growth rate. Currently, the rate of growth of the industry is at 7.4%. However, as demand in services as well as the excellent positioning and marketing of the brands provided, the rate is likely to increase.  The global cruise ship market is dominated by two major players that is the Carnival Corporation and Royal Caribbean Cruises whose market share combined is large. It is noteworthy that despite the positive direction of the industry there are some challenges that need to be fixed. The key challenges as identified are climatic change and the rise of insecurity due to the threat of terrorism. Holland American Line is also a company that provides cruise ship services to various destinations world-wide. This paper has given an overview of the aforementioned companies together with Holland American Line. This paper therefore gives a deeper insight of what the whole cruise industry entails, and the best players that should be emulated or that are potential threats to entrants into the industry.
 References
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