1

Case Study

Decision Brief Case

Study

Carnival Cruise Lines

2

• Incidents, background and information

• Facts bearing on problem

• Assumptions

• Course of Action (COA)

• Communications/PR

The Brief

3

Incidents

• On the afternoon of July 20, 1998, MS Ecstasy departed the Port of Miami, Florida, when a fire started in the main laundry room shortly after 17:00 hrs. As the Ecstasy attempted to reach an anchorage north of the Miami sea buoy, the vessel lost propulsion power and steering and began to drift.

• On September 19, 1999, the Carnival Tropicale’s engine room caught fire en route from Cozumel to Tampa. While disabled in the Gulf of Mexico, the ship was struck by Tropical Storm Harvey. No crew or guests were injured during the two days the Tropicale spent without propulsion. The ship was later sold and renamed the Ocean Dream.

• On November 8, 2010, a fire broke out in the generator room of the Carnival Splendor and the ship lost most of its power. The ship was adrift off the west coast of Mexico. The ship was towed to San Diego.

• On January 13, 2012, the Costa Concordia, operated by Costa Cruises (Carnival subsidiary), ran aground off Isola del Giglio, Tuscan. The ship capszied and partially sank, killing 32 people.

4

Incidents

• In March 2012, the Costa Allegra, owned by Carnival Cruise Lines’ Costa Cruises subsidiary, suffered an engine room fire and went adrift in the Indian Ocean…. After several days adrift without power, the ship was towed to the Seychelles… No casualties were reported.

• On February 10, 2013, the Carnival Triumph, with over 3k passengers aboard, suffered an engine room fire, leaving the ship adrift for four days in the Gulf of Mexico. The ship was towed to Mobile, Alabama, docking on the evening of February 14.

• On March 14, 2013, the Carnival Dream experienced an emergency generator failure while docked in port at Philipsburg, St. Maarten ….

• On the morning of March 15, 2013, the Carnival Legend suffered a mechanical problem with one propulsion pod while at sea. The cruise line cancelled the Legend’s scheduled stop in Grand Cayman, and returned to Tampa, FL.

5

Costa Concordia

6

Costa Concordia

7

Cruise Industry – Market Overview

8

Cruise Industry – Market Overview

• In 2013, the total world wide cruise industry is estimated at $36.2 billion (a 4.5% increase over 2012)

• 20.9 million estimated annualized cruise passengers (a 3.3% increase in 2013 over 2012)

• Cruise passengers by source,

• 60.5% North America

• 27.0% Europe

9

Cruise Industry – Market Overview

• 50 Total Cruise Brands

• 10 Brands owned by Carnival Cruise Lines

• 48.4% market share

• 5 Brands owned by Royal Caribbean (RCCL)

• 23.3% market share

10

Cruise Industry – Brand by Market Share

Red = Carnival Cruise LinesBlue = Royal Caribbean

Brand Market Share (%)

Carnival 21.1

Royal Caribbean 16.4

Norwegian 7.6

Costa 7.1

MSC Cruises 7.0

Princess 6.1

Aida 4.6

Celebrity 4.4

Holland America 3.3

Disney 2.5

All others below 2.0

11

Financial Breakdown of Typical Cruiser

• The average per passenger per day is projected to be $200.85

• $152.39 ticket price

• $49.47 on board spending

• Average cruise duration 8.5 days, median duration 7.0 days

12

Carnival Corporation

• Public company (Carnival Corp & plc)

• Global HQ – Doral, Florida (Miami) with European HQ in Southhampton, England

• World’s oldest passenger cruise line

• Trace origins back to Peninsular and Oriental Steam Navigation Company – P&O introduced first passenger ships in 1844

• Carnival is one of the two largest holding companies incorporated in Panama

13

Carnival Corporation

• Initially formed in 1972 under “Carnival Cruise Lines” name, changed to Carnival Corporation in 1993

• NYSE listed – CCL

• IPO 1987

• Micky Arison and family owns 47% of company stock

• Provided capital for expansion through acquisition

• Holland America Line (1989)

• Seabourn Cruise Lines (1992)

• Cunard Line (1998)

• Costa Cruises (2000)

14

Carnival Cruise Decision Brief Business Case

• World’s largest cruise ship operator

• 48.4% global market share for Carnival portfolio

• Carnival brand accounts for 24 ships and 21.1% of world market share (in 2013)

• 11 cruise line brand

• 100 ships

• 190,000 lower berths

• Executive control of each brand is by geo location,

• Carnival Corp, North America

• Carnival UK, in UK (including, Princess Cruises, Cunard)

• Costa Cruises, rest of

15

Carnival Brand Portfolio

• AIDA Cruises, Germany

• Carnival Cruise Lines, United States

• Costa Cruises, Italy

• Cunard Line, UK

• Holland America, USA

• Ibero Cruises, Spain

• P&O Cruises, UK

• P&O Cruises Australia, Australia

• Princess Cruises, USA

• Seabourn Cruise Line, USA

16

Carnival Brand Elements

• Carnival was a pioneer in the concept of shorter, less expensive cruises

• Its ships are known for their Las Vegas-style décor and entertainment.

• The line calls its ships The Fun Ships, and there are a wide range of activities offered on board

• Its trademark is the funnel, which is red, white and blue and shaped like a whale’s tail

17

Feedback via Social Media

Non-cruiser, Unaware

Non-cruiser, Aware

Light Cruiser

Heavy Cruiser

Get feedback from customers at different adoption stages.

18

Cruiser Feedback

Platform Development

New Product Launches

Reputation

19

PR / CommunicationsReputation

A company is more than a collection of its tangible assets.

It is even more than the intellectual capital of its employees.

How a corporation is perceived by the public can be worth more to a company than all its other tangible and intangible assets put together.

When you lose your reputation, you lose a whole lot more than your reputation.

20

PR / CommunicationsReputation

% Good

Opinions

%Bad

Opinions

Reputation Score

The reputation scores are based on the following question:

Do you have a GOOD OPINION, a BAD OPINION, or you DON'T KNOW the following companies?

Increase compliance

Crisis Management

21

PR / CommunicationsReputation

19

21

20

38

46

18

22

28

28

63

Carnival

RCCL

Princess

Holland

Disney

Rep Score

% comfortable

Increased reputation

Increased comfort with taking a cruise

Increased recommendation

Reputation and comfort with taking a cruise with the following lines:

Illustrative Data Only

22

Decision Brief Question:What does Carnival Cruise Lines do to stabilize the brand position, maintain brand equity, in addition to stabilizing topline revenue in light of the current and significant multiple ship challenges?

• What can be done to keep current customers and drive repeat visitation / purchase?

• Can Carnival use service/disaster recovery to improve brand position?

• Can Carnival possibly consider taking competitive share at this moment?

Think in terms of the Digital Space

23

Sample Starting Point: Sources

• www.carnival.com

• www.cruisemarketwatch.com