Chapter 14 Cruise Ships: Floating Resorts

Identify the changing trends in and demographic profiles of the cruise ship market.
• Travel by Ship
– The introduction of intercontinental commercial airline service precipitated the rapid decline in the use of ships as a scheduled passenger transportation mode. – Cruising has taken the place of scheduled liner services.

and customer friendly. claustrophobic. elitist. seasicknessinducing. social. and reserved for older couples only.Changing Trends (cont. – Some travelers perceive cruising as expensive.) • The Cruise Experience – Many tourists who choose to cruise perceive cruising as safe. – Cruise ships combine familiarity with the excitement of travel. service-oriented. .

encouraging repeat customers. Carnival Corporation. . – Cruise brands take great care when it comes to their reputations because customers believe a brand name implies a certain standard of cruise. establishing customer loyalty.Changing Trends (cont.) • Major Players – The major companies in the field include: Royal Caribbean Cruise Line. creating brand recognition. and most importantly. – Branding is essential for garnering new business. defining the company’s approach to operations and marketing. and Star Cruises/NCL.

” complete with swimming pools.Changing Trends (cont. and amenities – Resort/Contemporary • The modern “floating resorts. food. golf ranges.) • Ship Classifications – Luxury • Small liners with few passengers who enjoy fivestar-level accommodations – Premium • Above-average service. and climbing walls .

– Value/Traditional • Involves mid-sized.Changing Trends (cont.) • Ship Classifications (cont. soft adventure. such as cultural interaction.) – Niche/Specialty • Rely on specialization to attract their clientele. or language enrichment. older cruise ships with fewer facilities than the newest megaships. . Emphasizes one or more aspects of the cruising experience.

• The Distribution System – The cruise market can be divided three ways: focused on the product. .Identify the critical variables in determining a cruise ship’s profit potential. They either lease or own cruise ships for which they create itineraries or products. • Cruise Operators – Cruise operators or brands dominate the market. on customer identity. and on satisfying a need.

– To increase profits. the cruise operators seek to reduce these costs without adversely affecting quality.) – Cruises have a variety of fixed costs. . such as fuel. Through negotiations. costs can be effectively reduced. port administration. and customs.Profit Potential (cont.) • Cruise Operators (cont. Larger companies can negotiate for such items as fuel and consumables much more easily than smaller companies. often by quite a bit.

through such strategies as making off-season prices look dramatically lower than their on-season counterparts. .Profit Potential (cont.) • Cruise Operators (cont.) – Traditionally. cruise companies relied on travel agents to help them book cruises. – Brochures are carefully designed to encourage advance booking. – Cruise operators rely on printed brochures to sell their cruises. and promising discounts for booking early.

Consummate Shoppers.) • Market Segments – Six segments of the cruiser market include: Restless Baby Boomers. . and Ship Buffs. Explorers.Profit Potential (cont. Enthusiastic Baby Boomers. Luxury Seekers.

sales events. who frequently support “their agents” through training.) • Travel Agents – Travel agents who specialize in arranging cruises often form strong alliances with cruise companies.Profit Potential (cont. • Alliances – Cruise operators may decide to form alliances with other vacation service providers in order to create a more attractive package. . and customized marketing materials. or to create additional reasons for customer loyalty.

• The Cruise Product – Cruises have three different economic features: • Inelasticity .a cruise product is “perishable” because it can’t be stored if it’s not sold • Heterogeneity .Identify potential solutions to financial ratios relevant to cruise ships.the product consists of a variety of components that make the cruise experience different for each customer • Complementarity .the cruise is not one single experience but a host of elements that combine to form the cruise experience .

.Solutions to financial ratios (cont.) • Dining – The Buffet – Main Restaurants – Other Options – Bars • Entertainment – Entertainment generally does not produce additional revenue for the cruise. but small sales can be made indirectly.

Solutions to financial ratios (cont. . Alone. they generate revenue.) • Shore Excursions – Shore excursions are sold to passengers both before and during the cruise. but the shore excursion’s true purpose is to add value to the cruise experience. • Beauty and Therapy – Cruise brands may contract concessionaires to provide the service or other brands may have their own staff.

Solutions to financial ratios (cont. .) • Shopping – Shops generally include fashion stores for both sexes. a gift shop. • Photography – The presence of the photographers ensures that passengers can purchase professionally taken pictures. and a jeweler. a general store. some of which are available in special presentation packs.

birthdays. and anniversaries.Solutions to financial ratios (cont.) • Casinos – Cashless ships are becoming more popular within the cruise industry. • Celebrations – Many brands have developed special. . – Other celebrations can be catered to as part of a package. with special cards for passengers to use that credit purchases to their account. such as honeymoons. inclusive wedding packages.

Identify the most important financial ratios relevant to cruise ships. managers. • Managing the Hotel Department – Managing Service Five elements must be consistently maintained in order to provide the best customer experience: • Officers. crew. and staff must all be sufficiently • • • • trained Employees should be instinctively customer-oriented in their thinking Crew at every level should be empowered to solve customers’ problems Employees should be aware of company standards Employees should be capable of exceeding said standards .

others provide a helpful brochure which suggests tipping in a very formulaic and orderly system.Important Financial Ratios (cont.) – Role of Tipping • Cruise lines have different methods for tipping: several choose to enact a “no-tipping” policy. . while some automatically levy a daily service charge.

forecasting needed quantities. and identifying expected changes to routine.Important Financial Ratios (cont. . planning menus for different types of passengers.) • Managing Food and Beverage – Supplies and Services • Planning food and beverage supplies for an entire cruise ship relies on analyzing prior consumption patterns.

. – Yield management • Defined by offering the proper type of inventory (cabins/staterooms) at the correct price to maximize revenue.Important Financial Ratios (cont.) • Managing Facilities – One of the main challenges involved in operating a cruise ship involves dealing with the lack of space.

Important Financial Ratios (cont. . and therefore the yield management system needs to concern itself with attracting sales once onboard. • The multiplier effect suggests that revenue can be made after the booking is already made.) • Yield Management (cont.) • The perishability of the product (a cruise cabin unsold on a particular cruise can never be resold) drives the yield management policy.

and above all. flexible . thorough.Important Financial Ratios (cont. accommodation management must be extremely efficient.) – Accommodation • Because capacity may exceed 100% due to strategic booking.

• Cruises in particular must take care that they are operating in a more ecologically friendly manner. the hospitality industry has not been terribly environmentally friendly • The industry as a whole uses immense volumes of energy.) – Environment • Traditionally. consumer goods. . water. and rare luxury items while seemingly ignoring the environmental consequences of its consumer-driven product. simply because they operate in the ocean.Important Financial Ratios (cont.

Safety. . Security is also a significant concern.Important Financial Ratios (cont. tend to garner a lot of media attention. especially because cruises have recently begun marketing themselves as a very secure vacation option. such as the norovirus. and Security – Onboard diseases. but they are in no way the only threats.) • Health.

the US Health Service’s CDC introduced the vessel sanitation program as a reaction to several severe disease outbreaks aboard cruise ships. . must undergo a twice-yearly environmental health inspection as per the orders of the CDC. carry more than 13 people. and call into the U.S. – Sanitation Program Inspection • Vessels that have a foreign itinerary.Important Financial Ratios (cont.) – Centers for Disease Control • In the 1970s.

longer lines for passengers and crew to wait in.Important Financial Ratios (cont. . and officers. and a higher level of complexity when planning. increased costs. security equipment are not as effective at preventing security issues as is creating a “security philosophy and mindset” among the staff. crew. • Interestingly.) – Safety • There are a few downsides to the increase in security: more bureaucracy. less privacy.

.knowing the employees.Important Financial Ratios (cont.) • Managing the Operation – One key to successful management is understanding the attitudes and behaviors of the crew .

and the Mexican Riviera. • For cruises from the U. the Caribbean. .Important Financial Ratios (cont. the most important cruise destinations are Alaska.) – Cruise Destinations • Today’s ships are more like floating luxury resorts than a means of transportation. so it’s safe to say that the cruise ship itself can be interpreted as the destination.S..

The End! .