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Royal Caribbean Cruises Ltd.

Megan Dow, Kristin Belanger Angèle Bourgoin

May 4, 2006

Megan Dow, Kristin Belanger, Angèle Bourgoin

Overview of Royal Caribbean
• • • • • • • • • Overview of WAL-Mart History Stocks Stock Information The Divisions BCG Their Mission and Vision Statement New Mission and Vision Statement External Opportunities and Threats – CPM – EFE Internal Strengths and Weaknesses – IFE • Analysis – SWOT Matrix – SPACE – IE Matrix – Grand Strategy Matrix Key Ratios Different Strategies – QSPM Decisions EPS/EBIT Analysis Implementation Evaluation Update! References Questions?

• • • • • • • • •

May 4, 2006

Megan Dow, Kristin Belanger, Angèle Bourgoin

Overview
• Operates 26 ships under two brands
– Royal Caribbean International – Celebrity Cruises

• Over 200 destinations
– Caribbean – North America – South America – Europe
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin

History
• 1968 • Three Norwegian shipping companies
– Anders Wilhelmsen & Company – I.M. Skauge & Company – Gotaas Larsen

• 1970
– First Royal Caribbean Ship sails

• 1971
– Concept of air/sea vacations – Fly guests to Miami from all over N.A.

• 1972
– Three ships offer 7 and 14 night cruise vacations from Miami to Caribbean

• 1978
– Passenger boat was split and mid-section was added – from 700 passengers to 1,000
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin

History Cont.
• 1986
– Labadee, Royal Caribbean’s own exclusive destination, opens cost of Hispaniola


1988
– Royal Caribbean and Admiral Cruises merge – A 73,192-ton ship for 2,350 guests sets sail as Royal Caribbean triples in size

1991
– CruiseMatch 2000 – a fully automated cruise vacation reservations system with access to over 29,000 travel agents


• •

1993
– Royal Caribbean goes public under ticker symbol “RCL”

1995
– 25th Anniversary

1997
– Royal Caribbean Cruise Lines changes name to Royal Caribbean International – Celebrity Cruises merges with Royal Caribbean Cruises Ltd.

May 4, 2006

Megan Dow, Kristin Belanger, Angèle Bourgoin

6M in sale of shares.Important Facts • It is the 51st consecutive quarter Royal Caribbean's Board of Directors has voted to declare a dividend to shareholders. May 4. • Royal Caribbean executive nets $6. 2006 Megan Dow. • Only 10% of vacationing public in the United States. Kristin Belanger. Angèle Bourgoin . • A new ship is going to sale soon. April 28th they decided to give a dividend of 15 cents. Freedom of the seas.

RCL • • • • Services: Sector Industry: General Entertainment Full Time Employees: 111. Angèle Bourgoin .690 Index Membership: NYSE May 4. 2006 Megan Dow. Kristin Belanger.

Angèle Bourgoin . Kristin Belanger. 2006 Megan Dow.RCL May 4.

Industry May 4. Kristin Belanger. 2006 Megan Dow. Angèle Bourgoin .RCL vs.

Kristin Belanger. 2006 Megan Dow.RCL Competitors May 4. Angèle Bourgoin .

Angèle Bourgoin . 2006 Megan Dow. Kristin Belanger.RCL Historical May 4.

Executive VP Bonnie Biumi Sr. Brand Ops Royal Caribbean Celebrity Cruises May 4. VP. Treasurer Jack Williams President and COO Adam Goldstein Executive VP.Organizational Structure Richard Fain Chairman Luis Leon CFO. 2006 Megan Dow. Angèle Bourgoin . Kristin Belanger.

53 Chief Financial Officer and Exec. Rice . 58 Chairman and Chief Exec. Richard Fain . Luis E. VP of Revenue Performance May 4.00K $0 $0 $0 $0 $0 Exercised Mr.Important Facts KEY EXECUTIVES Pay Mr. 46 Pres of Royal Caribbean International Mr. 2006 Megan Dow.69M $ 1.00K $ 875. 48 Pres of Celebrity Cruises Mr. Officer $ 3. Kristin Belanger. Leon . Goldstein . Brian J. Adam M. Hanrahan . Angèle Bourgoin . Daniel J. 47 Exec.41M $ 979. VP Mr.52M $ 1.

Angèle Bourgoin . – Maintain strong relationships with travel agencies.Their Mission Statement • Royal Caribbean Cruises LTD. May 4. and price. Strives to: – Compete principally on the basis of quality of ships. 2006 Megan Dow. They are counted on to represent the company professionally and do the utmost to serve the company’s customers. quality of service. – Improve our competitive position with respect to the quality and innovation of our on-board product and state-of-the-art cruise ships. variety of itineraries. – Value the environment and remain committed to protecting and preserving environmental resources and preventing pollution. the principal industry distribution system. Kristin Belanger. – Serve markets and provide itineraries worldwide – Value its employees as the company’s most valuable asset. – Participate in and make grants to numerous community charity organizations with priority to those helping children and families and education and the environment.

Their Vision Statement • Royal Caribbean Cruises LTD. will build on its reputation of an unwavering commitment to service and a desire to deliver the best cruise vacation possible. 2006 Megan Dow.300 employees are singularly focused on one goal: providing the highest level of service and the best vacation experience on land or sea. Our 27. Kristin Belanger. Angèle Bourgoin . May 4.

Our new technological software will make our operations run better in keeping our unwavering commitment to service and a desire to deliver the best cruise vacation possible. 2006 Megan Dow. Angèle Bourgoin . We value being environmentally safe and helping out the communities by donating to charities. as well as capital expansion. We serve markets and provide itineraries worldwide. Kristin Belanger. Employees are of great significance to the companies well being. which we plan to expand more in.New Mission Statement • Royal Caribbean International is for everyone ranging from active adults to families who are vacation enthusiasts interested in exploring new destinations and seeking new experiences. May 4.

Angèle Bourgoin . Kristin Belanger.New Vision Statement • To be the leading Cruise Line and leader in market share by providing the highest level of service and the best vacation experience both on land or sea. May 4. 2006 Megan Dow.

FL Los Angeles. Argentina Dover. England Stockholm. FL Galveston. 2006 Megan Dow. Venice.Fleet Deployment (2003) • Domestic – – – – – – – – – – – – – – – – – Baltimore. Chile Vancouver. PA Port Canaveral. Germany Harwich. Italy May 4. MD Boston. CA Miami. FL • International – – – – – – – – – – – – – – Barcelona. Sweden Valparaiso. HA Jacksonville. FL New Orleans. England Ensinada. Spain Buenos Aires. NY Philadelphia. Angèle Bourgoin .C. TX Honolulu. Hampton. LA New York. Kristin Belanger. CA Seward. Mexico Hamburg. SC Fort Lauderdale. Italy San Juan. Norway Rome. Puerto Rico S. MA Charleston. B. AK Tampa. England Oslo. CA San Francisco. FL San Diego.

Issues • • • • • • • • • • Global Capital Expansion Issues Passenger Safety Issues Finance Issues Marketing Issues eCommerce Issues Economic Issues Suppliers’ Issues Natural Environment Issues Capacity Issues Megan Dow. Kristin Belanger. 2006 . Angèle Bourgoin May 4.

Angèle Bourgoin .Global Issues • AAA increase in vacationers driving to destinations – Adding more and new itineraries departing in different locations • Expanded itineraries in Alaska and Europe • Offered land-tour programs – Motorcoach or rail with railcars in Alaska and Canadian Rockies May 4. 2006 Megan Dow. Kristin Belanger.

2006 Megan Dow. Kristin Belanger. Angèle Bourgoin .Capital Expansion Issues • Driving revenue growth – Purchase new and larger ships • Expanding the ships average size • Expanding Celebrity Cruise Line May 4.

and other incidents – War. illnesses. terrorist attacks. carry-ons – 100% photo identification of passengers and crew – Passengers are prescreened – Certain areas on boat restricted May 4. 2006 Megan Dow. hostilities • Heightened security – 100% screening of luggage. health. security risks – Accidents. Kristin Belanger.Passenger Safety Issues • Safety. Angèle Bourgoin .

Angèle Bourgoin . 2006 Megan Dow. • Aboard Magic – 100 people aboard contracted Norwalk virus • Amsterdam – 450 passengers on four cruises suffered flu • Boat was sanitized by Center for Disease Control May 4. Kristin Belanger.Passenger Safety Issues cont.

time of year • Revenue from each passenger per day in 2002 was $190 • Suffered a 9% decrease in net income – Due to weak U.S. cabin style. Angèle Bourgoin .Finance Issues • Prices for cruise lines depends on luxuries – Destination. cruise length. 2006 Megan Dow. economy & Middle East conflicts May 4. Kristin Belanger.

Marketing Issues • Contemporary segment – 7 days or shorter – Out of season vacationers • Premium Segment – 7 to 14 days – Celebrity Cruises – Families eager to explore new destinations/experiences – Spent $97.9 million on advertisement in 2002 May 4. Angèle Bourgoin . 2006 Megan Dow. Kristin Belanger.

Angèle Bourgoin .eCommerce Issues • Online booking – Virtual tour capabilities • Electronic documents for passengers – Online access to shore excursion • CruiseManager • Software packages – Pricing. inventory. marketing actions • First company in industry to develop automated booking system May 4. 2006 Megan Dow. Kristin Belanger.

economy recession in 2001 • U. Angèle Bourgoin . Kristin Belanger.S.S. inflation rates in 2003 – low • Unemployment steady at 6% – Hurts cruise industry • Lower operating margins and profits • Fuel costs – Rising about 60% • Better euro-dollar exchange May 4.Economic Issues • U. 2006 Megan Dow.

– Fuel – Hotel supplies – Products related to guest accommodations – Shipyards • Sometimes make poor quality. delay in ships. Kristin Belanger. Angèle Bourgoin . mechanical problems May 4. 2006 Megan Dow.Suppliers’ Issues • Suppliers include – Travel agency commissions – Food and related items – Port facility utilization – Airfare – advertising.

Angèle Bourgoin May 4. 2006 .Natural Environment Issues • Environmental groups – Stringent regulations on ships • Environmental and health and safety regulations – Could increase costs of compliance • • • • Instituted Safety and Environment position EPA – studies on waste water Annual award program Financially supporting ocean conservation groups Megan Dow. Kristin Belanger.

Capacity Issues • Increased 9% over 2002 • Top 10 cruises carried over 2 million passengers on 932 North American cruises May 4. Angèle Bourgoin . 2006 Megan Dow. Kristin Belanger.

Angèle Bourgoin .External Factors May 4. Kristin Belanger. 2006 Megan Dow.

3. May 4.Opportunities 1. Demand for cruises has increased and is predicted to continue to increase 5. 2. 2006 Megan Dow. and markets Flexible strategy. Angèle Bourgoin . 4. moving their fleets throughout the year to meet the seasonal demand RCCL operates the websites with customer booking capabilities for both Royal Caribbean and Celebrity Cruises Offers competitive price on goods and services offered from suppliers in packaged deals. itineraries. Expansion of fleet has allowed RCCL increasing amount of destinations. Kristin Belanger.

2. 4. 8.Threats 1. Angèle Bourgoin May 4. 6. Terrorism Viral outbreaks Decreased tourism since 9/11 Challenging U. Kristin Belanger.S. economy Environmental lobbyists Illnesses aboard cruise ships Reports of physical attacks while on board Carnival Corporation Megan Dow. 3. 2006 . 5. 7.

6 3.3 0. Angèle Bourgoin .05 0.S.05 0.0 to 1.05 0.1 0.05 3 0. moving their fleets throughout the year to meet seasonal demand RCCL operates web sites with customer booking capabilities for both Royal Carribbean and Celebrity Cruises Offers competitive price on goods and services offered from suppliers in packaged deals 0.05 May 4. itineraries.2 1 3 3 3 3 2 3 2 3 0.6 0 Demand for cruises has increased and is predicted to continue increasing Threats Terrorism Viral Outbreaks Decreased tourism since 9/11 Challenging U.05 0.15 0.05 0.1 0. economy Environmental Lobbyists Illnesses aboard cruise ships Reports of physical attacks while on board Carnival Corporation Totals 0.15 3 3 3 4 0.05 0.EFE Key External Factors Weights 0.15 0.3 0.1 0. 2006 Megan Dow.05 0.05 0.1 0.0 Opportunities Rating 1 to 4 Weighted Score Expansion of fleet has allowed RCCL increasing amount of destinations.15 0.15 0.15 0. Flexible strategy.15 0. and markets. Kristin Belanger.15 0.

15 0 0 2.42 0.21 Weighted Score Global Expansion Organization Structure Production Capacity Advertising Customer Service Price Competition Management Experience 0.3 0.3 0.15 0.1 0.28 0.2 0.15 0 0 3.37 Totals 1 3. Angèle Bourgoin .06 0.45 0.07 0.21 Weighted Score Carnival Corporation Ratin g 1 to 4 4 3 4 3 3 3 0.56 0.1 0.3 0.15 0.4 0.14 0.07 Ratin g 1 to 4 3 3 3 2 4 3 0.6 0.1 0 0 4 3 3 4 3 4 3 0.21 0.1 0.4 0.1 0.4 0.3 0.21 0.15 0.0 Market Share Inventory System Financial Position Product Quality Consumer Loyalty Sales Distribution 0.05 0.1 0.14 0.15 0.49 3 2 2 2 2 3 3 0.4 0.1 0.0 to 1.2 0.05 0.06 0.02 0. 2006 Megan Dow.3 0. Kristin Belanger.21 Weighted Score Star Cruises Ratin g 1 to 4 2 2 2 2 2 3 0.1 0.CPM Royal Caribbean Critical Success factors Weights 0.2 0.3 0.2 0.4 0.45 0.04 0.05 4 3 3 3 3 3 2 0.1 0.1 May 4.

2006 Megan Dow. Kristin Belanger. Angèle Bourgoin .Internal Factors May 4.

Using latest information technology software to manage operations May 4. 2. Angèle Bourgoin . Increase net revenue yields Revenues growing Capital expansion of Celebrity Cruise Line Expanding passenger capacity deal sign Finland’s Kvaerner-Masa Yards to build bigger Ultra Voyager ships with capacity of 3. Kristin Belanger. 3. 4. 2006 Megan Dow.600 5.Strengths 1.

2006 Megan Dow. Angèle Bourgoin . 3. economy.31 2.S. During 2002 & 2003 RCCL experienced weaker margins due to pricing pressure caused by a weak U. 5. and increasing capacity Net income falling Higher marketing costs due to reduced demand because of weak economy and ongoing conflict in the Middle East RCCL financed recent shop acquisitions by issuing debt Highly leveraged with LT debt-to-equity ratio of 1.Weaknesses 1. 4. traveler safety concerns. May 4. Kristin Belanger.

6 0.8 Rating 1 to 4 Weighted Score 0.1 1 2 2 0.05 0.03 Using latest information technology software to manage operations 0. traveler safety concerns. and increasing capacity Net Income falling Higher marketing costs due to reduced demand because of weak economy and ongoing conflict in the Middle East RCCL financed recent shop acquisitions by issuing debt Highly leveraged with LT Debt-to-Equity ratio of 1. Angèle Bourgoin . 2006 Megan Dow.0 to 1.07 0.1 0.4 3 0.05 0.2 0.2 3 3 4 0.09 0.1 0.1 Internal Weaknesses During 2002-2003 RCCL experienced weaker margins due to pricing pressure caused by weak US economy. Kristin Belanger.2 2.600 0.85 May 4.05 2 1 2 0.31 Totals 4 0.0 Internal Strengths Increase net revenue yields Revenues growing Capital expansion of celebrity cruise line Expanding passenger capacity deal signing with Finland's Kvaerner-Masa to build bigger Ultra Voyager ships with capacity of 3.2 0.2 0.IFE Key Internal Factors Weights 0.1 0.21 0.

Angèle Bourgoin . 2006 Megan Dow.SWOT Matrix May 4. Kristin Belanger.

Space Matrix May 4. Angèle Bourgoin . Kristin Belanger. 2006 Megan Dow.

2006 Megan Dow.IE Matrix May 4. Kristin Belanger. Angèle Bourgoin .

Kristin Belanger. Angèle Bourgoin . 2006 Megan Dow.Grand Strategy Matrix May 4.

2006 Megan Dow. Angèle Bourgoin . Kristin Belanger.Matrix Analysis and SWOT Summary Alternative Strategies Forward Integration IE X SPACE GRAND X COUNT 2 Backward Integration Horizontal Integration Market Penetration Market Development Product Development Concentric Diversification Conglomerate Diversification Horizontal Diversification Joint Venture Retrenchment Divestiture X X X X X X X X X X X X X X X X X 2 2 2 2 2 2 2 2 1 Liquidation May 4.

Key Ratios FINANCIAL HIGHLIGHTS Fiscal Year Fiscal Year Ends: 31-Dec Most Recent Quarter (mrq): Profitability Profit Margin (ttm): Operating Margin (ttm): Management Effectiveness Return on Assets (ttm): Return on Equity (ttm): May 4.60% 17. 2006 31-Dec-05 14.78% 4.69% 12. Angèle Bourgoin .81% Megan Dow. Kristin Belanger.

47M 4. Kristin Belanger.27B 663.70% Diluted EPS (ttm): Qtrly Earnings Growth (yoy): N/A May 4. 2006 3.90B 23. Angèle Bourgoin .777 6.91B 1.Key Ratios con.26 Megan Dow. Income Statement Revenue (ttm): Revenue Per Share (ttm): Qtrly Revenue Growth (yoy): Gross Profit (ttm): EBITDA (ttm): Net Income Avl to Common (ttm): 1.

Key Ratios con.24M Megan Dow.19 26. Balance Sheet Total Cash (mrq): Total Cash Per Share (mrq): Total Debt (mrq): Total Debt/Equity (mrq): 125. 2006 -826. Angèle Bourgoin .594 4.748 Current Ratio (mrq): Book Value Per Share (mrq): Cash Flow Statement Operating Cash Flow (ttm): 1.39M 0. Kristin Belanger.11B 0.15B 0.403999 Levered Free Cash Flow (ttm): May 4.

Kristin Belanger. Angèle Bourgoin .Different Strategies • Expanding fleet by two boats with larger capacity for passengers • Capital expansion to increase the amount of revenue to surpass the larger competitor Carnival Cruiseline May 4. 2006 Megan Dow.

QSPM May 4. Kristin Belanger. 2006 Megan Dow. Angèle Bourgoin .

Angèle Bourgoin . 2006 Megan Dow. Kristin Belanger.QSPM cont. May 4.

Decisions • We have decided to add two other boats to the entire fleet and they will be finished by May 2006 and 2008. Angèle Bourgoin . Kristin Belanger. May 4. 2006 Megan Dow.

EPS/EBIT Analysis • • • • • • Amount needed = $ 10 Million Stock Price = $41. 2003) EBIT Range = $5 to $8 Million Tax Rate = 32% Interest rate = 5% # Shares Outstanding = 195. 2006 . Angèle Bourgoin May 4.6 (million) Megan Dow.89 (on May 2. Kristin Belanger.

60 3.03 119.60 1. 2006 Megan Dow. In $Millions Stock Financing Financing Low EBIT (280.36 2.EPS/EBIT Analysis Royal Caribbean LTD. Kristin Belanger.97 2.89 195.89 190. Angèle Bourgoin .7 Million) Interest 5% EBT Taxes 26% 500 0 High 800 0 Low 500 25 High 800 40 500 130 800 208 475 130 760 208 EAT # Shares Outstanding EPS 370 592 345 552 195.89 May 4.

May 4. Angèle Bourgoin .Implementation • We will do debt financing on both the high and low because the numbers were equally the same and they were the best all around option. Kristin Belanger. 2006 Megan Dow.

2006 Megan Dow.Evaluation • • • • • • Annual reports Quarterly reports Stock prices Key Ratio’s Progress of ship Average number of passengers per cruise May 4. Kristin Belanger. Angèle Bourgoin .

In The News… • George Smith IV. The ship was sailing the Mediterranean Sea on a 12 day cruise to Turkey. tragically disappeared while on his honeymoon from the Brilliance of the Seas sometime in the early morning hours on July 5. – The reason for his disappearance is still being investigated by the FBI May 4. Angèle Bourgoin . Kristin Belanger. a 26 year old man. 2005. 2006 Megan Dow.

Kristin Belanger. and ordered to have bigger ships built that can occupy 5. it operated 19 cruise ships with approximately 44. (rooms) • A new ship is going to sail Freedom of the Seas. 2005. • Royal Caribbean believes that bigger is better.350 berths.400 in the future. Will occupy 3. 2006 Megan Dow.Update! • Is still the second largest cruise line. • As of December 31. Angèle Bourgoin . and will be the world’s largest cruise ship. May 4.634 passengers.

yahoo. Angèle Bourgoin . 2006 Megan Dow.rcl.References • • • • • http://www.com http://biz.yahoo.com http://finance.com Business & Resource Premier Strategic Management Concepts and Cases May 4. Kristin Belanger.

2006 Megan Dow.Questions? May 4. Angèle Bourgoin . Kristin Belanger.

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