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Royal Caribbean Cruises Ltd.

Megan Dow, Kristin Belanger Angle Bourgoin

May 4, 2006

Megan Dow, Kristin Belanger, Angle 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, Angle 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, Angle 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, Angle Bourgoin

History Cont.
1986
Labadee, Royal Caribbeans 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, Angle Bourgoin

Important Facts
It is the 51st consecutive quarter Royal Caribbean's Board of Directors has voted to declare a dividend to shareholders. April 28th they decided to give a dividend of 15 cents. Royal Caribbean executive nets $6.6M in sale of shares. A new ship is going to sale soon, Freedom of the seas. Only 10% of vacationing public in the United States.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

RCL
Services: Sector Industry: General Entertainment Full Time Employees: 111,690 Index Membership: NYSE

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

RCL

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

RCL vs. Industry

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

RCL Competitors

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

RCL Historical

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Organizational Structure
Richard Fain Chairman

Luis Leon CFO, Executive VP

Bonnie Biumi Sr. VP, Treasurer

Jack Williams President and COO

Adam Goldstein Executive VP, Brand Ops

Royal Caribbean

Celebrity Cruises

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Important Facts
KEY EXECUTIVES Pay Mr. Richard Fain , 58 Chairman and Chief Exec. Officer $ 3.69M $ 1.52M $ 1.41M $ 979.00K $ 875.00K $0 $0 $0 $0 $0 Exercised

Mr. Luis E. Leon , 53


Chief Financial Officer and Exec. VP

Mr. Adam M. Goldstein , 46


Pres of Royal Caribbean International Mr. Daniel J. Hanrahan , 48 Pres of Celebrity Cruises Mr. Brian J. Rice , 47 Exec. VP of Revenue Performance
May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Their Mission Statement


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

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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. Our 27,300 employees are singularly focused on one goal: providing the highest level of service and the best vacation experience on land or sea.
May 4, 2006 Megan Dow, Kristin Belanger, Angle Bourgoin

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. We serve markets and provide itineraries worldwide, which we plan to expand more in, as well as capital expansion. 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. Employees are of great significance to the companies well being. We value being environmentally safe and helping out the communities by donating to charities.
May 4, 2006 Megan Dow, Kristin Belanger, Angle Bourgoin

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, Kristin Belanger, Angle Bourgoin

Fleet Deployment (2003)


Domestic
Baltimore, MD Boston, MA Charleston, SC Fort Lauderdale, FL Galveston, TX Honolulu, HA Jacksonville, FL Los Angeles, CA Miami, FL New Orleans, LA New York, NY Philadelphia, PA Port Canaveral, FL San Diego, CA San Francisco, CA Seward, AK Tampa, FL

International
Barcelona, Spain Buenos Aires, Argentina Dover, England Ensinada, Mexico Hamburg, Germany Harwich, England Oslo, Norway Rome, Italy San Juan, Puerto Rico S. Hampton, England Stockholm, Sweden Valparaiso, Chile Vancouver, B.C. Venice, Italy

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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, Angle Bourgoin

May 4, 2006

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, Angle Bourgoin

Capital Expansion Issues


Driving revenue growth
Purchase new and larger ships

Expanding the ships average size Expanding Celebrity Cruise Line

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Passenger Safety Issues


Safety, health, security risks
Accidents, illnesses, and other incidents War, terrorist attacks, hostilities

Heightened security
100% screening of luggage, carry-ons 100% photo identification of passengers and crew Passengers are prescreened Certain areas on boat restricted
May 4, 2006 Megan Dow, Kristin Belanger, Angle Bourgoin

Passenger Safety Issues cont.


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, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Finance Issues
Prices for cruise lines depends on luxuries
Destination, cruise length, cabin style, 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. economy & Middle East conflicts

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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, 2006 Megan Dow, Kristin Belanger, Angle 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, Angle Bourgoin

Economic Issues
U.S. economy recession in 2001 U.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, 2006 Megan Dow, Kristin Belanger, Angle Bourgoin

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

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, Angle Bourgoin

May 4, 2006

Capacity Issues
Increased 9% over 2002 Top 10 cruises carried over 2 million passengers on 932 North American cruises

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

External Factors

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Opportunities
1. 2. 3. 4. Expansion of fleet has allowed RCCL increasing amount of destinations, itineraries, and markets Flexible strategy, 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. Demand for cruises has increased and is predicted to continue to increase

5.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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

May 4, 2006

EFE
Key External Factors Weights 0.0 to 1.0 Opportunities Rating 1 to 4 Weighted Score

Expansion of fleet has allowed RCCL increasing amount of destinations, itineraries, and markets. Flexible strategy, 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

0.15

0.05
0.05 0.05 0.15

3
3 3 4

0.15
0.15 0.15 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.S. economy Environmental Lobbyists Illnesses aboard cruise ships Reports of physical attacks while on board Carnival Corporation Totals

0.1 0.05 0.1 0.05 0.05 0.05 0.05 0.2 1

3 3 3 3 2 3 2 3

0.3 0.15 0.3 0.15 0.1 0.15 0.1 0.6 3.05

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

CPM
Royal Caribbean
Critical Success factors Weights 0.0 to 1.0 Market Share Inventory System Financial Position Product Quality Consumer Loyalty Sales Distribution 0.1 0.02 0.1 0.05 0.1 0.07 Ratin g 1 to 4 3 3 3 2 4 3 0.3 0.06 0.3 0.1 0.4 0.21 Weighted Score

Carnival Corporation
Ratin g 1 to 4 4 3 4 3 3 3 0.4 0.06 0.4 0.15 0.3 0.21 Weighted Score

Star Cruises
Ratin g 1 to 4 2 2 2 2 2 3 0.2 0.04 0.2 0.1 0.2 0.21 Weighted Score

Global Expansion
Organization Structure Production Capacity Advertising Customer Service Price Competition Management Experience

0.1
0.07 0.1 0.14 0.05 0.15 0.05

4
3 3 3 3 3 2

0.4
0.21 0.3 0.42 0.15 0.45 0.1 0 0

4
3 3 4 3 4 3

0.4
0.21 0.3 0.56 0.15 0.6 0.15 0 0 3.49

3
2 2 2 2 3 3

0.3
0.14 0.2 0.28 0.1 0.45 0.15 0 0 2.37

Totals

3.1

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Internal Factors

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Strengths
1. 2. 3. 4. Increase net revenue yields Revenues growing Capital expansion of Celebrity Cruise Line Expanding passenger capacity deal sign Finlands Kvaerner-Masa Yards to build bigger Ultra Voyager ships with capacity of 3,600 5. Using latest information technology software to manage operations

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Weaknesses
1. During 2002 & 2003 RCCL experienced weaker margins due to pricing pressure caused by a weak U.S. economy, 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 1.31

2. 3. 4. 5.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

IFE
Key Internal Factors Weights 0.0 to 1.0 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 3,600 0.03 Using latest information technology software to manage operations 0.1 Internal Weaknesses During 2002-2003 RCCL experienced weaker margins due to pricing pressure caused by weak US economy, 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 1.31 Totals 4 0.4 3 0.09 0.07 0.2 0.2 3 3 4 0.21 0.6 0.8 Rating 1 to 4 Weighted Score

0.1 0.05 0.05

2 1 2

0.2 0.05 0.1

0.1
0.1 1

2
2

0.2
0.2 2.85

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

SWOT Matrix

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Space Matrix

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

IE Matrix

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Grand Strategy Matrix

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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, 2006

31-Dec-05
14.60% 17.78%

4.69% 12.81%
Megan Dow, Kristin Belanger, Angle Bourgoin

Key Ratios con.


Income Statement Revenue (ttm): Revenue Per Share (ttm): Qtrly Revenue Growth (yoy): Gross Profit (ttm): EBITDA (ttm): Net Income Avl to Common (ttm): 1.91B 1.27B 663.47M 4.90B 23.777 6.70%

Diluted EPS (ttm): Qtrly Earnings Growth (yoy): N/A


May 4, 2006

3.26

Megan Dow, Kristin Belanger, Angle Bourgoin

Key Ratios con.


Balance Sheet

Total Cash (mrq):


Total Cash Per Share (mrq): Total Debt (mrq): Total Debt/Equity (mrq):

125.39M
0.594 4.15B 0.748

Current Ratio (mrq):


Book Value Per Share (mrq): Cash Flow Statement Operating Cash Flow (ttm): 1.11B

0.19
26.403999

Levered Free Cash Flow (ttm):


May 4, 2006

-826.24M
Megan Dow, Kristin Belanger, Angle 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, Kristin Belanger, Angle Bourgoin

QSPM

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

QSPM cont.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Decisions
We have decided to add two other boats to the entire fleet and they will be finished by May 2006 and 2008.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

EPS/EBIT Analysis
Amount needed = $ 10 Million Stock Price = $41.89 (on May 2, 2003) EBIT Range = $5 to $8 Million Tax Rate = 32% Interest rate = 5% # Shares Outstanding = 195.6 (million)
Megan Dow, Kristin Belanger, Angle Bourgoin

May 4, 2006

EPS/EBIT Analysis Royal Caribbean LTD.


In $Millions

Stock Financing

Financing

Low
EBIT (280.7 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

195.60
1.89

195.60
3.03

119.36
2.89

190.97
2.89

May 4, 2006

Megan Dow, Kristin Belanger, Angle 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.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Evaluation
Annual reports Quarterly reports Stock prices Key Ratios Progress of ship Average number of passengers per cruise

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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

Update!
Is still the second largest cruise line. As of December 31, 2005, it operated 19 cruise ships with approximately 44,350 berths. (rooms) A new ship is going to sail Freedom of the Seas, and will be the worlds largest cruise ship. Will occupy 3,634 passengers. Royal Caribbean believes that bigger is better, and ordered to have bigger ships built that can occupy 5,400 in the future.

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

References
http://www.rcl.com http://finance.yahoo.com http://biz.yahoo.com Business & Resource Premier Strategic Management Concepts and Cases

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

Questions?

May 4, 2006

Megan Dow, Kristin Belanger, Angle Bourgoin

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