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May 4, 2006
May 4, 2006
Overview
Operates 26 ships under two brands
Royal Caribbean International Celebrity Cruises
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.
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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.
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RCL
Services: Sector Industry: General Entertainment Full Time Employees: 111,690 Index Membership: NYSE
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RCL
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RCL Competitors
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RCL Historical
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Organizational Structure
Richard Fain Chairman
Royal Caribbean
Celebrity Cruises
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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
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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
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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
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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
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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
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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
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%
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
Instituted Safety and Environment position EPA studies on waste water Annual award program Financially supporting ocean conservation groups
Megan Dow, Kristin Belanger, Angle Bourgoin
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Capacity Issues
Increased 9% over 2002 Top 10 cruises carried over 2 million passengers on 932 North American cruises
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External Factors
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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.
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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
3 3 3 3 2 3 2 3
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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
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Internal Factors
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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
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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.
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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
2 1 2
0.1
0.1 1
2
2
0.2
0.2 2.85
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SWOT Matrix
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Space Matrix
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IE Matrix
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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
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Key Ratios
FINANCIAL HIGHLIGHTS
Fiscal Year Fiscal Year Ends: 31-Dec
31-Dec-05
14.60% 17.78%
4.69% 12.81%
Megan Dow, Kristin Belanger, Angle Bourgoin
3.26
125.39M
0.594 4.15B 0.748
0.19
26.403999
-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
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QSPM
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QSPM cont.
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Decisions
We have decided to add two other boats to the entire fleet and they will be finished by May 2006 and 2008.
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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
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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
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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.
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Evaluation
Annual reports Quarterly reports Stock prices Key Ratios Progress of ship Average number of passengers per cruise
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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
References
http://www.rcl.com http://finance.yahoo.com http://biz.yahoo.com Business & Resource Premier Strategic Management Concepts and Cases
May 4, 2006
Questions?
May 4, 2006