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May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Royal Caribbean Cruises Ltd.
Megan Dow, Kristin BelangerAngèle 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
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, Angèle Bourgoin
RCL
• Services: Sector• Industry: General Entertainment• Full Time Employees: 111,690• Index Membership: NYSE
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
RCL
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
RCL vs. Industry
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
RCL Competitors
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
RCL Historical
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Organizational Structure
Richard FainChairman
Luis LeonCFO,
Executive VP
Bonnie BiumiSr. VP,
Treasurer
Jack WilliamsPresident and COO
Adam GoldsteinExecutive VP,
Brand Ops
Royal CaribbeanCelebrity Cruises
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Important FactsKEY EXECUTIVES
Pay Exercised
Mr. Richard Fain , 58
$ 3.69M $0 Chairman and Chief Exec. Officer
Mr. Luis E. Leon , 53
$ 1.52M $0 Chief Financial Officer and Exec. VP
Mr. Adam M. Goldstein , 46
$ 1.41M $0 Pres of Royal Caribbean International
Mr. Daniel J. Hanrahan , 48
$ 979.00K $0 Pres of Celebrity Cruises
Mr. Brian J. Rice , 47
$ 875.00K $0 Exec. VP of Revenue Performance
May 4, 2006 Megan Dow, Kristin Belanger, Angèle 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 company’s most valuable asset.
They are counted on to represent the company professionally and do the utmost to serve the company’s 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, Angèle 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, Angèle 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, Angèle 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, Angèle 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, Angèle Bourgoin
Issues
• Global• Capital Expansion Issues• Passenger Safety Issues• Finance Issues• Marketing Issues• eCommerce Issues• Economic Issues• Suppliers’ Issues• Natural Environment Issues• Capacity Issues
May 4, 2006 Megan Dow, Kristin Belanger, 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, Angèle 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, Angèle 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, Angèle 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, Angèle 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, Angèle 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, 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, Angèle 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, Angèle 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, Angèle 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
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
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, Angèle Bourgoin
External Factors
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Opportunities
1. Expansion of fleet has allowed RCCL increasing amount of destinations, itineraries, and markets
2. Flexible strategy, moving their fleets throughout the year to meet the seasonal demand
3. RCCL operates the websites with customer booking capabilities for both Royal Caribbean and Celebrity Cruises
4. Offers competitive price on goods and services offered from suppliers in packaged deals.
5. Demand for cruises has increased and is predicted to continue to increase
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Threats
1. Terrorism2. Viral outbreaks3. Decreased tourism since 9/114. Challenging U.S. economy5. Environmental lobbyists 6. Illnesses aboard cruise ships7. Reports of physical attacks while on
board8. Carnival Corporation
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
EFEKey External Factors Weights Rating Weighted Score
0.0 to 1.0 1 to 4
Opportunities
Expansion of fleet has allowed RCCL increasing amount of destinations, itineraries, and markets. 0.05 3 0.15
Flexible strategy, moving their fleets throughout the year to meet seasonal demand 0.05 3 0.15
RCCL operates web sites with customer booking capabilities for both Royal Carribbean and Celebrity Cruises 0.05 3 0.15
Offers competitive price on goods and services offered from suppliers in packaged deals 0.05 3 0.15
Demand for cruises has increased and is predicted to continue increasing 0.15 4 0.6
Threats 0
Terrorism 0.1 3 0.3
Viral Outbreaks 0.05 3 0.15
Decreased tourism since 9/11 0.1 3 0.3
Challenging U.S. economy 0.05 3 0.15
Environmental Lobbyists 0.05 2 0.1
Illnesses aboard cruise ships 0.05 3 0.15
Reports of physical attacks while on board 0.05 2 0.1
Carnival Corporation 0.2 3 0.6
Totals 1 3.05
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
CPMRoyal Caribbean Carnival Corporation Star Cruises
Critical Success factors WeightsRatin
gWeighted
ScoreRatin
gWeighted
ScoreRatin
gWeighted
Score
0.0 to
1.0 1 to 4 1 to 4 1 to 4
Market Share 0.1 3 0.3 4 0.4 2 0.2
Inventory System 0.02 3 0.06 3 0.06 2 0.04
Financial Position 0.1 3 0.3 4 0.4 2 0.2
Product Quality 0.05 2 0.1 3 0.15 2 0.1
Consumer Loyalty 0.1 4 0.4 3 0.3 2 0.2
Sales Distribution 0.07 3 0.21 3 0.21 3 0.21
Global Expansion 0.1 4 0.4 4 0.4 3 0.3
Organization Structure 0.07 3 0.21 3 0.21 2 0.14
Production Capacity 0.1 3 0.3 3 0.3 2 0.2
Advertising 0.14 3 0.42 4 0.56 2 0.28
Customer Service 0.05 3 0.15 3 0.15 2 0.1
Price Competition 0.15 3 0.45 4 0.6 3 0.45
Management Experience 0.05 2 0.1 3 0.15 3 0.15
0 0 0
0 0 0
Totals 1 3.1 3.49 2.37
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Internal Factors
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Strengths
1. Increase net revenue yields2. Revenues growing3. Capital expansion of Celebrity Cruise
Line4. Expanding passenger capacity deal sign
Finland’s 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, Angèle 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
2. Net income falling 3. Higher marketing costs due to reduced demand
because of weak economy and ongoing conflict in the Middle East
4. RCCL financed recent shop acquisitions by issuing debt
5. Highly leveraged with LT debt-to-equity ratio of 1.31
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
IFEKey Internal Factors Weights Rating Weighted Score
0.0 to 1.0 1 to 4
Internal Strengths
Increase net revenue yields 0.07 3 0.21
Revenues growing 0.2 3 0.6
Capital expansion of celebrity cruise line 0.2 4 0.8
Expanding passenger capacity deal signing with Finland's Kvaerner-Masa to build bigger UltraVoyager ships with capacity of 3,600
0.03 3 0.09
Using latest information technology software to manage operations
0.1 4 0.4
Internal Weaknesses
During 2002-2003 RCCL experienced weaker margins due to pricing pressure caused by weak US economy, traveler safety concerns, and increasing capacity 0.1 2 0.2
Net Income falling 0.05 1 0.05
Higher marketing costs due to reduced demand because of weak economy and ongoing conflict in the Middle East 0.05 2 0.1
RCCL financed recent shop acquisitions by issuing debt 0.1 2 0.2
Highly leveraged with LT Debt-to-Equity ratioof 1.31 0.1 2 0.2
Totals 1 2.85
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
SWOT Matrix
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Space Matrix
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
IE Matrix
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Grand Strategy Matrix
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Matrix Analysis and SWOT Summary
Alternative Strategies IE SPACE GRAND COUNT
Forward Integration X X 2
Backward Integration X X 2
Horizontal Integration X X 2
Market Penetration X X 2
Market Development X X 2
Product Development X X 2
Concentric Diversification X X 2
Conglomerate Diversification X X 2
Horizontal Diversification X X 2
Joint Venture X 1
Retrenchment
Divestiture
Liquidation
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Key Ratios
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 31-Dec-05
Profitability
Profit Margin (ttm): 14.60%
Operating Margin (ttm): 17.78%
Management Effectiveness
Return on Assets (ttm): 4.69%
Return on Equity (ttm): 12.81%
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Key Ratios con.
Income Statement
Revenue (ttm): 4.90B
Revenue Per Share (ttm): 23.777
Qtrly Revenue Growth (yoy): 6.70%
Gross Profit (ttm): 1.91B
EBITDA (ttm): 1.27B
Net Income Avl to Common (ttm): 663.47M
Diluted EPS (ttm): 3.26
Qtrly Earnings Growth (yoy): N/A
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Key Ratios con.Balance Sheet
Total Cash (mrq): 125.39M
Total Cash Per Share (mrq): 0.594
Total Debt (mrq): 4.15B
Total Debt/Equity (mrq): 0.748
Current Ratio (mrq): 0.19
Book Value Per Share (mrq): 26.403999
Cash Flow Statement
Operating Cash Flow (ttm): 1.11B
Levered Free Cash Flow (ttm): -826.24M
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
• 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
Different Strategies
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
QSPM
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
QSPM cont.
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
• We have decided to add two other boats to the entire fleet and they will be finished by May 2006 and 2008.
Decisions
May 4, 2006 Megan Dow, Kristin Belanger, Angèle 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)
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
EPS/EBIT Analysis Royal Caribbean LTD.
In $Millions Stock Financing Financing
Low High Low High
EBIT (280.7 Million) 500 800 500 800
Interest 5% 0 0 25 40
EBT 500 800 475 760
Taxes 26% 130 208 130 208
EAT 370 592 345 552
# Shares Outstanding 195.60 195.60 119.36 190.97
EPS 1.89 3.03 2.89 2.89
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
• 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.
Implementation
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
• Annual reports• Quarterly reports• Stock prices• Key Ratio’s• Progress of ship• Average number of passengers per
cruise
Evaluation
May 4, 2006 Megan Dow, Kristin Belanger, Angèle 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, Angèle 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 world’s 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, Angèle Bourgoin
• http://www.rcl.com• http://finance.yahoo.com• http://biz.yahoo.com• Business & Resource Premier• Strategic Management Concepts and
Cases
References
May 4, 2006 Megan Dow, Kristin Belanger, Angèle Bourgoin
Questions?