In 1972 American Travel Services, Inc., along with Ted Arison, bought two ships from the Canadian Pacific Empress Lines for $6.5 million. These two ships were named the Marti Gras and the Carnivale. Things did not begin well for this group of investors. On its first voyage, the Marti Gras ran aground in Miami Harbor. The ship was also slow and used up very expensive fuel.
For the next three years, Carnival lost money. During this time, Arison tried to drum up business by adding such attractions as casinos, discos, nightclubs, and various forms of activities. Finally, in 1974, American Travel Services was ready to pull out of the joint venture. So, Ted Arison bought out ATSI for $1 cash. Unfortunately, he also acquired the $5 million debt that went along with the venture. As luck would have it, however, the following month after the buyout by Arison, the repaired Marti Gras began showing a profit. For the remainder of the year, it operated at or above than 100-percent capacity.
Following this successful year, Mr. Arison along with his son, Micky Arison and Vice President of Sales Bob Dickinson, began to change the Carnival marketing strategy. They devised a scheme that went after the first time and young cruisers with “a moderately priced vacation package.” This vacation included the cruise and airfare to and from the port of departure. CarnivalÅfs rates were competitive with such vacation packages as that of Walt Disney World. Also included in the fare was entertainment, meals, and activities.
During the 1980s, Carnival was able to maintain a growth rate of 30 percent. This figure was three times that of the industry. In 1987, Carnival conducted a customer profile. During its study, they found that the average person cruising with Carnival was between the ages of 25 and 39 and had a household income of $25,000 to $50,000.
In 1988, 1989, and 1990 Carnival experienced vast expansion and change. They acquired 4 cruise ships from the Holland American Line. These ships were used to target the higher income vacationer. They also began construction of the $250 million Crystal Palace Resort and Casino located in the Bahamas. Ted Arison in 1990 relinquished his role as chairman of the board to his son Micky who remains in that position today.
With the vast explosion of the airline industry in the 1960s, the ocean liner was quickly becoming obsolete. Cruising, which was the exclusive privilege of the rich and famous, was now being targeted toward the middle class. These luxuries and amenities were now offered to the middle class. “According to Robert Meyers, editor and publisher of Cruise Travel magazine, the increasing popularity of taking a cruise as a vacation can be traced to two events. First, televisionÅfs Love Boat and the increased participation in the workforce by women gave families more disposable income.”
Carnival is a thriving industry today. It owns four other Cruise lines including Holland America Line and Windstar Cruises. The parent company, Carnival Corporation owns Costa Cruise Lines, Seabourn Cruise Line, Airtours, and Weston hotels and resorts.
Carnival has just introduced two new SuperLiners this year. The first ship is the MS Elation. This ship can hold 2,040 passengers and is the first ship to sail year round from Los Angels. The MS Elation was built with all the features of the most popular ship, the Carnival Destiny. The second ship is the MS Paradise. The most surprising feature of this ship is the fact that it is entirely smoke free, which makes it the worldÅfs first cruise ship with this distinction. The Paradise will have seven-day cruises that run year round from Miami.
There are five new cruise ships that are under construction now. The Carnival Triumph, the Carnival Victory, and three more which have yet to be named. The MS Carnival Triumph and MS Carnival Victory are both supposed to be larger than the Carnival Destiny. Triumph will be released in late 1999, and Victory will be released in the summer of 2000. The other three will be in the water sometime after 2000.
Carnival is having no problem dealing with consumer demand for their cruises. Carnival has twelve operating ships in its fleet. They have nearly one hundred percent occupancy for all of their cruises. Carnival is currently operating cruises ranging from three to sixteen days in length to the Bahamas, Caribbean, Mexican Riviera, Alaska, Hawaii, and the Panama Canal.
Carnival has implemented some programs that have met with incredible success. This year Carnival implemented the cruise industryÅfs only vacation guarantee. People who might be hesitant to be on a cruise might try it with this offer. If someone is unsatisfied with the cruise they will be dropped off at any port of call, flown back to their home free of cost, and have the unused potion of their cruise refunded. For those that are health conscious, brand new “Nautica Spas” are aboard all of CarnivalÅfs ships. The dining roomÅfs relaxed environment, with non-formal dress wear is the biggest success on the Carnival ships. Carnival does place an emphasis keeping the customer happy.
Carnival Cruise Lines has set out to accomplish nothing less than a totally new concept of cruising. There is absolute dedication to the highest level of personal service. This service is not only the finest afloat but equals to that found in celebrated hotels, resorts, and restaurants anywhere ashore. Carnival ships are spacious and comfortable. They allow guests to establish their own pace as befits their lifestyle. With its service and performance, Carnival has proven itself to be one of the top Cruise lines in the world.
One proposed definition of value is “quality at the right price.” Carnival believes in this definition. When the consumer is satisfied with the product that they have purchased then the consumer feels they have received value. Carnival tries to make it a moderately priced cruise, worth every penny. CarnivalÅfs approach to market competition is if they can offer superior quality at comparable prices, then the consumer will recognize the value.
Guests will find that CarnivalÅfs philosophy may be summed up by the phrase “Fun Ship.” Carnival recognizes that its customer is independent, intelligent, and wants to have a cruise that they will completely enjoy. The vacation plan is to offer them numerous choices with what they want to do with their time, and let them absorb the atmosphere. Carnival believes in nurturing customer loyalty and providing rewards for past passengers.
“Carnival Cruise Lines is the largest, most popular, and most profitable cruise line in the world. The leader in the contemporary cruise market, Carnival operates 11 ÅeFun ShipsÅf, including the worldÅfs largest, Carnival Destiny. Carnival ships sail to the Bahamas, the Caribbean, Mexico, the Panama Canal, Alaska, and Hawaii. The companyÅfs customer base is divided up into three different target audiences. They are: the contemporary segment which is served by the seven days or shorter cruise and features a casual ambience, the premium segment which is served by the seven-day-and longer market, and the luxury segment which caters to the experienced cruiser for seven-day-and-longer sailing.
Carnival has the unique ability to provide customers with a wide range of vacation choices that appeal to any taste, interest, lifestyle, or budget. With a mission to surpass customer expectations, Carnival offers leisure travelers vacation experiences equal or superior to those at the worldÅfs most popular travel destinations.
Carnival wants to remain the leader and innovator in the cruise industry and intends to do this with sophisticated promotional efforts and to gain loyalty from former cruisers by refurbishing ships, varying activities and ports of call, and being innovative in all aspects of ship operations.”
Carnival Cruise Lines Internal Matrix
- Carnival is known for Carnival Destiny, the largest cruise ship in the world. The square tonnage is 101,353, which is over 30,000 more than any other ship in Carnival’s fleet. It can hold up to 2,642 passengers with double occupancy.
- The “Fun Oriented” Philosophy is there to keep everyone involved. There are various activities to keep young and old alike entertained. The ship has been designed to cater to everyone’s interests.
- Not everyone wants to have to dress up to go to dinner on a cruise. The non-formal dress setting keeps the atmosphere light and happy. People do not feel the need to be embarrassed, and Carnival has gotten great response to it.
- There are six new ships under construction for Carnival. These includes Paradise, scheduled to be released by the end of 1998; the Carnival Triumph, which will be larger than the Carnival Destiny; The Triumph will be released by early 1999; the Carnival Victory is scheduled to be released by summer 2000.
- Who wants to be on a cruise and sit in their room all day? Carnival ships are fully equipped to handle the entertainment of all the passengers. With casinos, shopping centers, weight and exercise rooms, activities, bars, lounges, ballrooms, etc. there is more than one way to tickle your fancy.
- The advertising team for Carnival is doing its job well for it leads it competitors in advertising and promotion. The Carnival Cruise Line is a common name because of such advertising and promotion efforts.
- One thing that is amazing is the fact that Carnival sails at almost 100% capacity during all of its trips. The ship is almost always full, which means that they are generating incredible revenues.
- Carnival has only tapped 10% of the market.
- The cruise line is only discounted during the off season. This discourages people to use Carnival during the busy season because they can not get a reduced rate.
- The fact that Carnival is usually at a 100% capacity is good news, but there is always the risk of overbooking. If this should happen, Carnival would need to pocket out some money because of unhappy customers.
- There are only so many ports of call that Carnival can go to. The ships all have a specific route that they follow, and some people do not want that specific route. They want to be able to hit several different ports of call that may not be offered by one cruise.
Carnival Cruise Lines External Matrix
- Most people want to get away for awhile. They want a unique vacation that they will remember forever. Instead of having the hassle of trying to drive across the country to spend a couple of days somewhere, they can take a week off and not have to worry about anything. Carnival takes care of all their travel worries including airfare, hotel, food, and entertainment accommodations.
- The pricing of the Carnival Cruise Line is very moderate compared to other Cruises. It ranges from $75 to $100 a day, where the competitors range from $75 to over $1000 a day!
- It is truly a company that can take care of all of a traveler’s needs. Carnival Corporation owns five cruises, a chain of hotels, an airline, and a bus line. Travelers can be flown from where they live, have a bus deliver them to the cruise, and be able stay in a hotel all through Carnival.
- Ever since the popularity of the movie “Titanic”, people have gone wild wanting to take a Trans-Atlantic Cruise. If Carnival can cash in on this, they could make a tidy profit.
- The idea behind Carnival is the “Fun Ship” philosophy. They want people of all ages enjoy their cruise. They have everything from Nautilus workout rooms, to indoor and outdoor pools, casinos, shopping centers, exciting ports of call, etc. From the youngest child to the oldest person, there is something for everyone on Carnival Cruise Lines.
- There are various competitors in the market of cruise lines. With so many to choose from, it is not always easy to be able to decide what is best for the dollar. This is where Carnival needs to differentiate itself from all the rest.
- There are so many other vacation spots that require less planning. For example people could go to the beach, take a bus tour across the country, go to Disney World, etc. People usually regard cruises for the rich, or for those people who do not want to take the time to plan their vacation out.
- There is only a limited target audience that Carnival can reach due to its cost. For $75 a day and higher, there is only a certain portion of the population that would consider a cruise.
- When serious mishaps occur, it could spell disaster for a cruise line. It has yet to be determined the extent the fire aboard “Ecstasy” has had on business.
Carnival Cruise Lines is positioned in Quadrant I which means it is in an excellent strategic position. Firms in this quadrant should continue their concentration on market penetration and market development. In CarnivalÅfs case, they should try to tap into the 90% of the untouched market. Firms in Quadrant I can afford to explore external opportunities aggressively. This means forward, backward and horizontal integration strategies are all possibilities. Carnival should try horizontally integrating some of the smaller companies that are competing for the market.
Carnival Cruise Lines Recomended Strategic Plan
Carnival Cruise Lines should seek a market penetration strategy. With this strategy, Carnival can use one of its major strengths. It can use its advertising and promotion strength and try to tap into more of the potential market.
Carnival Cruise Lines should seek a horizontal integration strategy. By seeking ownership or increased control over competitors, Carnival could gain an even greater market share. With Carnival being so strong in the market, they can afford the minor risk of buying out competitors.
Carnival Cruise Lines should seek a concentric diversification strategy. Carnival should consider getting more involved in the airline and motel business either by buying out such chains or by getting involved through a joint venture.