Transcript Royal Caribbean Cruises Ltd

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
May 4, 2006
•
•
•
•
•
•
•
•
•
•
Analysis
– SWOT Matrix
– SPACE
– IE Matrix
– Grand Strategy Matrix
Key Ratios
Different Strategies
– QSPM
Decisions
EPS/EBIT Analysis
Implementation
Evaluation
Update!
References
Questions?
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 Fain
Chairman
Luis Leon
CFO,
Executive VP
Bonnie Biumi
Sr. VP,
Treasurer
Jack Williams
President and COO
Royal Caribbean
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
Celebrity
Cruises
Adam Goldstein
Executive VP,
Brand Ops
Important Facts
KEY EXECUTIVES
Pay
Exercised
Mr. Richard Fain , 58
Chairman and Chief Exec. Officer
$ 3.69M
$0
$ 1.52M
$0
$ 1.41M
$0
$ 979.00K
$0
$ 875.00K
$0
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,
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
May 4, 2006
•
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
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.
2.
3.
4.
5.
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
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle 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
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
EFE
Key External Factors
Weights
Rating
0.0 to 1.0
1 to 4
Weighted Score
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
0.05
3
0.15
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
0.2
3
0.6
Viral Outbreaks
Decreased tourism since 9/11
Carnival Corporation
Totals
May 4, 2006
1
Megan Dow, Kristin Belanger,
Angèle Bourgoin
3.05
CPM
Royal Caribbean
Critical Success factors
Market Share
Weights
Ratin
g
0.0 to
1.0
1 to 4
Carnival Corporation
Weighted
Score
Ratin
g
Weighted
Score
Star Cruises
Ratin
g
1 to 4
Weighted
Score
1 to 4
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
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
0.07
3
0.21
3
0.21
2
0.14
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
Product Quality
Organization Structure
Production Capacity
Totals
May 4, 2006
1
0
0
0
0
0
0
3.1
3.49
2.37
Megan Dow, Kristin Belanger,
Angèle Bourgoin
Internal Factors
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
Strengths
1.
2.
3.
4.
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 3,600
5. Using latest information technology software
to manage operations
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
Weaknesses
1.
2.
3.
4.
5.
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
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
IFE
Key Internal Factors
Weights
Rating
0.0 to 1.0
1 to 4
Weighted Score
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
0.03
3
0.09
0.1
4
0.4
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 ratio
of 1.31
0.1
2
0.2
Expanding passenger capacity deal signing with Finland's Kvaerner-Masa to
build bigger Ultra
Voyager ships with capacity of 3,600
Using latest information technology software to manage operations
Internal Weaknesses
During 2002-2003 RCCL experienced weaker margins due to pricing
pressure caused by weak US economy, traveler safety concerns, and
increasing capacity
Totals
May 4, 2006
1
Megan Dow, Kristin Belanger,
Angèle Bourgoin
2.85
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
Forward Integration
SPACE
GRAND
COUNT
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
Retrenchment
Divestiture
Liquidation
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
1
Key Ratios
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends:
Most Recent Quarter (mrq):
31-Dec
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):
Total Debt (mrq):
0.594
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
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,
Angèle Bourgoin
QSPM
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
QSPM cont.
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle 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,
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
Low
EBIT (280.7 Million)
Financing
High
Low
High
500
800
500
800
0
0
25
40
500
800
475
760
Taxes 26%
130
208
130
208
EAT
370
592
345
552
195.60
195.60
119.36
190.97
1.89
3.03
2.89
2.89
Interest 5%
EBT
# Shares
Outstanding
EPS
May 4, 2006
Megan Dow, Kristin Belanger,
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.
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin
Evaluation
•
•
•
•
•
•
Annual reports
Quarterly reports
Stock prices
Key Ratio’s
Progress of ship
Average number of passengers per cruise
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
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,
Angèle Bourgoin
Questions?
May 4, 2006
Megan Dow, Kristin Belanger,
Angèle Bourgoin