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Cruise Ships Floating Resort PowerPoint Presentation

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  • Slide 1 - CHAPTER FOURTEEN CRUISE SHIPS: FLOATING RESORTS Copyright © 2012 John Wiley & Sons, Inc. Photograph Courtesy of SuperStock
  • Slide 2 - Learning Objectives Identify the changing trends in and demographic profiles of the cruise ship market. Identify the critical variables in determining a cruise ship's profit potential. Identify potential solutions to financial rations relevant to cruise ships. Identify the most important financial ratios relevant to cruise ships. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 3 - Identify the changing trends in and demographic profiles of the cruise ship market. Travel by Ship The introduction of intercontinental commercial airline service precipitated the rapid decline in the use of ships as a scheduled passenger transportation mode. Cruising has taken the place of scheduled liner services. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 4 - Changing Trends (cont.) The Cruise Experience Many tourists who choose to cruise perceive cruising as safe, social, service-oriented, and customer friendly. Cruise ships combine familiarity with the excitement of travel. Some travelers perceive cruising as expensive, claustrophobic, elitist, seasickness-inducing, and reserved for older couples only. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 5 - Changing Trends (cont.) Major Players The major companies in the field include: Royal Caribbean Cruise Line and Carnival Corporation Cruise brands take great care when it comes to their reputations because customers believe a brand name implies a certain standard of cruise. Branding is essential for garnering new business, encouraging repeat customers, creating brand recognition, defining the company’s approach to operations and marketing, and most importantly, establishing customer loyalty. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 6 - Classifications 75 percent Contemporary 13 percent Premium 6 percent Budget 2 percent Traditional Luxury; Small Ship Luxury, Luxury Sailing Vessels; Exploration/ Soft Adventure Cruises and Niche Cruising Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 7 - Identify the critical variables in determining a cruise ship’s profit potential. The Distribution System The cruise market can be divided three ways: focused on the product, on customer identity, and on satisfying a need. Cruise Operators Cruise operators or brands dominate the market. They either lease or own cruise ships for which they create itineraries or products. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 8 - Profit Potential (cont.) Cruise Operators (cont.) Cruises have a variety of fixed costs, such as fuel, port administration, and customs. To increase profits, the cruise operators seek to reduce these costs without adversely affecting quality. Larger companies can negotiate for such items as fuel and consumables much more easily than smaller companies. Through negotiations, costs can be effectively reduced, often by quite a bit. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 9 - Profit Potential (cont.) Cruise Operators (cont.) Traditionally, cruise companies relied on travel agents to help them book cruises. Cruise operators rely on printed brochures to sell their cruises. Brochures are carefully designed to encourage advance booking, through such strategies as making off-season prices look dramatically lower than their on-season counterparts, and promising discounts for booking early. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 10 - Profit Potential (cont.) Market Segments Six segments of the cruiser market include: Restless Baby Boomers, Enthusiastic Baby Boomers, Luxury Seekers, Consummate Shoppers, Explorers, and Ship Buffs. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 11 - Profit Potential (cont.) Travel Agents Travel agents who specialize in arranging cruises often form strong alliances with cruise companies, who frequently support “their agents” through training, sales events, and customized marketing materials. Alliances Cruise operators may decide to form alliances with other vacation service providers in order to create a more attractive package, or to create additional reasons for customer loyalty. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 12 - Identify potential solutions to financial ratios relevant to cruise ships. The Cruise Product Cruises have three different economic features: Inelasticity - a cruise product is “perishable” because it can’t be stored if it’s not sold Heterogeneity - the product consists of a variety of components that make the cruise experience different for each customer Complementarity - the cruise is not one single experience but a host of elements that combine to form the cruise experience Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 13 - Solutions to financial ratios (cont.) Dining The Buffet Main Restaurants Other Options Bars Entertainment Entertainment generally does not produce additional revenue for the cruise, but small sales can be made indirectly. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 14 - Solutions to financial ratios (cont.) Shore Excursions Shore excursions are sold to passengers both before and during the cruise. Alone, they generate revenue, but the shore excursion’s true purpose is to add value to the cruise experience. Beauty and Therapy Cruise brands may contract concessionaires to provide the service or other brands may have their own staff. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 15 - Solutions to financial ratios (cont.) Shopping Shops generally include fashion stores for both sexes, a gift shop, a general store, and a jeweler. Photography The presence of the photographers ensures that passengers can purchase professionally taken pictures, some of which are available in special presentation packs. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 16 - Solutions to financial ratios (cont.) Casinos Cashless ships are becoming more popular within the cruise industry, with special cards for passengers to use that credit purchases to their account. Celebrations Many brands have developed special, inclusive wedding packages. Other celebrations can be catered to as part of a package, such as honeymoons, birthdays, and anniversaries. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 17 - Identify the most important financial ratios relevant to cruise ships. Managing the Hotel Department Managing Service Five elements must be consistently maintained in order to provide the best customer experience: Officers, managers, crew, and staff must all be sufficiently trained Employees should be instinctively customer-oriented in their thinking Crew at every level should be empowered to solve customers’ problems Employees should be aware of company standards Employees should be capable of exceeding said standards Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 18 - Important Financial Ratios (cont.) Role of Tipping Cruise lines have different methods for tipping: several choose to enact a “no-tipping” policy; others provide a helpful brochure which suggests tipping in a very formulaic and orderly system, while some automatically levy a daily service charge. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 19 - Important Financial Ratios (cont.) Managing Food and Beverage Supplies and Services Planning food and beverage supplies for an entire cruise ship relies on analyzing prior consumption patterns, planning menus for different types of passengers, forecasting needed quantities, and identifying expected changes to routine. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 20 - Important Financial Ratios (cont.) Managing Facilities One of the main challenges involved in operating a cruise ship involves dealing with the lack of space. Yield management Defined by offering the proper type of inventory (cabins/staterooms) at the correct price to maximize revenue. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 21 - Important Financial Ratios (cont.) Yield Management (cont.) The perishability of the product (a cruise cabin unsold on a particular cruise can never be resold) drives the yield management policy. The multiplier effect suggests that revenue can be made after the booking is already made, and therefore the yield management system needs to concern itself with attracting sales once onboard. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 22 - Important Financial Ratios (cont.) Accommodation Because capacity may exceed 100% due to strategic booking, accommodation management must be extremely efficient, thorough, and above all, flexible Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 23 - Important Financial Ratios (cont.) Environment Traditionally, the hospitality industry has not been terribly environmentally friendly The industry as a whole uses immense volumes of energy, water, consumer goods, and rare luxury items while seemingly ignoring the environmental consequences of its consumer-driven product. Cruises in particular must take care that they are operating in a more ecologically friendly manner, simply because they operate in the ocean. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 24 - Important Financial Ratios (cont.) Health, Safety, and Security Onboard diseases, such as the norovirus, tend to garner a lot of media attention, but they are in no way the only threats. Security is also a significant concern, especially because cruises have recently begun marketing themselves as a very secure vacation option. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 25 - Important Financial Ratios (cont.) Centers for Disease Control In the 1970s, the US Health Service’s CDC introduced the vessel sanitation program as a reaction to several severe disease outbreaks aboard cruise ships. Sanitation Program Inspection Vessels that have a foreign itinerary, carry more than 13 people, and call into the U.S. must undergo a twice-yearly environmental health inspection as per the orders of the CDC. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 26 - Important Financial Ratios (cont.) Safety There are a few downsides to the increase in security: more bureaucracy, longer lines for passengers and crew to wait in, less privacy, increased costs, and a higher level of complexity when planning. Interestingly, security equipment are not as effective at preventing security issues as is creating a “security philosophy and mindset” among the staff, crew, and officers. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 27 - Important Financial Ratios (cont.) Managing the Operation One key to successful management is understanding the attitudes and behaviors of the crew - knowing the employees. Copyright © 2012 John Wiley & Sons, Inc.
  • Slide 28 - Important Financial Ratios (cont.) Cruise Destinations Today’s ships are more like floating luxury resorts than a means of transportation, so it’s safe to say that the cruise ship itself can be interpreted as the destination. For cruises from the U.S., the most important cruise destinations are Alaska, the Caribbean, and the Mexican Riviera. Copyright © 2012 John Wiley & Sons, Inc.

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