An Overview of the Cruise Industry (Research Paper Sample)

An Overview of the Cruise Industry Name of Student: Name of Institution: An Overview of the Cruise Industry The cruise industry has seen reputable growth in recent years. The industry has responded well to innovation and extensive research in consumer needs by industry players and the rise of new exciting destinations. The cruise industry has become a major part of the tourism sector due to its increased popularisation. This paper begins by analysing the cruise industry in the context of the tourism industry. The paper goes on to carry out an analysis of two major cruise companies: Carnival Corporation and Royal Caribbean Cruises Ltd. Finally, it goes a step further to give an overview of one cruise line; Disney Cruise Line. The cruise industry has a compound annual growth rate of 6.55% (Crusie Market Watch, 2015). This tremendous growth is mainly due to the marketing strategies applied by the cruise companies. Besides, larger cruise ships, more ports and destinations, and new onboard activities have been the driving forces behind the growth of the industry. These developments have been tailored to meet customer demands. The number of ships is increasing year by year as new ships continue to be built. In 2015, seven ships were scheduled to be added to the industry with a total capacity of 18813 passengers. Ten more ships will be added in 2016 (Crusie Market Watch, 2015). This indicates the industry players’ confidence in the growth of cruise tourism. Below is a table of new cruise ships this year. Source: GoCruise Franchise, 2015 In 2013, the industry generated 36.27 billion U.S. dollars in revenues (Statista, 2015). The revenues were expected to increase to 37 billion U.S dollars by the end of 2014. According to Statista.com, the number of passengers carried by cruise industry has been growing year by year, and projections show the numbers will exceed 24 million in 2018 (Statista, 2015). The popularity of the industry is growing to a higher level every year and according to GoCruise Franchise (2015), the trend is not about to change anytime soon. The graph below indicates the total number of passengers carried and to be carried between 2010 and 2018. The future number can be summed from the number and capacity of the ships that are being built. Source: GoCruise Franchise, 2015 North America is the biggest cruise market worldwide, and in 2014, the region had a market size of $ 21.21billion (Statista, 2015). The expectation on the cruise industry is high in the U.S as it is projected to hit $ 50 billion in 2018. Also, North America was the largest source of passengers providing 11.82 million of them in 2013. However, a new competition is emerging. Although Australia has small passenger input into the industry, its growth as source market is enormous. In 2013, the country grew by 20% as a source market (Statista, 2015). During the same year, North America grew only by a mere 3%. Australia has continued to maintain its position as the industry’s number one in term of market penetration and growth. In 2014, the country reached a new milestone when it hit one million passengers. This was way ahead of time because the milestone was targeted to be achieved in 2020. It represented 4.2 % of the country’s population taking cruise (Cruise Lines International Association [CLIA], 2014). This was more than any other region the world. North America, which is the largest cruise market, managed just 3.4% in terms of market penetration. The graphical representation below shows cruise market penetration rates in major cruise regions of the world. Source: CLIA, 2014 The demand for cruise tourism has majorly driven the cruise industry. More people around the world want to travel with cruise ships. The high demand has prompted cruise companies to build more ships with a bigger capacity to accommodate the growing demand. The growth of the demand is mainly due to the satisfaction of passengers who go on to recommend cruise tourism to other people. The cruise companies, therefore, have to invest heavily on passengers’ satisfaction to keep the demand growing. Satisfied passengers will come back with more customers. This brings the concept of competition. Competition has also contributed to the growth of the industry. Passengers will always recommend the services of a cruise company if they are satisfied (Doiron & Weissenberger., 2014). Industry players understand that customer satisfaction is a key factor in tourism. The companies are therefore competing against one another in ensuring the passengers get the best experience while onboard their cruise ships. This completion is healthy as it drives the growth of the industry. The competition in the industry is done by the existing companies because of the barriers to entry and exit. The cost of purchasing a cruise ship and maintaining cruise line are so high that it is hard for new companies to enter the industry. Innovation and marketing are therefore crucial elements in the industry. The customers of cruise tourism get the biggest benefits from the competition among industry players. In 2014, two big industry players went head-to-head battling for internet supremacy. Royal Caribbean partnered with a communications firm, O3b, to provide high-speed internet on its cruise ships. Carnival Corp, on the other hand, unveiled a hybrid internet system that could provide internet speeds up ten times faster than what is available in the industry (Peltier, 2015). The passengers are the best beneficiaries of such competitions because they get the best services. As mentioned earlier, industry players strive to satisfy customer’s demands because that satisfaction drives the growth of the industry. Just like other industries, cruise tourism has its problems and challenges. Environmental issues are a major concern for the industry. The impact of cruise tourism on marine and the coastal environment has been a major talking point of the industry (Klein, 2011). Cruise ships produce wastes such as ballast water, oily bilge water, and air emissions (Klein, 2011). There is also a high volume of human waste produced. These are major issues for environmental conservationists. Companies have to invest in wastewater treatment for sustainable tourism. Other issues include onboard safety, working conditions, and health. These issues have to be handled in an ethically conscientious manner by industry players to stay competitive and increase the industry’s growth. Overview of Carnival Corporation and Royal Caribbean Cruises These two companies are the industry’s biggest and the most popular players. Each of them owns and operates various other brands. Carnival Corporation and Royal Caribbean have contributed immensely to the escalation of the cruise tourism industry. These two companies are responsible for bringing innovation and better services for passengers because of the competition among them. As mentioned earlier, the great beneficiaries of completion in the cruise industry are the customers because the companies strive to satisfy them. Revenues for Carnival Corporation and Royal Caribbean Cruises were $15.88 billion and 8.07 billion respectively in 2013 (Statista, 2015). Carnival Corporation has a total of 106 ships across its ten brands with a total passenger capacity of 235,653. On the other hand, Royal Caribbean has a total of 42 ships, with a total passenger capacity of 104,898 (Crusie Market Watch, 2015). Each of the two companies has one main brand. The flagship brand for Carnival Corporation is the Carnival Cruise Lines (CCL) while for Royal Caribbean Cruise Limited; it is Royal Caribbean International (RCI). In terms of pricing, Carnival Corporation is known for charging the lowest fares in the industry. The Royal Caribbean on the other hand charges significantly higher prices. Its newest ships charge higher prices than other ships. Pricing affect how tourists select the line they would take. When it comes to pricing, Carnival Corporation is an outright winner. The entertainment offered at Royal Caribbean is high-tech, and this may be another reason for charging higher prices compared to Carnival Corp. It is necessary to compare the flagship brands of the two companies to come with clear distinctions between the two. When it comes to fleet size, CCL currently has 24 ships. The number will increase to 25 by the end of 2016. Of the available 24 ships, nine of them were built before 2000. The smallest ships in CCL are the Fantasy class that have a capacity of 2,050 passengers. Its largest ship is the Carnival Vista. It has a capacity of 3,954 and will be launched in 2016. On the other hand, RCI currently has 23 ships, of which eight were built before 2000. The smallest ships of this line are Splendour of the Seas and Legend of the Seas, both of which will be leaving the company’s fleet in 2016 (Cruise Critic, 2015). Its largest ships are the Oasis Class with a capacity of between 5,400 and 5,488 passengers (Cruise Critic, 2015). Dining options are a major consideration by tourists when selecting which brand to cruise with. CCL and RCI have different dining options. Each of CCL’s ships has some speciality restaurants like Bluelguana Cantina and Guy’s Burger joint whose cost are included in the passenger fares (Cruise Critic, 2015). The ships of the company also have some speciality restaurants that charge extra money. They include Seafood Shack, The Steakhouse, and Bonsai Sushi. The line has also partnered with celebrity chef Guy Fieri, who owns the Guy’s Burger joint that is found on the ship. On the other hand, RCI ships have an extraordinary range of speciality restaurants of which a few are included in the cost fares. This explains why this line is more expensive than CC...