Carnival Cruise Lines Case

CARNIVAL CRUISE LINES

Current Success

The year of 2004 was the greatest one so far for Carnival Cruise Lines. Indeed, it proved once again that hard work and exceptional strategic planning of the past years made the company one of the industry’s biggest and influential players. With more than 3 million passengers to carry in 2004 alone, the company managed to achieve a 33.8% share of the North American market. This became possible through an average growth in passenger capacity of 11.83% every year from 1994 through 2004 (see Exhibit 1). Compared to the industry’s 6.65% passenger capacity growth rate for the same timeframe, this was quite an achievement. Moreover, the launch of the new ship before the end of the year would make Carnival Cruise Lines the largest brand in the North America and in the world. Carnival Cruise Lines is the largest brand of the Carnival Corporation and brings the highest return on capital.

Many factors specific to Carnival Cruise Lines make it successful and highly competitive. One of the most important factors, in general terms, is a clear vision about the industry and the ability of highly experienced management to carry this vision throughout the whole organization. More specifically, the utilization of the “Fun Ships” brand has played a very important role. Combined with a slow but positive change in general public’s perception of the cruise industry as an affordable (the company is, after all, a low-cost leader of the cruising industry) and fun (!) vacation alternative, the company was able to grow faster than most of the industry players. Joined with solid relationships with travel agencies, extensive print and TV advertisement, company’s “fun ship” reputation bring in a lot of “first-timers”. Furthermore, bringing its ships closer to customers through introduction of the “home ports”, programs and discounts targeting, again, primarily “first-timers”, and a variety of cruises (many destinations in Americas and Europe, specialized cruises such as those for NASCAR fans, etc.), great service and experience on the cruises (yielding a 98% satisfaction rate with passengers) and the positioning as a mass-market value cruise line most likely helped to increase the passenger throughput as well.

From a financial viewpoint, by leveraging its current size Carnival Cruise Lines is able to buy new passenger capacity (build ships) at