Carnival Cruises Essay

5132 words - 21 pages

Carnival CruisesIn 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. Carnival's 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.Current SituationThe current situation in the cruise industry and in Carnival Corporation is not as favorable as they would like to be. The vast majority of Carnival's business consists of its cruise operations, with tour operating accounting for just 5.0% of sales in 2002 (excluding eliminations). Moreover, Carnival has not attempted to expand its tour operating business in recent years. Sales from tour operating fell by 5.8% between 1997 and 2002 to total US$229 million, whilst revenues from cruise operations almost doubled over the same period to reach almost US$4.4 billion."Many companies can deliver solid results under favorable market conditions, but it takes a particularly resilient organization...

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