Company Profile: Royal Caribbean Cruises: Global Business Model

While there are many new and exciting developments at Royal Caribbean Cruises these days, Chairman and CEO Richard Fain said the most important aspect of the business is the strength of the market positions of its cruise brands. “It is tempting to talk about what’s new, but the bottom line is to continue to operate strongly and successfully – that remains our bread and butter,” he said in a one-on-one interview with Cruise Industry News.

In the process, Royal Caribbean Cruises has grown to six brands and 36 ships. In addition are seven ships under construction for deliveries from spring 2008 through 2011.

Royal Caribbean ranks as the second largest cruise company in the world with an estimated worldwide market share of nearly 25 percent.

The future Royal Caribbean will focus less on the U.S., according to Fain, and follow a more global sourcing and destination model.

Nineteen percent of the company’s revenues came from outside North America in 2007 and this is expected to increase to 20 percent for 2008.

Royal Caribbean is presently focusing its growth strategy on both sides of the Atlantic and has recently launched new brands in Germany, France, North America and Spain.

At press time, TUI and Royal Caribbean announced that they will launch a new joint venture serving the German cruise market. The new company, TUI Cruises, will begin service with one ship, in early 2009, and grow with two newbuildings planned for 2011 and 2012. Both partners will hold a 50 percent interest in joint venture.

CDF Croisieres de France was announced last fall with one ship starting service this spring.  Designed for the French market, Fain said the product will help make cruising more appealing to the French, which, he said, have historically not done much cruising. “When we look at the vacation preferences of the French people, we are confident our product will appeal to the market.”

Meanwhile, Royal Caribbean has also been building up its Spanish brand, Pullmantur, quite aggressively. Pullmantur was acquired in late 2006.

“Spain is an underserved market,” Fain said, adding that he sees great potential for growth. Pullmantur will have five ships in 2008 and add one more in 2009, becoming the single largest brand in the Spanish market.

In addition, Azamara Cruises was launched for the North American market with one ship in spring of 2007 and added a second ship last fall. The product is described as deluxe – between premium and luxury.

Fain described the rationale behind the brand as an opportunity to meet market demand. “As the market becomes more sophisticated, it is able to better differentiate between brands,” he said, “and this was an opportunity to develop a different market. The key is to provide a product there is demand for.

“We will not add new brands for the sake of adding brands,” Fain added. However, if there is a need or a gap in the market, he will consider launching another new cruise line.

Excerpted from the Cruise Industry News Quarterly Magazine: Winter 2007/2008

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