Strengths
1. RCCL operates more ships than any other cruise. Not only does this multiply their potential revenue, but it also influences their brand image with consumers as the second-largest cruise company, giving RCCL strong market position and brand recognition. This allows RCCL to charge a premium price for their cruises.
2. RCCL is known for their extensive and innovative product offerings. For example, they operate the world’s largest ship, Symphony of the Seas. They also were the first ocean cruise to offer ice skating rinks and rock-climbing walls, and they boast the tallest slide at seas (150 ft). RCCL added the first surf simulator at sea in 2006. In 2014, the debuted Oasis of the Seas, which was the first “smartship” that allowed guests to use the internet onboard in the same way they would on land.
3. RCCL has enough capital to withstand revenue loses through the end of 2023 (over $5 billion in cash), due to their strong stock price that has recently risen to over $80. Not only will this allow RCCL to remain solvent while some competitors struggle to remain open during the Covid-19 pandemic, but large cash reserves will also support additional advertising and fund new innovations that can push RCCL above competitors in the market.
4. RCCL has enhanced their safety protocols as a result of the Covid-19 pandemic. For example, RCCL currently has certain areas of its cruise ships designated for only fully vaccinated passengers, where passengers there are allowed to take off their mask while in this area. Admission to these vaccinated areas is enforced by crew members, who check if a passenger is vaccinated or not. RCCL also require a negative Covid-19 test before for all U.S. sailings. These safety measures will help RCCL regain trust with consumers who are concerned over Covid-19 safety.
5. RCCL now provides a “Cruise with Confidence” guarantee. This allows guests to cancel their cruise vacation for any reason up to 48 hours prior to sailing and receive full credit toward a future sailing. This is contrasted with the industry standard of charging large fees and keeping hefty deposits as the departure date approaches. The guarantee creates a strong incentive for cruisers to choose RCCL over competitors.
Weaknesses
1. RCCL operates more ships than any other cruise. This means that RCCL has higher operating costs than their competitors. As a result, they will not be able to compete on price, as their competitors have the cost advantage.
2. RCCL’s target audience are adults aged 35-49 with children, and seniors aged 55+. However, adults aged 25-34 are the largest market for both ocean and river cruises, and are also the most likely segment to post about their trip on social media. According to a recent Lightspeed poll, 35% of people said that social media was their source of inspiration while planning their last vacation. By not targeting the most digitally engaged market of cruisers, RCCL puts themselves at a disadvantage to companies able to attract consumers in this demographic, as competitors will be in a better position to leverage social media advertising into sales.
3. In RCCL’s Q1 2021 report, they claimed a quarterly loss of about $1.1 billion, on revenue of just $42 million. Monthly cash burn stood at approximately $300 million. While RCCL does have enough liquidity (over $5 billion in cash) to fund its cash burn through the end of 2023, its debt load has also soared, with long-term debt standing at $20.7 billion. This is likely to impact earnings in the long run, given that interest expenses were up 3x compared to last year.
4. RCCL has been involved in several scandals over the years that threaten to erode consumer trust in the brand. For instance, in 1999 RCCL was forced to pay an $18 million criminal fine for dumping waste and hazardous chemicals and for lying to the Coast Guard. In a 2016 lawsuit, RCCL was found guilty of not protecting their passengers from sexual assault. And more recently, in 2021 RCCL was accused of knowingly destroying evidence when a toddler fell to her death on one of their cruise ships.
5. RCCL spends more on advertising to attract consumers than their competitors. Higher customer acquisition costs will diminish profits and will allow competitors able to attract new customers less expensively to grow at a faster rate.
Opportunities
1. According to a 2021 Cruise Lines International Association survey, 81% of previous cruisers are likely to cruise again in the next few years, and 60% of non-cruisers are open to trying a cruise. The 13.5 million US passengers estimated to cruise in 2019 is projected to grow to 15.9 million in the next five years according to a 2019 Mintel report.
2. Amid Covid-19 concerns, heightened attention to safety will attract cruisers. 58% of non-cruisers say they will likely consider a cruise vacation in the next few years given the proper safety precautions. The pandemic has also created a new appreciation for personal space among travelers, so much so that over half are willing to pay extra to have more of it.
3. The pandemic has caused people’s social circles to shrink, giving social media unprecedented access to travel planners looking to be inspired. According to a recent Lightspeed poll, 35% of people said that social media was their source of inspiration while planning their last vacation. Cruise brands can capitalize on this by reaching their audience on pertinent platforms.
4. Ocean cruises are specifically seen as a spectacle by consumers, and one that’s worth talking about. Consumers who are seeking a brag-worthy vacation are more likely to choose ocean cruises. Also, recommendations from friends and family serve as the largest source of inspiration for travel planners, so there is extra incentive for vacations to be brag-worthy spectacles.
5. Domestic waters are a largely untapped market. River cruising is gaining in popularity in the US, as travelers become more interested in seeing their own country’s waterways. River cruise vacations hit on a lot of current vacation trends, such as locality and variety of destinations, so there is a lot of potential for the ocean cruise industry to expand into this market.
Threats
1. The Covid-19 pandemic has had a devastating effect on the cruise industry, which was shut down for much of 2020-2021. Concerns of when cruise lines would again start sailing eroded consumer trust in the industry. Consumers were also concerned of the danger of exposure to the virus while confined on board with other passengers and staff. The pandemic also made travelers wary of visiting unfamiliar places, and so the incidence of traveling to new destinations has been low.
2. Cruise lines are in competition with land-based vacation providers, such as Disney Parks. During the Covid-19 pandemic, land resorts enjoyed a distinct advantage over cruises, as many remained open while cruise lines were forced to cease operation for over a year. Even with Covid-19 vaccines readily available, many consumers will continue to trust land-based resorts over cruises. Also, while cruises force passengers to remain in crowds, land resorts offer consumers a greater degree of personal space.
3. Cruises can be prohibitively expensive to consumers, compared to more affordable vacation alternatives. One of the highest costs is transportation to the destination port. In a recent survey asked among 1,090 internet users aged 18+ who have previously been on a cruise, “too expensive to get to the departure point” was the top barrier given for not choosing to go on another cruise.
4. According to polls, the environmental impact of the cruise industry is a barrier for many consumers. Of travelers who have taken a cruise in the last 3 years, an above average number said that having others perceive them as environmentally responsible was a large concern, and they were concerned about the pollution caused by transportation. A single cruise ship can emit as much pollution as 700 trucks and as much particulate matter as a million cars. Environmental concerns will turn some consumers to less impactful vacation options.
5. Florida is a major departure point in the cruise industry, however the industry now finds itself in a compromising position between two politically charged positions in Florida. According to the US Centers for Disease Control and Prevention, 95% of both crew members and passengers should have two vaccinations before they can join a cruise. However, Florida Governor Ron DeSantis has threatened companies that ask passengers if they have been vaccinated with a $5,000 fine, per passenger. Cruises that operate in Florida will face a dilemma of which authority to listen to, and may face heavy fines or legal sanctions depending on their choice.
MRI-Simmons. (2021). Crosstab of consumers who have taken a cruise in the last 3 years [attitudes(environment)].
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Cruise Line Faces 21 Felony Counts in 6 Different U.S. Courts – www.justice.gov/archive
Royal Caribbean Knew of Sexual Assault Epidemic on Cruises but Did Nothing, Court Says – Miami New Times
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