CRUISE INDUSTRY IN US-2013

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AGENDA The Market

Key Facts Categories and Prices Financial Breakdown Destinations The Influencers Market Potential Recent Trends

Major Players Growth Drivers and Challenges PEST Analysis Porter’s Five Forces

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THE MARKET Global Cruise Market in 2013- $36.46 Billion. US Cruise Market in 2013- $22.1 Billion-58.79% contribution to the Global Cruise Market. 21.3 million passengers travelled in Cruise in 2013 globally. In US , it was 11.01 million

passengers – 51.6% contribution to the Global Cruise Passengers. Number of Cruise Passengers around the globe is estimated to grow at 2.89% reaching 24.1

million in 2018. Cruise Passengers from US likely to touch 11.62 million by 2018 at CAGR 1.38% - contribution

48% to Global Cruise Passengers.Revenues Trend:

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2007 2008 2009 2010 2011 2012 2013 2014 20150.05.0

10.015.020.025.030.0

17.0 15.2 16.0 17.519.8

22.124.5

US Cruise Revenues($ Billion)

Year

Billion USD

KEY FACTS

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Capacity Number of Ships in 2013 - 239. Number of beds in 2013 - 3,78,256. Occupancy ratio – 102% in 2013. Consistent at 100% since 2008.Operations: Number of ports in USA – 23. Top three ports that handle maximum cruise lines and passengers,

I. Fort Lauderdale , Florida – 12II. Miami – 10III. New York – 9

Total number of jobs in the US Cruise Industry – 3,14,000. There are 13,500 travel agencies with 35,000 agents with CLIA(Cruise Liners International

Association) in North America alone. Commission for Agents - Average 13% on the total price per passenger.Future trends: Number of Ports are to be increased to 30. 12 new ships are to be introduced in 2014 that will add 16,450 new beds with the capital

investment of $3.395 billion.

CATEGORIES AND PRICESCategories: Contemporary Shipping Premium Shipping Luxury Shipping Rivers Cruise

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Category Destinations Average Days Minimum Price($) Maximum Price($)

Contemporary Caribbean(Sample) 7 309 1,700

Transatlantic 15 699 3,499

Premium Caribbean(Sample) 7 699 1,899

Oceanic 15 699 2,999

Luxury Caribbean(Sample) 15 1,049 8,499

World 50 8,000 31,999

River Cruise Mississipi 14 5,299 5,999

Categories differ with respect to Price Service Comfort

Price is directly proportional to Ports of Call.

Average Price for a passenger $1700.

FINANCIAL BREAKDOWN

Components/passenger Revenues ExpensesTicket $1,304 Other Spending $415

Total Revenues $1,719

Operating Costs $1,080 Depreciation $165 Other Costs $236 Interest $53 Total Expenses $1,534 PBT $185

Operating Costs include Agent Commission cost of $223/ticket on average. Ticket – Sales Revenue for Cruise Liners. Net Operating Margin – 17%.Margin reduces as luxury increases.

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DESTINATIONS

Top 3 sought out for Destinations in 2013: Caribbean Mediterranean Europe

Top 3 Growing Markets in 2013-14: Asia Australia Caribbean

Top 3 Losing Markets in 2013-14: South America Mediterranean Alaska

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Caribbean36%

Meditarranean22%

Europe11%

Alaska5%

South America4%

Australia5%

Others16%

Capacity Market Share in 2013

Asia

Australia

Caribbean

South Americ

a

Meditarre

neanAlaska

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

29%

18%

8%

-15%-12%

-6%

Percentage

Growth

THE INFLUENCERS

What do Cruise Liners say? Knowledge of the Cruise Brand Destinations- Ports of Call Price

What do Travel Agents say? Value Proposition Price Destinations- Ports of Call Lifestyle and Amenities

Source: Travel Agents and Cruise Liners Survey by CLIA – 2013.

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MARKET POTENTIAL 38% of Cruise Passengers earn an annual income of more than $1,000,000 in USA Total families in the US- 122.5 Million Families above annual income of $1,000K- 26.6 Million(21.8% of Total HH) Average members in an Household – 2.05 Average Number of Individuals earning annual income of above $1,000K- 54.3

Million.

Market Penetration is very low at 8% - Supply is less.

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Present Market Market Potential0.00

10.00

20.00

30.00

40.00

50.00

60.00

4.29624

54.3

Millions

$39-50k9%$50-60k

10%

$60-75k16%

$75-80k19%

$100-200k39%

$200-300k7%

$300k+1%

Annual Income of Cruise Passengers in US

RECENT TRENDS

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• Remodeling of the Cruise • Refurbishment

Refreshments and Revitalization

Innovations

Explorations

Technology

Entertainment • Live Performances by famous personalities • Clubs

• Smart Phone Apps for ticketing • Fast- Track Check In scanning systems

• New Ports , Destinations• More traffic towards Asia .

• New Products – Sea slides • Customization of the Layout by Customers

MAJOR PLAYERS

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Contemporary Cruises Premium Cruises

River CruisesLuxury Cruises

DRIVERS & CHALLENGES

Fares are cheaper and affordable compared to Air tickets.

Specialty Cruises are on the rise at affordable costs .

Addition of new ports , ports of call, itineraries. This would attract more passengers

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Market Penetration is low . Most of the passengers are not first timers.

Eliminating the fear of lack of safety among the cruisers.

Compliance to heavy rules and regulations of the US Fed.

GROWTH DRIVERS

CHALLENGES

Growing sentiment among Non Cruise vacationers that Cruise is a better option for vacation.

Margins are low for the companies as the provision of luxury increases.

PESTE ANALYSIS

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Cruise lines are to comply with the rules and regulations according to Cruise Vessel Security and Safety Act.

Cruise Market in US-2013

Political/LegalP

Annual spending on leisure travel has increased from $597 Billion in 2012 to $621 Billion in 2013.

Per capita Disposable Income has increased from 39,757 USD in 2013(last quarter) to 40,216 USD in 2014 (first quarter).

EconomicESocial S

Fast Track Checking in System and Mobile Apps in ticketing are on the rise in the Cruise Industry.

Technological T

Only 6% of the leisure spending is from the Cruise industry in US.

In a survey, it has been found that non-cruise vacationer’s near future choice is Cruise vacations.

PORTER’S FIVE FORCES

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Bargaining Power of Suppliers

Bargaining Power of Consumers

Threat of Substitutes

Threats of New Entrants

Competitors Rivalry

Building a Cruise takes 2 to 3 years. Suppliers have huge demand for their materials as the

supply of cruise ships are on the rise.

Consumers have many alternatives to a Cruise travel. Consumers want to better facilities at cheaper prices .

Stay at Holiday resorts , Air travels are the best available alternatives for Cruise Industry.

Even though the price is made affordable , expenses on travel is more for the passengers that makes the whole travel expensive .

80% of the world’s cruise passenger capacity is managed by 3 big corporations

A new company would need heavy capital , differentiated value offering and heavy investment in building brand value to compete well in the market .

Players consistently compete over differentiating their product offerings to the passengers.

Brand value plays a major role in the Cruise market .

High

High

Moderate- High

Low- Moderate

Moderate