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Holland America Line“Take a journey to reward

your life”HOME

Agenda

• Situation Analysis

• Issues &

Objectives

• Recommendations

• Financial

Projections

• ConclusionHOME

Company Profile

Situation Analysis

Issues & Objectives

Recomm.Financial

ProjectionsConclusion

Company Profile

• Seattle-based cruise line

• Subsidiary of Carnival Corporation

• Leader in cruising market

• Premium type of cruise brand

• 90% of passengers are American

• Baby boomers are the main

passengers

• Receives several awards &

accoladesHOME

Company ProfileSituation Analysis

Issues & Objectives

Recomm.Financial


Financial crisis has led to a steep drop in consumption which affects the cruise industry.

Consumer

Behavior

Economic Recovery

MacroAssump.

Macroeconomic Assumption

Lack of sufficient fund

from government

Financial system forced to shed asset

and limit lending

Undermine spending and investment

21 3

Fall in stock and housing

prices

Depress wealth and

consumption

Result in crippling banks

54 6

Lower of interest rate by Federal

Reserve

Result in impulsive

lending from banks

Severe Recession

87 9

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Issues & Objectives

Recomm.Financial


Financial crisis has led to a steep drop in consumption which affects the cruise industry.

Consumer

Behavior

Economic Recovery

MacroAssump.

Macroeconomic Assumption

$US GDP in trillion

14.51

Recession

(2 yrs.)

Trough (1.75 yrs.)

Recovery

(1.5 yrs.)

2008 2009 2010F 2011F 2012F 2013F

Year

14.28

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The Government and the Federal Reserve play an important role in

rescuing the U.S. economy.

Consumer

Behavior

Economic

Recovery

Macro.Assump.

Recession Trough (U-Shape Recovery)


Issues & Objectives

Recomm.Financial


• Interest rate cut

• Tax cut

• Expansion of unconventional

lending

• Injection of equity into banks

• Guarantee of bank debts

• Expand deposit insurance

Money market starts

to function again

Restore consumer confidence in financial systems

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There will be some permanent changes of consumer behaviors after the financial

crisis.

Consumer

Behavior

EconomicRecovery

Macro.Assump.

The root cause of the financial crisis => HUMAN


Issues & Objectives

Recomm.Financial

Projections

Unsustainable lifestyle• Overspending• Little savings• High use of future cash• Overuse of credit cards

CHANGES

• More sustainable lifestyle• More conservative• Little use of future cash flow• More savings• Less spending on luxury items

xxxxxxxxxxxx

Changes in Consumer Behavior

Conclusion

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Issues & Objectives

Recomm.Financial


Now(2009)

Future(2015)

Issues Identification

• 90% of passengers

are

North American

• Declining revenue

from

“Last minute

booking”

• Cutting prices to

retain

same sales growth

from

previous year

• Intense marketing efforts

• Expansion of

customer base

• Passengers are

various

countries

• More sources of

revenue

• Healthy revenues and

profit growth

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• xxx

How can HAL maximize its

customer satisfaction?

How can HAL expand its

customer base?

How can HAL increase revenues

without compromising its

brand image?

Issues

To create new values for HAL services

To implementCustomer Experience

Management

To expand to European countries

Objectives

Issues Identifications


Issues & Objectives

Recomm.Financial


HOME

• xxx

Rewarding Strategy

Recommendations

Satisfying Strategy

Expansion Strategy

PICTURE

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Issues & Objectives

Recomm.Financial


HAL can increase its revenues by establishing a value of the experience on

cruises to customers.

“Rewarding” Concept

“Take a journey to reward your life”

Old ValuesNew

Values

• Sustainability life

• Necessity item

• Happiness in life

• Overspending lifestyle

• Luxury item

• Fun and excitement

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Issues & Objectives

Recomm.Financial


HAL can increase its revenues by emphasizing on marketing promotional

tools“Special” Concept

GOAL: To raise prices back to pre-recession levels

Ticket

50% of the

ticket price

“Take someone

special with you for a

HALF PRICE ticket”

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Rewarding Strategy

Recommendations

Expansion Strategy

PICTURE

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Satisfying Strategy

HAL can maximize customer satisfaction by implementing

the Customer Experience Management (CEM).


Issues & Objectives

Recomm.Financial


“Satisfying” Concept

GOAL: To retain and maximize customer satisfaction on board

New Exotic Themes1 New

Activities & Services

2 Track Record of Customer

Preferences

3

• xxx

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HAL can maximize customer satisfaction by building a social networking via new innovative

media.


Issues & Objectives

Recomm.Financial


“Networking” Concept

GOAL: To enable passengers to be socially connected to others

• xxx

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Organize discussions or topics that target customers share same interests

E.g. global warming & environmental issues

Rewarding Strategy

Recommendations

Satisfying Strategy

Expansion Strategy

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We think that Europe is still the best market for HAL to expand its customer

base.• xxx


Issues & Objectives

Recomm.Financial


“Expanding” Concept

Decision Criteria Weight EU Middle EastEast

Asia

Industry Growth 25% 10 4 8

Income distribution 30% 8 10 6

Percentage of baby boomers 15% 8 10 7

Lifestyles 30% 10 8 6

TOTALS 100% 9.1 7.9 6.6

Distribution Channels

Strategic Alliance with major travel

agentsHOME

HAL should create a buzz when first entering into the European markets .


Issues & Objectives

Recomm.Financial


“Buzzing” Concept

GOAL: To create brand awareness among customers in EU

First phase

“A Charity Cruise with Elton John”

Second phaseTV

Advertisements

E.g. BBC, & Bloomberg

Third phaseTournament

SponsorE.g. Soccer &

Golf

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HAL can maximize customer satisfaction by implementing

the Customer Experience Management (CEM).


Issues & Objectives

Recomm.Financial


“Expanding” Concept

Customer Experienc

e

Contact Point

Online Website

Our solution!

GOAL: To enable people from EU to easily gather information from the HAL website

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Implementation


Issues & Objectives

Recomm.Financial


Strategies Q2/09

Q3/09

Q4/09

2010F

2011F

2012F

2013F

1st Strategy

Rewarding

Special

2nd Strategy

CEM

Social network

3rd Strategy

Strategic alliance

Brand awareness

Multilingual website

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Issues & Objectives

Recomm.Financial


Financial Justification

7.00%

Share of British Cruise Market

After

HAL

Others

Before

• xxx

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• NPV = $98.88 Millions• Initial investment = $900 Millions

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Issues & Objectives

Recomm.Financial


• xxxA Worthwhile Investment for Expansion

Strategy

• xxx


Issues & Objectives

Recomm.Financial



2006 2007 2008 2009F 2010F 2011F 2012F 2013F0

100

200

300

400

500

600

Projected Revenue (In Mil-lions)

CAGR =15.79

%

$U

S in

m

illio

n

Year

2006 2007 2008 2009F 2010F 2011F 2012F 2013F0

10

20

30

40

50

60

70

Operating Income (In Mil-lions)

$U

S in

m

illio

n

Year

CAGR =21.30

%

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Conclusion


Issues & Objectives

Recomm.Financial


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How can HAL increase revenues without

compromising its brand image?

How can HAL maximize its

customer satisfaction?

How can HAL expand its

customer base?

Rewarding Strategy

Satisfying Strategy

Expansion Strategy

Q & A

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Slide Index

Company Profile

Situation AnalysisSituation Analysis (1.1)Situation Analysis (1.2)Situation Analysis (2)Situation Analysis (3)

Issues & ObjectivesIssues & Objectives (Now & Future)Issues & Objectives

StrategiesStrategy (1.1)Strategy (1.2)Strategy (2.1)Strategy (2.2)Strategy (3.1)Strategy (3.2)Strategy (3.3)

Implementation PlanImplementation plans

Financial ProjectionFinancial Projections (market share)Financial Projections (Rev. & profits)NPVConclusions

GeneralSWOT Analysis of HAL13 Types of Baby boomer habitsCompetitive Analysis

Strategy 3Why not Far East Asian countries?Why not Middle East Asian countries?Why go to U.K.? (1)Why go to U.K.? (2)Why focus on Soccer and Golf?Why focus on BCC & Bloomberg?How can we compete with competitors?

Financial JustificationsSensitivity AnalysisCalculation Inputs

Strength: - Customer Loyalty- Quality Service- Large market share in North America- Large choices of destination and on-board servicesWeaknesses:- No customer base in Europe and other non-North AmericaOpportunities:- Growth of aging population in North America and Europe- Small players are cheaper to buy at recessionThreats:- Change in consumer behavior towards more frugal lifestyle

Holland America Line

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13 Tips for Baby boomers in U.S. & EU

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13 truths about baby boomers

1. Boomers consider travel a necessity, not a luxury.2. Boomers have traveled more than their predecessors. 3. Boomers see themselves as forever young.4. Boomers want to have fun.5. Boomers demand immediate gratification.6. Boomers are not passive. 7. Boomers think they are special.8. Boomers like creature comforts.9. Boomers are time deprived. 10.Boomers will pay for luxury, expertise and convenience. 11. Boomers are skeptical of institutions and individuals. 12.Boomers like to associate with people like themselves.13.Boomers are not homogenous.

Why not East Asian countries?

• Lifestyle difference-Cruise is still more popular in Europe than in Asia

• Spending more on children and save more of their earning

• Purchasing power is lower in Asia

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Why not Middle-East Asian countries?

• Baby-boomers aging population is low

• Not the right target segment for HAL

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• Growth of aging population• High purchasing power – top ten percent population hold majority

of assets in the country• Similar leisure activities to those in the US

Why expand to U.K.?

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Table 4: Percentage of wealth held by the Top 10% of the adult population in various Western countries

countrywealth owned

by top 10%

Switzerland 71.3%

United States 69.8%

Denmark 65.0%

France 61.0%

Sweden 58.6%

UK 56.0%

Canada 53.0%

Norway 50.5%

Germany 44.4%

Finland 42.3%

Why expand to U.K.?

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How can HAL compete with competitors?

Major Competitor: Royal Caribbean Cruise International

• Royal Caribbean Cruise International has a number of weaknesses on its services on board as in the next two slides

Weakness of RCI• Caribbean have found limited selections in places

to grab a bite to eat, with little available poolside and only a handful of eating areas to choose from. Also, while ice skating is a big hit on this cruise ship, the hours available for skating tend to be very limited and are often around the dinner hours. This makes it difficult to find a good time to indulge in this activity. Finally, many Royal Caribbean passengers may find that the service on Royal Caribbean is less attentive, probably due to the fact that the ships are so large.


Weakness of RCI

• The main weakness of a Royal Caribbean cruise is that it is not the kind of cruise line that a person who wants privacy should choose. The cruise ships are large, and as such many people will be on the ship, both in the form of guests, and in the form of staff.

• For example, if you are the kind of person that likes to relax by yourself at the pool, you really should not go on a cruise, because the pool is the main attraction of the ship. As such, many people will be relaxing by the pool for most of the day. The only time you might get the pool almost to yourself is if you decide to not go on a shore excursion to one of the cruise stops.


http://travelblog.savvy-cafe.com/planning-a-cruise-know-the-strengths-and-weaknesses-of-a-royal-caribbean-cruise-2007-09-02/

• Soccer is the most popular sports in Europe

• Golf is a prestigious sport played by many baby-boomers

Why focus on golf and soccer?

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• Target market is upper-middle baby boomers and executives who are interested in financial news and surrounding environment

Why focus on BBC & Bloomberg?

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Sensitivity AnalysisOccupancy

75% 76% 77% 78% 79% 80% 81% 82% 83% 84% 85%

Cycles

35 -80.61 -69.68 -58.76 -47.83 -36.91 -25.98 -15.06 -4.13 6.79 17.72 28.6436 -57.20 -45.96 -34.72 -23.48 -12.25 -1.01 10.23 21.47 32.70 43.94 55.1837 -33.79 -22.24 -10.69 0.86 12.41 23.96 35.51 47.06 58.61 70.16 81.7138 -10.37 1.49 13.35 25.21 37.07 48.93 60.80 72.66 84.52 96.38 108.2439 13.04 25.21 37.38 49.56 61.73 73.91 86.08 98.25 110.43 122.60 134.7840 36.45 48.93 61.42 73.91 86.39 98.88 111.36 123.85 136.34 148.82 161.3141 59.86 72.66 85.46 98.25 111.05 123.85 136.65 149.45 162.24 175.04 187.8442 83.27 96.38 109.49 122.60 135.71 148.82 161.93 175.04 188.15 201.26 214.3743 106.68 120.10 133.53 146.95 160.37 173.79 187.22 200.64 214.06 227.48 240.9144 130.09 143.83 157.56 171.30 185.03 198.77 212.50 226.24 239.97 253.70 267.4445 153.50 167.55 181.60 195.64 209.69 223.74 237.78 251.83 265.88 279.92 293.97

Sensitivity Analysis

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• Purchase = 3 ships -- $300m per ship• Average capacity per ship = 1,500 persons• Average ticket price = $1,300 per person

per week• Operating margin = 43%• Cost of Debt = 7.5%• Cost of Equity = 6.5%• WACC is approximately 7%• A cruise can be used for 30 years

Calculation Inputs

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