Carnival Corporation & PLC has been taking people around the world for over 40 years ago. Founded in 1972, Carnival Cruise Line began as a single trip from Miami to San Juan on a second hand ship. After years of growth, Carnival has 10 different cruise line brands and over 100 ships. It has over 100,000 employees and serves about 10 million customers a year.
Carnival states, “Our mission is to take the world on vacation and deliver exceptional experiences through many of the world’s best-known cruise brands that cater to a variety of different geographic regions and lifestyles, all at an outstanding value unrivaled on land or at sea.”
Their business model consists of taking passengers, who exist at many different price points in many different geographies, on enjoyable vacations. Once a passenger is on board, Carnival has the opportunity to “up sell” customers with alcohol, specialty restaurants, casinos, and shore excursions. Typically, 80% of the total revenue comes from selling tickets and the remaining 20% comes from these additional purchases.
Carnival Corporation has been very successful at segmenting the market with their cruise brands. While their largest brand, Carnival Cruise Line, is known as “The Fun Ships” and caters to families and cost conscious customers, they have many other options available for passengers. Seabourn provides an ultraluxury vacation on a small and intimate ship. Costa, based out of Italy, is Europe’s largest cruise line. There is also a dedicated cruise lines for both the UK and Australia
Carnival has done an excellent job of cruising to a diverse set of ports to satisfy customer demands. For example, Princess Cruises sails to Asia, Africa, North & South America, Australia, the Mediterranean, and the Caribbean. Not only does Carnival Corporation capture a large and diverse set of market needs, this operational strategy is beneficial because of the seasonality of certain destinations. The Mediterranean/Europe is more desirable in the summer months and the Caribbean is more desirable in the winter months. This model allows Carnival Corporation to provide vacations where there is the most demand year round. By utilizing a model that allows flexibility in the vacations they provide (what part of the world they sail in and the exact ports of call), they can maximize the price they charge for a ticket.
Similarly, Carnival has a dynamic pricing policy that encourages customers to use their ships year round. Ticket prices are highest around holiday times and much lower during non-peak demand. Ticket prices might be hundreds of dollars more for traveling during Christmas week than during the second week in January. This strategy ensures that the maximum number of passengers are on each ship for each voyage.
Carnival does an excellent job of minimizing costs. While their headquarters are in Miami, the company is incorporated in Panama, and each of their cruise ships are registered in countries outside of the US. These two decisions have a number of tax and wage benefits. Because the ships aren’t registered in the US, they do not need to comply with minimum wage laws and are able to hire unskilled labor for certain jobs on board the ship. This helps the company maintain profitability and allows them to provide great value to their customers.
By bundling a customer’s accommodation and food together, Carnival is able to provide customers with great value and a fantastic experience. By booking a cruise, customers have the knowledge that they are booking a vacation that is semi all inclusive. There is always a wide variety of food options for different tastes and you are able to expect a certain level of quality. The cruise lines have extensive data on how much food to order for their preset menus. This allows for highly efficient ordering. Additionally, Carnival can capture additional revenue from alcohol sales.
Operationally, Carnival has to meet the needs of a small, floating city. Feeding thousands of passengers a day, ensuring their safety, and providing entertainment is no easy task. Perhaps no job is more impressive than turning the ship over between cruises. When a cruise gets to the port of debarkation, all the customers must get off the ship. Several hours later, a new set of customers gets on the ship and the week’s activities repeat itself. All new food must be brought on board and the ship must be fueled and cleaned. By having turning over the ship in the same day, they are able to maximize the number of trips that each boat takes in a given year.
No other cruise company has the scale that Carnival Corporation does. With a 47% market share, they are by far the largest player in the cruise industry. Carnival utilizes a number of tactics to profitably take passengers on cruises. Segmenting the industry, up selling customers, utilizing dynamic pricing, and effectively executing on key operations are a few ways that they ensure their business model works. They would not be able to be dominant if their operational and business models didn’t align well.