Celebrity Cruises Case Study

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StudyBackground
Celebrity Cruises was founded in 1989 by the Chandris Group, a Greek company originally in the shipping business. In 1997, the company merged with Royal Caribbean International to become part of Royal Caribbean Cruises Ltd. The parent company was determined to keep the two brand’s marketing and operations separate in order for each to target their own market segments. Royal Caribbean Cruises Ltd. operates not only Royal Caribbean Cruises but also Celebrity Cruises, Azamara Club Cruises, Pullmantur Cruises, CDF Croisieres de France, and TUI Cruises (Royal Caribbean Cruises Ltd., 2012).

Celebrity Cruises is situated in the premium market segment between luxury cruise lines such as Crystal Cruises and mass-market lines such as industry leader Carnival Cruise lines. Celebrity Cruises offers an upscale experience at an intelligent price with an added proposition of rejuvenation, enrichment, and connection (Frei, 2005). However, in the highly competitive cruise line industry, Celebrity’s market strategy is indistinct at best, as it struggles to find a ways to create customer loyalty while increasing revenues.

Problem Statement
Celebrity Cruises has an ambiguous marketing strategy without any focus attracting customers but fumbling with customer loyalty.

Analysis
Celebrity Cruises must develop and transform aspects of their operation if it expects to increase market share. Celebrity Cruises foremost must begin by identifying a clear marketing position in order to source potential customers. Celebrity Cruises has done a good job of appealing to prospective cruisers however, their marketing efforts have to be fine-tuned. Celebrity Cruises must be able to direct their marketing efforts on the right market segment, which in their case should be the baby-boomers and multi-generational market.

Baby-boomers comprise a large portion of the U.S. population. Over one-fourth of the total U.S. population in 2006 was between the ages of 42 and 60 (U.S. Census Bureau, 2006). There are approximately 76 million U.S. consumers in this market segment alone possessing $1.2 trillion in annual spending power. Baby-boomers represent 53 percent of all cruisers worldwide and the market segment is expected to drive cruise demand growth. As shown in figure 1, baby-boomers are a large segment of the population that Celebrity Cruises can benefit from. Baby-boomers as a group are big spenders on travel. Vibrant Nation found that 42 percent of baby-boomer women would spend more than $2500 per person on every vacation (Creating Results, LLC., 2011). Figure 1. Source: U.S. Census Bureau

This market segment settles on family collectivity. As baby-boomers retire, they have the time and money to indulge their desire to travel and they are choosing to take those trips with their children and grandchildren. According to MMGY Global, 37 percent of baby-boomers with a household income greater than $50,000 who took a vacation last year did so with grandchildren (Tergesen, July). Celebrity Cruises can take advantage of this segment of the population by offering all-inclusive prices, and children’s programs, allowing families the flexibility to do things together or separately.

Celebrity Cruises must also understand that extravagance does not necessarily support their service package. Although standardization achieved efficiencies in many areas across the fleet, 150 New Tastes with expansive menus, numerous daily activities, etc., is not what demanding cruisers are necessarily looking for. Having these extras upsets Celebrity Cruises cost management strategy, since staffing levels will have to be augmented and labor is already the company’s biggest expense.

Celebrity Cruises must take control of its cost structure. Labor is already the company’s biggest expense, with the food and beverage department accounting for almost half of a Millennium-class ship’s employees (Frei, 2005). Shipboard employees do not receive annualized salaries...
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