Ted Arison Case

In 1972 cruise industry pioneer, Ted Arison and the owner of American International Trade Service (AITS), Meshulam Riklis, formed Carnival Cruise Lines as a subsidiary of AITS. They purchased their first ship for $6.5 million and renamed it to the Mardi Gras. The Mardi Gras’ first trip was along the Florida coast with travel agents. In 1974, Mr. Arison bought out his partner’s share with $1 and assumed the $5 million debt of the company. In order to compensate for the debt and reduce costs, Mr. Arison decided to reduce the speed of the ship and the amount of stops it made through its voyage. As a result, Mr. Arison added additional on-board activities for passengers such as a disco, casino, movie theater, etc. Quickly afterwards the ship was known as the “Fun Ship”. Little did he know that this cost reduction tactic would transform the company’s marketing strategy for Carnival Cruise Lines and the cruise industry as a whole.
The company fourth ship called the Tropicale was purchased in 1978 and completed in 1982. In 1979, Ted Arison’s 30-year-old son, Micky Arison, was named president and chief executive officer of the company. By 1982, all four boats were carrying about 200,000 passengers and earning $40 million in revenues of $200 million and growing 30% every year. This growth was said to be three times faster than any average cruise line company