Creating a consumer-driven business model for the cruise line industry: Case Royal Caribbean Cruise Lines Ltd.

Abstract

AALTO UNIVERSITY SCHOOL OF ECONOMICS ABSTRACT Department of Information and Service Economy 10.08.2011 Master's thesis Anni Ahola

Purpose of the study The purpose of this study is to figure out a new kind of a cruise line business model that can be used by cruise line organizations in their business planning processes. The objective is to find out general frameworks and theories from the literature that could be applied to the empirical part of the study. Mainly, the goal is to examine tourism growth, current cruise line business, consumer behavior and service industry in order to form this business model especially for Royal Caribbean Cruise Lines Ltd. (RCCL). One of the most significant things is to examine people?s requirements and needs towards tourism, cruise lines and service industry, since they reflect to the business planning and strategy making that eventually lead to competitive advantages in the markets. China and Russia are taken as case country examples, so the model developed through the literature part of the study is used, generating specific results and proposed business models for these countries.

Methodology The study is pursued as a multiple case study, in which two countries are taken into consideration. China and Russia were chosen subjectively seeing that the results from them would induce value to the study as well as to RCCL. The study is descriptive in nature as its purpose is to describe the nature, commonness and the historical development of tourism and the cruise line industry. Three sources of evidence are used. Archival records are analyzed by quantitative as well as qualitative methods, whereas semi-structured interviews and focus groups by only qualitative ones. These three sources reduce errors and biases, since they are used interchangeably. As a whole, the research is seen qualitative as its main purpose is to propose new practical knowledge and a new kind of a business model related to the cruise line business.

Findings The key finding of this research is that cruise line business models should be developed according to the interests of their target markets. The results from China and Russia showed that those consumers have very diverse requirements and wants related to services, and therefore consumer behavior mainly associates with the business planning and strategies that organizations pursue. In addition, the cruise line industry has been seen to become more oligopolistic, so new industry entrants may compete with niche market opportunities. Anyway, in case of RCCL the competitive advantage can be achieved by pursuing both cost advantages and differentiation simultaneously. The value offered should meet consumers? perceptions and expectations, so market researches and surveys should be done in the first place before starting to develop new offerings. In case of China, the cruise lines have great potential due to the country?s emergent nature. The concept should enhance family-orientation and it should include casinos, gardens and Asian food onboard. Russians appreciate spas and sanatoria and excellent service. The first move would be to concentrate on the big cities such as Saint Petersburg and Moscow. Common to both countries is that package trip opportunities should be included and the marketing channels should be more efficient in order to reach the untapped market potential.

Keywords: cruise line business model/concept, RCCL, consumer behavior, service industry, tourism growth, customer value and expectations