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Richard Glasier, CFO
Royal Caribbean International
Q: Richard, how large is the cruise industry and how much is it growing?
A: The estimated current value of this market is $10 to $12 billion. The cruise industry has experienced a nine percent annualized growth in capacity over the last twenty years. The relatively recent addition of new ports of call in Europe and Latin America has significantly contributed to this growth.
Q: Would you describe the majority of the cruise industry’s customers as upper income?
A: Not necessarily. The cruise industry has undergone a significant metamorphosis, evolving from a luxury market into a mass market.
Q: What are the demographics of your customers in terms of age and location?
A: Our average passenger is about 45 years old. Royal Caribbean targets the 25- to 55-year-old market segment, but we have a considerable number of customers over 55 on our cruises as well as many families who bring their children. Our standard customer’s annual income falls between $25,000 and $75,000, squarely within middle class demographics. We target all states in the U.S. Florida is the most represented because the majority of our cruises originate from this state.
Q: What percentage of Royal Caribbean’s customers is U.S. versus non-U.S.?
A: Until a few years ago, about 95% of our passengers were U.S. Today 20% are non-U.S. This is not by chance. We have directed a marketing strategy at Europe and South America.
Q: How is Royal Caribbean positioned within the industry and what is your market share?
A: RCL is the second-largest operator in this market. One out of three customers choose our cruises. Our market share is growing along with our investment in new ships. We offer the largest and broadest selection of cruises in terms of length and destinations.
Q: What advantages does Royal Caribbean have over the competition?
A: Royal Caribbean has an ongoing commitment to invest in the most up-to-date facilities available in the market. As an example, our newest ships are equipped with skating rinks and rock-climbing facilities. We also are very focused on providing customers with the best service, food and entertainment possible in the industry. We have also developed the most sophisticated Yield Management System in the industry for revenue maximization.
Q: How would you characterize the margins in the cruise industry?
A: We continue to see very high margins. In the past few years, our returns have benefited from the economies of scale that have resulted from our creating additional capacity.
Q: How important are traditional travel agents and your Website to RCL’s business?
A: Travel agents are our primary source for selling cruises. RCL’s sale force supports and helps ten thousand agents to become more efficient in their booking process, especially in terms of accessing our information on-line. In the past five years, we have significantly invested in new technology to design an effective way of showing our products on our Website. Today, any travel agent and customer can easily download exhaustive information on any of RCL’s cruises and view detailed pictures of our ships, their decks and cabin interiors.
Q: Will we begin to see consolidation in the cruise industry?
A: In my opinion the consolidation process has already occurred. Today there are only three main players in the cruise market: Royal Caribbean, Carnival Cruises and Princess.
Q: Richard, how many employees does RCL have? Is there a high turnover, or is this a stable population?
A: On land, we have 3,000 employees. Most are in Miami, and we have a small number in our Wichita, Kansas office. At sea, we have a staff of 22,000, recruited from all over the world. Top-line wages and competitive benefits have enabled us to enjoy a relatively low turnover of our workforce.
Q: What is your largest challenge, looking ahead?
A: Definitively to generate a growing demand for our product. Our customers today have an incredibly wide choice of how to spend their vacations, and we have to ensure that our cruises are top-of-mind.
