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TRANSCRIPT
Pictures & Logo
Holland America Line“Take a journey to reward
your life”HOME
Agenda
• Situation Analysis
• Issues &
Objectives
• Recommendations
• Financial
Projections
• ConclusionHOME
Company Profile
Situation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Company Profile
• Seattle-based cruise line
• Subsidiary of Carnival Corporation
• Leader in cruising market
• Premium type of cruise brand
• 90% of passengers are American
• Baby boomers are the main
passengers
• Receives several awards &
accoladesHOME
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Financial crisis has led to a steep drop in consumption which affects the cruise industry.
Consumer
Behavior
Economic Recovery
MacroAssump.
Macroeconomic Assumption
Lack of sufficient fund
from government
Financial system forced to shed asset
and limit lending
Undermine spending and investment
21 3
Fall in stock and housing
prices
Depress wealth and
consumption
Result in crippling banks
54 6
Lower of interest rate by Federal
Reserve
Result in impulsive
lending from banks
Severe Recession
87 9
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Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Financial crisis has led to a steep drop in consumption which affects the cruise industry.
Consumer
Behavior
Economic Recovery
MacroAssump.
Macroeconomic Assumption
$US GDP in trillion
14.51
Recession
(2 yrs.)
Trough (1.75 yrs.)
Recovery
(1.5 yrs.)
2008 2009 2010F 2011F 2012F 2013F
Year
14.28
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The Government and the Federal Reserve play an important role in
rescuing the U.S. economy.
Consumer
Behavior
Economic
Recovery
Macro.Assump.
Recession Trough (U-Shape Recovery)
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
• Interest rate cut
• Tax cut
• Expansion of unconventional
lending
• Injection of equity into banks
• Guarantee of bank debts
• Expand deposit insurance
Money market starts
to function again
Restore consumer confidence in financial systems
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There will be some permanent changes of consumer behaviors after the financial
crisis.
Consumer
Behavior
EconomicRecovery
Macro.Assump.
The root cause of the financial crisis => HUMAN
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
Projections
Unsustainable lifestyle• Overspending• Little savings• High use of future cash• Overuse of credit cards
CHANGES
• More sustainable lifestyle• More conservative• Little use of future cash flow• More savings• Less spending on luxury items
xxxxxxxxxxxx
Changes in Consumer Behavior
Conclusion
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Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Now(2009)
Future(2015)
Issues Identification
• 90% of passengers
are
North American
• Declining revenue
from
“Last minute
booking”
• Cutting prices to
retain
same sales growth
from
previous year
• Intense marketing efforts
• Expansion of
customer base
• Passengers are
various
countries
• More sources of
revenue
• Healthy revenues and
profit growth
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• xxx
How can HAL maximize its
customer satisfaction?
How can HAL expand its
customer base?
How can HAL increase revenues
without compromising its
brand image?
Issues
To create new values for HAL services
To implementCustomer Experience
Management
To expand to European countries
Objectives
Issues Identifications
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
HOME
• xxx
Rewarding Strategy
Recommendations
Satisfying Strategy
Expansion Strategy
PICTURE
HOME
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
HAL can increase its revenues by establishing a value of the experience on
cruises to customers.
“Rewarding” Concept
“Take a journey to reward your life”
Old ValuesNew
Values
• Sustainability life
• Necessity item
• Happiness in life
• Overspending lifestyle
• Luxury item
• Fun and excitement
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Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
HAL can increase its revenues by emphasizing on marketing promotional
tools“Special” Concept
GOAL: To raise prices back to pre-recession levels
Ticket
50% of the
ticket price
“Take someone
special with you for a
HALF PRICE ticket”
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Rewarding Strategy
Recommendations
Expansion Strategy
PICTURE
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Satisfying Strategy
HAL can maximize customer satisfaction by implementing
the Customer Experience Management (CEM).
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
“Satisfying” Concept
GOAL: To retain and maximize customer satisfaction on board
New Exotic Themes1 New
Activities & Services
2 Track Record of Customer
Preferences
3
• xxx
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HAL can maximize customer satisfaction by building a social networking via new innovative
media.
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
“Networking” Concept
GOAL: To enable passengers to be socially connected to others
• xxx
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Organize discussions or topics that target customers share same interests
E.g. global warming & environmental issues
Rewarding Strategy
Recommendations
Satisfying Strategy
Expansion Strategy
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We think that Europe is still the best market for HAL to expand its customer
base.• xxx
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
“Expanding” Concept
Decision Criteria Weight EU Middle EastEast
Asia
Industry Growth 25% 10 4 8
Income distribution 30% 8 10 6
Percentage of baby boomers 15% 8 10 7
Lifestyles 30% 10 8 6
TOTALS 100% 9.1 7.9 6.6
Distribution Channels
Strategic Alliance with major travel
agentsHOME
HAL should create a buzz when first entering into the European markets .
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
“Buzzing” Concept
GOAL: To create brand awareness among customers in EU
First phase
“A Charity Cruise with Elton John”
Second phaseTV
Advertisements
E.g. BBC, & Bloomberg
Third phaseTournament
SponsorE.g. Soccer &
Golf
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HAL can maximize customer satisfaction by implementing
the Customer Experience Management (CEM).
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
“Expanding” Concept
Customer Experienc
e
Contact Point
Online Website
Our solution!
GOAL: To enable people from EU to easily gather information from the HAL website
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Implementation
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Strategies Q2/09
Q3/09
Q4/09
2010F
2011F
2012F
2013F
1st Strategy
Rewarding
Special
2nd Strategy
CEM
Social network
3rd Strategy
Strategic alliance
Brand awareness
Multilingual website
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Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Financial Justification
7.00%
Share of British Cruise Market
After
HAL
Others
Before
• xxx
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• NPV = $98.88 Millions• Initial investment = $900 Millions
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Financial Justification
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
• xxxA Worthwhile Investment for Expansion
Strategy
• xxx
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
Financial Justification
2006 2007 2008 2009F 2010F 2011F 2012F 2013F0
100
200
300
400
500
600
Projected Revenue (In Mil-lions)
CAGR =15.79
%
$U
S in
m
illio
n
Year
2006 2007 2008 2009F 2010F 2011F 2012F 2013F0
10
20
30
40
50
60
70
Operating Income (In Mil-lions)
$U
S in
m
illio
n
Year
CAGR =21.30
%
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Conclusion
Company ProfileSituation Analysis
Issues & Objectives
Recomm.Financial
ProjectionsConclusion
HOME
How can HAL increase revenues without
compromising its brand image?
How can HAL maximize its
customer satisfaction?
How can HAL expand its
customer base?
Rewarding Strategy
Satisfying Strategy
Expansion Strategy
Q & A
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Slide Index
Company Profile
Situation AnalysisSituation Analysis (1.1)Situation Analysis (1.2)Situation Analysis (2)Situation Analysis (3)
Issues & ObjectivesIssues & Objectives (Now & Future)Issues & Objectives
StrategiesStrategy (1.1)Strategy (1.2)Strategy (2.1)Strategy (2.2)Strategy (3.1)Strategy (3.2)Strategy (3.3)
Implementation PlanImplementation plans
Financial ProjectionFinancial Projections (market share)Financial Projections (Rev. & profits)NPVConclusions
GeneralSWOT Analysis of HAL13 Types of Baby boomer habitsCompetitive Analysis
Strategy 3Why not Far East Asian countries?Why not Middle East Asian countries?Why go to U.K.? (1)Why go to U.K.? (2)Why focus on Soccer and Golf?Why focus on BCC & Bloomberg?How can we compete with competitors?
Financial JustificationsSensitivity AnalysisCalculation Inputs
Strength: - Customer Loyalty- Quality Service- Large market share in North America- Large choices of destination and on-board servicesWeaknesses:- No customer base in Europe and other non-North AmericaOpportunities:- Growth of aging population in North America and Europe- Small players are cheaper to buy at recessionThreats:- Change in consumer behavior towards more frugal lifestyle
Holland America Line
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13 Tips for Baby boomers in U.S. & EU
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13 truths about baby boomers
1. Boomers consider travel a necessity, not a luxury.2. Boomers have traveled more than their predecessors. 3. Boomers see themselves as forever young.4. Boomers want to have fun.5. Boomers demand immediate gratification.6. Boomers are not passive. 7. Boomers think they are special.8. Boomers like creature comforts.9. Boomers are time deprived. 10.Boomers will pay for luxury, expertise and convenience. 11. Boomers are skeptical of institutions and individuals. 12.Boomers like to associate with people like themselves.13.Boomers are not homogenous.
Why not East Asian countries?
• Lifestyle difference-Cruise is still more popular in Europe than in Asia
• Spending more on children and save more of their earning
• Purchasing power is lower in Asia
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Why not Middle-East Asian countries?
• Baby-boomers aging population is low
• Not the right target segment for HAL
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• Growth of aging population• High purchasing power – top ten percent population hold majority
of assets in the country• Similar leisure activities to those in the US
Why expand to U.K.?
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Table 4: Percentage of wealth held by the Top 10% of the adult population in various Western countries
countrywealth owned
by top 10%
Switzerland 71.3%
United States 69.8%
Denmark 65.0%
France 61.0%
Sweden 58.6%
UK 56.0%
Canada 53.0%
Norway 50.5%
Germany 44.4%
Finland 42.3%
Why expand to U.K.?
HOME
How can HAL compete with competitors?
Major Competitor: Royal Caribbean Cruise International
• Royal Caribbean Cruise International has a number of weaknesses on its services on board as in the next two slides
Weakness of RCI• Caribbean have found limited selections in places
to grab a bite to eat, with little available poolside and only a handful of eating areas to choose from. Also, while ice skating is a big hit on this cruise ship, the hours available for skating tend to be very limited and are often around the dinner hours. This makes it difficult to find a good time to indulge in this activity. Finally, many Royal Caribbean passengers may find that the service on Royal Caribbean is less attentive, probably due to the fact that the ships are so large.
How can HAL compete with competitors?
Weakness of RCI
• The main weakness of a Royal Caribbean cruise is that it is not the kind of cruise line that a person who wants privacy should choose. The cruise ships are large, and as such many people will be on the ship, both in the form of guests, and in the form of staff.
• For example, if you are the kind of person that likes to relax by yourself at the pool, you really should not go on a cruise, because the pool is the main attraction of the ship. As such, many people will be relaxing by the pool for most of the day. The only time you might get the pool almost to yourself is if you decide to not go on a shore excursion to one of the cruise stops.
How can HAL compete with competitors?
• Soccer is the most popular sports in Europe
• Golf is a prestigious sport played by many baby-boomers
Why focus on golf and soccer?
HOME
• Target market is upper-middle baby boomers and executives who are interested in financial news and surrounding environment
Why focus on BBC & Bloomberg?
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Sensitivity AnalysisOccupancy
75% 76% 77% 78% 79% 80% 81% 82% 83% 84% 85%
Cycles
35 -80.61 -69.68 -58.76 -47.83 -36.91 -25.98 -15.06 -4.13 6.79 17.72 28.6436 -57.20 -45.96 -34.72 -23.48 -12.25 -1.01 10.23 21.47 32.70 43.94 55.1837 -33.79 -22.24 -10.69 0.86 12.41 23.96 35.51 47.06 58.61 70.16 81.7138 -10.37 1.49 13.35 25.21 37.07 48.93 60.80 72.66 84.52 96.38 108.2439 13.04 25.21 37.38 49.56 61.73 73.91 86.08 98.25 110.43 122.60 134.7840 36.45 48.93 61.42 73.91 86.39 98.88 111.36 123.85 136.34 148.82 161.3141 59.86 72.66 85.46 98.25 111.05 123.85 136.65 149.45 162.24 175.04 187.8442 83.27 96.38 109.49 122.60 135.71 148.82 161.93 175.04 188.15 201.26 214.3743 106.68 120.10 133.53 146.95 160.37 173.79 187.22 200.64 214.06 227.48 240.9144 130.09 143.83 157.56 171.30 185.03 198.77 212.50 226.24 239.97 253.70 267.4445 153.50 167.55 181.60 195.64 209.69 223.74 237.78 251.83 265.88 279.92 293.97
Sensitivity Analysis
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• Purchase = 3 ships -- $300m per ship• Average capacity per ship = 1,500 persons• Average ticket price = $1,300 per person
per week• Operating margin = 43%• Cost of Debt = 7.5%• Cost of Equity = 6.5%• WACC is approximately 7%• A cruise can be used for 30 years
Calculation Inputs
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