Operations Management, 4e Reid, Sanders

The following virtual service case has been developed as an interactive supplement to the Reid & Sanders Operations Management textbook. The case requires you, the student, to assume the role of an intern working for Cruise International, Inc. (CII). Cruise International operates cruise ships globally. During your internship you will be working at corporate headquarters on both strategic and tactical issues as well as on board one or more of our cruise ships. While Cruise International is a fictional company, much of the data used with regard to the cruise industry is real. There has been some manipulation of the data to include Cruise International as part of the industry. Much of the data has been adapted from an annual report done by the Cruise Lines International Association, Inc. The style and format of this virtual case draws heavily from the previous Virtual Company Consulting Case developed by Ted Helmer of Theodore Helmer and Associates, Inc. and Jon Ozmun of Northern Arizona University. An Overview of the Cruise Industry In 2006, the size of the worldwide cruise market was approximately 12 million passengers. Of those 12 million passengers, 10 million passengers embarked on cruise voyages from ports in North America. The U.S. cruise passengers, representing approximately 78% of the worldwide cruise passengers, have about 9 million passenger embarkations. The total economic impact of the cruise lines, passengers, and their U.S. suppliers reached $35.7 billion according to a study done by the Business Research and Economic Advisors (BREA). In the BREA report, it shows the following U.S. industries that most benefited from the cruise industry.

 Professional & Technical Services $4.0 billion

 Nondurable Goods Manufacturing $4.8 billion

 Travel Services $3.9 billion

 Financial Services $2.3 billion

 Airline Transportation $2.1 billion

 Wholesale Trade $1.8 billion

Direct spending of the cruise lines and their passengers on goods and services produced in the United States in 2006 was $17.6 billion. This spending resulted in 348,000 U.S. jobs paying $14.7 billion in wages. In 2006, the top ten U.S. cruise port cities, ranked by number of embarkations, were Miami, Port Canaveral, Port Everglades, Galveston, Los Angeles, New York, Tampa, Long Beach, Seattle, and Honolulu. Florida remains the center of the U.S. cruising industry, accounting for almost 56% of the embarkations. California’s cruise ports represented nearly 14% of all U.S. embarkations. Texas is the highest growth market. New York increased embarkations to 536,000 with the opening of the Brooklyn Cruise Terminal. U.S. ports of call had approximately five million cruise ship visits in 2006. Most of the visits were to Alaska, Hawaii, and Key West. Following are some fast facts about the cruise industry.

 On average, a 2000-passenger cruise ship with 950 crew members generates approximately $322,700 in offshore spending in a U.S. homeport city.

 Approximately 40% of embarking cruise ship passengers stay one or more nights in a port city either before or after the cruise. Each of these visitors spends an average of $289 per visit on retail, dining, local transit, and lodging.

 According to the Cruise Lines International Association (CLIA), the industry has had an average annual growth rate of 8.5% per annum.

 The cruise industry is relatively young. Since 1980, over 100 million passengers have taken a deep- water cruise. Of this number, almost 60% have done their cruise within the past ten years.

 The market potential is large. More than 50 million North Americans expressed an intent to cruise within three years. Of those, 31 million expressed a strong intent to cruise within three years. At this point in time, only 17% of the U.S. population has ever cruised.

 The industry continues to add new destination ports, new ship design concepts, new onboard and/or onshore activities, new cruise themes, and new cruise lengths to reflect the changing vacation patterns of today’s market.

 The cruise experience consistently exceeds passengers’ expectations. Cruising consistently receives top marks.

 Cruising allows passengers to sample destination areas to which passengers may return for a future vacation.

 The North American cruise market is strong across all 50 states and Canada.