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Carnival

analytical Essay
820 words
820 words
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This financial analysis report examines two high profile competitors, Royal Caribbean International and Carnival Cruise Line, within the cruise industry in order to evaluate company performance and financial health. The industry started a major growth phase in the late 1960s and early 1970s achieving more than 2,100 percent growth. The early goal of the cruise industry was to develop a mass market since cruising was until then an activity for the elite. A way to achieve this was through economies of scale as larger ships were able to accommodate more customers as well as to create additional opportunities for onboard sources of revenue. The global growth rate of the cruise industry has been enduring and stable, at around 7% per year in spite of economic cycles of growth and recession. For instance, the financial crisis of 2008-2009 has not impacted the demand for cruises. This underlines that the industry has been so far fundamentally supply based; the ships are built and the customers are found to fill them through various marketing and discounting strategies. Cruise lines companies compete with other vacation alternatives, such as land-based resort hotels and sightseeing destinations for consumers’ leisure time. Demand for such activities is influenced by political and general economic conditions. Companies within the vacation market are dependent on consumer discretionary spending. The year 2012 was overall a very difficult for the cruise industry. Carnival International is still recovering from the effects of sinking of Costa Concordia off Italy in January 2012. On other hand, Royal Caribbean’s biggest challenge in 2012 was due to one-time impairment charges of nearly $385 million related to Spanish line Pullma... ... middle of paper ... ...t example of short-term worries providing an opportunity for long-term investors to make a great investment. Works Cited http://media.royalcaribbean.com/content/en_US/pdf/13034530_RCL_2012StwrdshpTwoPgrs_v4.pdf http://analysisreport.morningstar.com/stock/research?t=RCL&culture=en-US®ion=usa&cur=USD&productcode=MLE http://answers.businesslibrary.uflib.ufl.edu/a.php?qid=76331 http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=RCL:NYQ http://www.miamiherald.com/2013/03/15/3289232/carnival-lowers-financial-outlook.html http://www.ukessays.com/essays/tourism/sustainable-measure-for-royal-caribbean-tourism-essay.php http://beta.fool.com/ruperthargreav/2013/03/05/does-carnivals-current-ratio-present-problem/25676/ http://beta.fool.com/hoangquocanh/2013/03/20/-161/27482/ http://beta.fool.com/kwmatt82/2013/01/23/royal-caribbean-earnings-bigger-better/22325/

In this essay, the author

  • Analyzes royal caribbean international and carnival cruise line in the cruise industry to evaluate company performance and financial health.
  • Explains that the cruise industry started a major growth phase in the late 1960s and early 1970s achieving more than 2,100 percent growth.
  • Analyzes how the year 2012 was a difficult year for the cruise industry. carnival international is recovering from the effects of the sinking of costa concordia off italy in january 2012.
  • Explains that the cruise industry is constantly threatened by events that disrupt their operations. hurricanes in the u.s., the tsunami in japan and the volcanic ash cloud over parts of europe are obstacles.
  • Analyzes how carnival international's events have resulted in reduced bookings, forcing the company to give discounts in a bid to rebuild customer base. this strategy could do more harm than good in the long run.
  • Explains that carnival is capable of navigating its way through stormy waters with an industry-best profit margin ratio of 8.44%, around $3 billion in operating cash flow, used $1.8 billion to fund net capital expenditures, and left with $1.2 billion of free cash.
  • Explains carnival is facing two big headwinds: marketing and promotions have increased in order to boost ticket sales, negatively impacting margins and earnings. the broader market looks to bubbly.
  • Opines that royal caribbean cruise line's massive debt load and single digit profit margin are the major weaknesses of the company.
  • Explains that royal caribbean has consistently improved revenue over the past three years, but earnings declined in 2012. innovation and quality of its vacation products have helped it remain a relevant player.
  • Opines that royal caribbean has the newest and jazziest fleet in the industry which generates marketing buzz that attracts first-time cruisers at premium prices.
  • Analyzes how royal caribbean provides an opportunity for long-term investors to make a great investment despite all the drama.
  • Cites http://markets.ft.com/research/markets/tearsheet/forecasts?s=rcl:nyq.
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