Examining a Sector in Travel Industry Essay

Introduction

The travel industry is one of the most lucrative service sectors in the UK. The industry accommodates various companies that offer different travel services such as vacation reservation via the Internet, tour operations, and travel agency professional services.

Other sectors in the industry are cruise lines, airlines, food service companies, car renting, rail travel companies, meeting and conventions, parks, sporting and entertainment companies, publication organisations, marketing research organisations, and regulatory agencies. Each of these sectors has various organisations, which operate under competition.

For instance, in the marketing sector, there are different organisations that offer marketing research services to various organisations that deal with travel services in the bid to help them analyse their industry trends to derive better strategies to retain and increase their market share.

Competition also occurs between organisations in different sectors. For example, the airlines sector competes with companies that offer alternative means of travel such as the rail travel.

The vast and the sheer number of organisations operating in the entire travel industry in the UK makes it impossible to conduct an overhaul examination of the services offered in the industry. This paper focuses only on the cruise lines sector.

Operational cruise lines in the UK include Cruise and Maritime Voyages, European Water Ways, Fred Olsen Cruise Lines, Cunard Line, P&O Cruises, Saga Cruises, Swan Hellenic, and Thomson Cruises. These cruise lines compete for market share. Carnival Corporation & plc is the major player in the cruise lines service sector.

Apart from other cruise lines operating in other markets including the USA and Australia, the corporation owns UK’s Cunard Lines and P&O Cruises. This paper examines service sector industry in cruise lines with reference to the Carnival Corporation & plc.

Definition, Size, and Competitive Structure of Cruise Line Service Sector

Definition

Cruise line covers all organisations operating cruise ships. Cruise ships or liners include ships that carry passengers for voyages with the main intention of offering pleasure and entertainment. In the cruise lines travel sector, transportation does not comprise the main business of the organisations in the sector. Most companies operate ships, which return their clients back to the ports from which they came.

As Hannafin and Sarna (2010, p.307) inform that there are even ‘cruises to nowhere” or “nowhere voyages” where the ship makes 2-3-day round trips without any ports of call’. Consequently, cruise lines travel sector can be considered a subsector within the hospitality industry whose specialty is on water floating hotels and recreational facilities.

This definition is particularly important upon considering that cruise lines employ hospitality staff people who are under the leadership of a person whose job description is equivalent to that of hotel manager. Nevertheless, they also possess the traits of the transportation-sector service organisations. They also have vessel crew led by a ship captain.

Market Size

Cruise line service sector is an evolving, but rapidly growing market. Cruising experience is gaining immense popularity in the UK. Archer (2013, p.1) supports this assertion by further adding, ‘Round-Britain cruises are gaining popularity with British cruisers as a cost-effective way to holiday at home while getting the feeling of going abroad’.

The growth of the perception that cruising offers an alternative lucrative way of spending a holiday to abroad travel results in immense growth of the size of cruise line sector. In 2009, about 16,000 Britons sought cruising services from various organisations operating in the cruise lines sector. In 2010, this figure rose to more than 20,000 (Archer 2013).

Citing data from Clia UK and Ireland cruise lines trade organisation, Archer (2013) puts the UK cruise lines sector at 23,000 Britons in 2011. This market size rose to even higher levels in 2012 and 2013. In 2014, some 11-cruise lines will be providing voyage experience around the UK.

For instance, according to Archer (2013, p.1), ‘Hebridean Island Cruises will operate cruises around the Scottish isles from Oban between March and mid-November on the luxurious 50-passenger Hebridean Princess, with drinks and gratuities included in its fare’ (p.1). On the global scale, in 2005, the size of cruising market was at 14 million people (Hannafin & Sarna 2010).

North America emerged the most preferred destinations at 70 percent while continental Europe followed at 13 percent (Hannafin & Sarna 2010). In the UK market, the CEO for Carnival Corporation, Micky Arison, approximated the growth of the UK cruising market size by 1 million people every year (TTG Digital 2012). This figure includes both Britons and non-Britons.

Competitive Structure

The competition in the cruise service sector is not only regional, but also global. In the UK, different organisations adopt different strategies for enhancing their competitive advantage in comparison with their rival organisations.

One of the forces shaping competition in cruise travels is the type of on-board facilities incorporated in a cruise ship. Many cruise ships have Casinos. To ensure that the operation of the Casino does not conflict with local laws within ports within which the cruise ships visit, the Casino normally opens while the ship is at sea.

Apart from Casinos, cruise ships compete in other on-board facilities. According to TTG Digital (2012, p.22), they include ‘spa, fitness centre, shops, library ,theatre with Broadway style shows, cinema , swimming pools, hot tub ,Buffet restaurant, lounges, gym , clubs, shuffleboard, basketball courts, pool tables, and ping pong tables’.

Shops are opened while at sea to avoid incidences of compulsion to comply with taxes and licensing laws within areas where the cruise ship docks. On-board facilities form important factors that shape the structure of competition in the cruise lines service sector since they act as determinants of the customer satisfaction.

The more customers are satisfied with the services offered, the higher the probability of the same clients considering making cruise bookings with an organisation. In this sense, customer satisfaction enhances keeping clientele in the cruise lines service sector.

Cruise service sector organisations in the UK also compete based on price. Cruise business is characterised by immense volatility. This challenge occurs amid high costs of operation of the ships and initial investment capital of purchasing them. Decreasing booking translates into exposure of a company into financial problems.

To overcome these problems, competition is high on renovations and renaming of ships in the effort to meet the emerging trends in the cruise lines business. Ships operate in all hours in a day, all days within a week, and all weeks in a year. This implies that all idling ships lead to loss of large incomes. However, ensuring that ships are busy all the time requires persistent rise in bookings for cruise services.

Every company wants to out power its competing company in terms of clientele as a survival strategy in a volatile market. Success of this strategy forces cruise lines service sector competitors to compete intensively in terms of price competitiveness.

Archer (2013, p.1) supports this argument by adding, ‘a round-Britain cruise offers outstanding value for money and there is a ship for everyone, from boutique ships, often fully inclusive, to larger vessels with an extensive range of dining and entertainment options’.

Price is important in attracting adequate people to fill a cruise ship in the effort to ensure that a ship does not embark on a cruise journey in capacity that cannot make it break even. If fact, a study by Robertson (2013) reported that agents (60 percent) in the cruise line business consider pricing a major important issue affecting the competitive advantage of an organisation operating in the business sector.

Opportunities and Threats facing the Cruise Lines Sector in the UK

Opportunities

The operating environment of organisations presents both opportunities and threats. Opportunities are the existing external chances, which while utilised make an organisation improve its performance (Menon et al. 1999). To gain optimal profitability as a determinant of success levels for organisations, the goal of a company is to take full advantages of opportunities within its operation sector.

One of the important opportunities in the cruise-line service sector encompasses the increased cost of living. Although cruise line holidays are reserves of the working class middle class people, high costs of living make people consider cutting on holiday expenses.

Cruise lines service sector offers entertainment and pleasure to its clients in a cost effective manner compared to bookings equal service standard hotels and other entertainment facilities in foreign nations. The services offered are also all inclusive. They are provided in one setting (the cruise ship). This helps in cutting administration costs.

As claimed before, shops and casinos are opened while the ships are at sea to limit the necessity to comply with various local laws on licensing and taxation. This suggests that the cruise line service sector has the opportunity for manoeuvring around operation schedules for some of its on-board facilities to cut the operations cost.

In any business sector, costs are transferred to customers. Where costs associated with taxation and licensing are avoided, it implies that the cruise line companies can offer services to their clients at much reduced prices.

Increased cost of living forces people to reduce impulse spending. Bad economic times compel people to budget for their household incomes through elimination of unnecessary expenditures (Dale & Andreas 2008).

Cruise lines service sector has the opportunity to attract people even in bad economic times since the amounts paid in bookings also include beverages and foods that are served during voyage apart from alcohols.

Although alcohols are served on the order-to-pay basis, this issue is not significant among people going for a voyage holiday in hard economic times. During such times, consumption of alcohols is always low and not a necessity for pleasure and feeling entertained.

The second opportunity is technology. As discussed before, price is an important issue that shapes the cruise lines service sector competition. Offering low price to customers also calls for deployment of strategies for reducing costs of operating companies in the sector.

Technology such as the utilisation of the Internet to conduct travel organisation bookings and/or the use of social media in advertisements is an important opportunity for cost cutting in the service sector, which remains untapped.

High start-up capital and high operating costs constitute other important opportunities for cruise lines service industry. The degree of rivalry in any business industry influences the overall profitability of firms operating in the industry. The number of rival organisations in an industry is a function of the ease of the ability of new organisations penetrating in the market (Mazucat 2006).

High capital requirement and high costs of operating a cruise line company mean that an opportunity exists for the already existing organisations to study and implement cost cutting strategies without the fear of erosion of their market shares by new entrants.

Threats

Threats are the external chances that impair the performance of an organisation (Menon et al. 1999). Optimal performance requires the identification of all threats followed by the strategies for mitigating them. In the UK, a major threat facing all travel agencies including those in the cruise service sector is the failure to provide strong anchors to areas of tolerance (Gilbert & Gao 2005).

These areas encompass service quality expectations of customers, which are only possible to access and analyse after service delivery. Gilbert and Gao (2005, p.307) insist that this challenge occurs due to the occurrence of ‘non- routine situations, thus making standardised and tribute-base methods for handling customer concerns incomplete’.

In the travel industry, agents are the main sources of customer information. Thus, the success of an organisation operating in the cruise lines service sector depends on its presentation to customers.

Cruise lines organisations in the UK also experience the threat of inability to address the issues of environmental sustainability. Gibson and Papathanassis (2010, p.407) note that cruise ships ‘generate a number of waste streams that can result in discharges to the marine environment, including sewage, gray water, hazardous wastes, oily bilge water, ballast water, and solid waste’.

This implies that as the sector become more popular, with the clientele levels and the number of cruise ship increasing, the threat of the creation of legislation focusing particularly on marine operations of cruise ships exists. The environmental impacts of cruise ships on marine habit including the aquatic organisms may become of critical interest to legislators due to the large number of people aboard the ships during cruise voyages.

Cruise line service sector faces the threat of pricing together with brand image. Robertson (2013, p.22) notes that the director for marketing at Carnival Cruise UK noted that the lines embarked on an effort to combat the pricing threat by ‘restructuring its own pricing arrangement’.

In fact, pricing does not encompass a problem that is encountered by the cruise lines service sector only in the UK. Sixty two (62) percent of agencies studied in the travel industry in the UK identified price as the single most important threat (Robertson 2013) followed by fuel costs and taxing.

These costs are important, as they are essential determinants of the time taken by different organisations operating in the cruise lines service sector to break even. The sector also needs to deal with the threat of poor brand presentation.

Fifty (50) percent of the total agents surveyed by Robertson (2013, p.22) said ‘the perception that cruises were for old people was the reason why consumers chose land-based holidays ahead of cruises’. Indeed, several travel lines such as Saga Cruises do not permit people aged below 50 years into their journey on their ships.

Commonalities and Differences between the Current Marketing Strategies

Cruise lines organisations in the UK deploy different, yet similar marketing strategies in some ways. A common marketing strategy deployed by most organisations is the point of sale. To ensure customer satisfaction while onboard, the cruise ships acts as a strategy that is deployed by all organisations in the service sector to claim a repeated service sale.

Depending on financial capability of organisations, different organisations in the sector invest in different thresholds in mass media advertisements such as print and television. Carnival has a particular advantage in mass media advertisements. It is the biggest corporate organisation running about 11 cruise line brands. Large economies of scale enable the organisation allocate large financial resources in marketing.

Although marketing strategies for different organisations operating in the UK cruise lines service sector are similar, their target audiences are different. This difference also makes the type and the content of marketing campaigns and advertisements vary.

With regard to Yolanda (2013), marketing promotion for different cruise line organisations targets specific lifestyles for a particular group of service consumers. For instance, Seabourn markets itself as ‘intimate luxury’ cruise line. Carnival promotes itself as a ‘fun ship’ cruise line. Most cruise-line travel companies in the UK rely on travel agents to make arrangements on the apart of clients.

Hence, satisfaction of services offered by travel agencies is critical to the marketing of a cruise line organisation. This dependency makes Carnival Corporation invest in marketing indirectly through offering training and development programs for its partnering travel agencies.

The company also invests in online marketing for both itself and its travel agency partners. The next section discusses the various issues that are anticipated by this organisation in the next five years.

Carnival Corporation & plc

Service Marketing issues for the Next Five Years

Environmental sustainability is becoming a major issue that influences the selection of goods and services offered for sale by an organisation. This sustainability is particularly important in the business age when the impacts of global warming in terms of climatic changes have affected many people.

Although some clients for Carnival Corporation & plc may not be concerned about the environmental sustainability efforts deployed by the organisation, other people are incredibly concerned about consuming services and products produced and marketed by socially corporate responsible organisations.

Upon considering that all ships emit various wastes, both human and combustion emissions, Carnival Corporation & plc needs to face the challenge of marketing itself not only as a luxurious cruise lines corporation, but also as a socially responsible organisation.

Carnival Corporation & plc runs a number of brands. To create universal brand associations, the company faces the challenges of harmonisation of its brands. This would help to create a homogeneous marketing campaign to aid in building strong customer brand loyalties.

This challenge is important since some of its brand such as Saga cruises create the impression that cruise lines are meant for old people. Others such as P&O cruise lines attempt to fight this image through the creation of a brand image of universality of cruise lines in offering pleasure and entertainment to people of all demographic characteristics.

Application of Marketing Principles in the Context of Marketing Issues of Carnival Corporation & plc

Although harmonisation of brand image for Carnival Corporation & plc is important, the current marketing approaches adopted by the corporation reflects important aspects of marketing as developed by the marketing theory. Marketing entails efforts to create awareness for the values of an organisation’s products and services (Khosla 2010).

A fundamental interpretation of the marketing function in an organisation is that marketing is the art of selling. However, selling is only a small fraction of marketing concerns. In a broader perspective, marketing entails market research, market segmentation, setting of marketing strategies, evaluation of the marketing environment, and even positioning of marketing strategies among others (Kotler et al. 2009).

A strategy to market Saga Cruises as a brand that is specifically created for old people calls for an effort to segment the Carnival Corporation and plc’s market.

Marketing literature also develops various strategies that organisations need to deploy to build strong brands. Social corporate responsibility is one of such strategies. Marketing calls for a large number of people to work together in a team work environment. During this activity, people are guided by codes of action that define what needs to be done during the marketing and what should not be done.

Despite the fact that it is important for marketers to place their products with success in the market, it is a violation of marketing codes of ethics to deceive in the attempt to make a sale (Simon 2007). Hence, it is wrong to persuade consumers to consume cruise lines’ services without creating awareness of the implications of services, for instance, on pollution and destruction of aquatic life.

All marketing efforts for the cruise-line service sector must ensure that the target audience gains the greatest good from the products and services offered during voyage. This implies that social corporate responsibility in marketing of cruise line products and services has the capacity to result in the greatest happiness among all stakeholders in the service sector.

Reference List

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