The travel industry provides many positive aspects into leisure vacationing. It offers the ability to enhance one’s self knowledge. A more cultural diverse knowledge will also broaden business choices. International travel has impacted businesses worldwide. Executives and employees increase their knowledge with different cultures, legalities and politics. This gained knowledge improves the corporation’s structure with financial, marketing, sales, management practices in addition to personal fulfillment.
The cruise industry fits perfectly into this way of enhancement. Leisure travel and cruising has impacted many different economies, such as the United States and abroad. They do so by integrating and expanding regional markets, sales, supply, and demand across the globe.
Purpose of Study
This paper’s purpose is to explain the benefits of travel and the cruise industry in a corporate infrastructure. Royal Caribbean, the cruise industry and other travel methods will show how and why corporate executives choose to incorporate leisure into business.
Some limitations of study would be the lack of knowledge and experience in managing an entire corporation in the United States or internationally. Also, the travel industry and cruise line’s main focus is offering consumer vacations primarily to United States citizens. Only in the recent two decades have they embarked on becoming more globalized.
Definition of Terms
Terminology within this paper will be of common knowledge and common sense. Any unusual terms used will be explained in the section it resides.
Review of Literature
Organization of the cruise industry
Annual cruise reviews from the Passenger Shipping Association (PSA), announced the cruise industry will grow after prior years of economic slowdown. Despite the slumping economy, Royal Caribbean has continued to expand its fleets, introduce new port of calls (stops and ship destinations) and itineraries. In addition to American growth, international growth has also been reported. The United Kingdom is expected to double its passengers in 2010. The increase in passengers is attributed to Royal Caribbean, Holland America, MSC and Maritime Voyages (Griffiths, 2010, p. 10).
Since the late 1980s the United States accounts for two-thirds of the global cruise market. Also, Europeans and Asians are quickly capturing shares in this growing industry. This is shown by Royal Caribbean’s “global expansion strategy” by easing ships into Asia. Since 2009, Asian passengers increased to one million due to the rise of the middle class. Royal Caribbean’s expansion strategy has left a “footprint” for other cruise lines to follow. Adam Goldstien, President of Royal Caribbean acknowledges his “job is to lead a brand that delivers the Wow!” (Kolesnikov-Jessup, 2008, p. 12).
Strategy and organizational architecture
Strategic planning often involves working with the National Tourism Organization (NTO). Although it has been argued that the NTOs of different countries describe strategic planning as “an overall government strategy” its mission is to research, develop and promote tourism on an economic level. NTOs help organizations in several aspects such as improving organizational levels, management, and performance to provide the needs of the organization, the industry and itself (Soteriou and Roberts, 1998, p. 21).
Different models of plan of action are used depending on the industry, economic environment and organizational needs. Royal Caribbean uses the most common type, known as the normative model. This strategy requires a proactive view in establishing and achieving goals, such as to observe environments and economic conditions, assess internal capabilities, and research and development (Soteriou and Roberts, 1998, p. 21).
This proactive view consists of restructuring the organization. There are several factors that affect the organization’s operations. These factors include, “control systems, incentives, organizational culture, processes, and people.” This is referred to as organizational architecture of a company. These five factors are divided into subunits often called product divisions, national operations and functions. These divisions provide the ability to improve on executive decision-making, integration of teams domestically and internationally, and the coordination of processes and activities. Processes are the method of how decisions are agreed upon and approved (Hill, 2009, p. 451).
Royal Caribbean’s level of competency is a major determinant on whether the NTOs normative model will be successful. Some factors of competency are whether management understands the commitment to the past, present and future development of the organization. Other factors are time management, the ability to deal with disruptive crises, manage disruptions and the desire to focus on what is important to the organization (Soteriou and Roberts, 1998, p. 21).
Royal Caribbean and the NTOs main focus are to become more globalized. Decisions on how to perform and achieve the ultimate goal is important. Most of the critical issues are centralized to hierarchy executives at the main headquarters in Miami, Florida. For example, strategic and financial decisions are primarily the responsibility of the President and board of directors. These major company changes and objectives need to be kept consistent, avoid cultural problems, and poorly repeated activities (Hill, 2009, pp. 451-452).
International local offices have more of decentralized decision-making capabilities. Local offices in Italy, Germany, United Kingdom, Brazil, Spain, Australia and Singapore have better flexibility, control and professional freedom. For example, if there are employee, entertainment, ship safety and maintenance issues with ships in the Australia region, that local office has the ability to make quicker decisions in resolving problems (Hill, 2009, p. 453).
Globalization of the cruise industry
Globalization is important for most organizations to expand through the ever-changing world of technology. Over twenty years ago cruise ships were exclusively available to travelers of the United States. Royal Caribbean, the second largest cruise line behind Carnival Cruise foresaw globalization as a way to help lead the industry into the millennium (Griffiths, 2010).
Significant changes and benefits have spanned over-seas. New emerging market industries have appeared in some European countries such as Germany and Italy. Royal Caribbean and other large cruise lines have invested time and money into these countries to utilize their prime locations and joint ventures for ship building. While Royal Caribbean expands their fleets, they are also helping to improve economies. Improvements can be seen in providing employment and wages to drawing attention to the European nations through tourism (WTTC, IFTO, IH&RA, ICCL, 2002, p. 45).
According to MaryAnne Howland of Black Enterprises, globalization encompasses “mixing business with leisure.” Whether your single or have a family, business trips do not require suffering through boring hotel stays and horrible food. With the ease of internet access, making reservations for the next business trip can also be you and your family’s next mini-vacation (2004, p. 125).
In addition to having quality time to yourself and saving costs to the company or client, business trips can now involve family, education and the chance to broaden your cultural diversity. Royal Caribbean and other cruise lines offer exactly this-with ports all over the world, amenities and activities for all age groups. While the family is enjoying themselves, conferences and meetings can be conducted with minimal interruptions with a more refreshed attitude. Globalization also provides more opportunities in obtaining new contracts, prospects, and clients enabling positive memorable first impressions with personal meetings (Mancini, 2004, p. 15).
Although obtaining flights and hotels all over the world are the primary choice of conducting business and gathering new prospects and clients, cruising has offered a different option. For most executives, being away from the family and children is the first sacrifice when building an organization. Business trips can often span over several weeks of time especially when traveling overseas. Some business dealings are conducted via the internet and conference calls, but nothing makes a better impression than in-person meetings when “closing the deal.” This aspect proves why it is undeniable the ease of flights and hotels as a primary choice of conducting travel. With all success comes sacrifice and in most instances it is the personal lives of family that carries that burden. This inevitably creates stress for the executive in addition to the family dynamic. Stress not only affects the family dynamic, but will also transfer into the workplace. This is where Royal Caribbean comes into the picture. They provide a choice of combining work and pleasure. The family no longer has to always sacrifice personal happiness and growth for the sake of better careers and higher incomes. It is true, families can fly to worldly destinations on business trips, but unless they are familiar with the country, location and culture most often they are “stuck” in the hotel. With Royal Caribbean and other cruise lines, this is no longer a problem. Safety is their number one priority in addition to reaching the different age groups of providing fun and entertainment. Everything is inclusive, from staterooms (sleeping quarters), food, pools, gyms, daycare to bars, casinos and shopping (Mancini, 2004).
Regional economic impact on global economies
The United States and international economies are in dire need of recovery. According to the Travel Trade Gazette business travel is on the rise and will be an important factor in repairing global economies. Corporations such as Royal Caribbean and Carnival Cruise among other large companies are trying to achieve that competitive edge. A survey recently revealed that approximately seventy-nine percent of organizations prefer a more personal approach in conducting business. Eighty-nine percent of business executives believe face-to-face interaction is crucial to finalize the deal. It is essential for executives to visit and personally interact with people and analyze new market industries, especially in a recession (Travel Trade Gazette, 2010, p. 11).
The cruise industry has impacted many different economies in addition to the United States. The most well known areas are Mexico, Alaskan, Hawaiian, Bahamian and Caribbean locations. More recently a new trend has emerged. Several countries offer unexplored and untouched regions. Despite pirate-infested waters, Royal Caribbean among other larger cruise lines is adding new routes to their itineraries. Some itineraries include Asia to Europe, South and West Africa, Australia, Mediteranian and Singapore to Rome. Each different port offers several offshore excursions. These lesser-explored areas create excitement to the consumer. For example, Africa currently offers heritage tours remembering past slave trades. National parks, exquisite beaches, chimpanzee and hippopotamus sanctuaries are only a few of the choices consumers have, while cruising with Royal Caribbean and other cruise lines. These underdeveloped, international areas have increased in revenue because of the cruise industry – revenue from tourism that would not have normally been accessible other than by air (Jainchill, 2010, np).
Despite recent port additions Royal Caribbean felt the hard reality of three key factors in the early 1990s. These three factors affected most of the cruise industry; the war in the Middle East, the United States recession and increased costs of supply, primarily fuel. Glenn Withiam of Cornell Hotel and Restaurant Administrations cited from analyst Arthur Little that the United States recession was affecting the cruise industry, tourism and international economies worse than the war (1992, p. 1).
Although the early 1990s looked bleak, four encouraging factors were offering a positive outlook leading up to the year 2010. The four factors were; the consumer’s continued interest in adventure and cultural diversity, the cruise industries earned reputation from word of mouth of having the best customer satisfaction, decreasing production schedules on fleet expansions and cost control because newer ships run more efficiently. Other interrelated lesser, encouraging factors will continue to be higher air fares, more conservative lending institutions and the slowing of supply due to space constraints in shipyards (Withiam, 1992, p. 9).
Cultural diversity and impact
Royal Caribbean offers luxury and lavish attention which can be enjoyed by vacationers and executives on business trips. Cruise ships offer interesting and exciting destinations and an excellent way to visit several different geographic areas in a short period of time. In addition to meeting new prospects on port-of-calls, cruise ships have the most cultural diversity within its passengers (Magic at sea: The cruise industry, 2005).
When vacationing or conducting business on or off the ship, it is important to be aware of different societies and their shared values and norms. The last thing desired is to offend societies or possible new customers or business partners (Hill, 2009, p. 89). Religion and ethical systems (or moral principles) play a large part in shaping cultures (p. 96).
Royal Caribbean embraces cultural diversity. They believe in employing a well rounded workforce and inspiring other cruise lines to adopt the same way of thinking. They often choose to employ people from the different country and island destinations that are on the itineraries. Employing people from local cultures exposes passengers and fellow employees to new learning experiences (Our Company, 2010).
According to the International Council of Cruise Lines (ICCL) the cruise industry employs about eighty five to ninety percent of people from international countries. As Royal Caribbean is providing new cultural experiences for everyone onboard, these international or local workers are gaining financial independence, “personal autonomy, economic, social and cultural equality.” Extensive training and education required for all company personnel provides a sense of pride and empowerment – not otherwise gained in the country of origin” (WTTC, IFTO, IH&RA, ICCL, 2002, p. 48).
In addition to providing a more diverse environment on ships, it has been proven that cultural dining and entertainment is exciting to consumers. For example, employing European, Japanese and Mexican chefs offer the chance to taste the very best cuisine that would normally be available only in four-star restaurants and hotels. Foreign entertainment coordinators also provide unique experiences in traditional and exotic shows. Cultures are never constant and are always changing through the decades thus providing an endless array of different styles of entertainers and entertainment (Our Company, 2010).
Review of Findings
Royal Caribbean has helped lead industries into a new way of vacationing and business travel. Their global expansion strategy, positive impact on the United States, international economies and cultural diversity has been noticed by many different industries and corporations worldwide.
Smaller cruise lines have also noticed how globalization has affected the market. Unfortunately due to their lack of capital, fleets (numerous ships) and vision they are unable to effectively compete with the large corporations like Royal Caribbean. These smaller organizations are primarily localized in small city-limit areas and are often privately owned and operated. These limitations keep them from expanding.
Working with the NTO, Royal Caribbean has improved on several internal levels of the organization such as, management and performance. Their strategy focuses on a proactive view when making decisions in regards to company goals, research, development and internal capabilities. Although determinants sometimes exist such as lack of competency, commitment and conflict management skills, most of these abilities can be learned through experience, proper training and role models.
Globalization has been a key part of the cruise industry’s success in the last three decades. Creating new itineraries and new foreign relations has helped Royal Caribbean and their leading competitor Carnival Cruise to expand their fleets and improve the United States and international economies.
To keep a competitive edge on industry markets, executives from all over the globe have the choice to utilize cruise ships to achieve a more personalized first impression to confirm and close the sale’s deal. Nearly ninety percent of organizations prefer a personalized method. Royal Caribbean and the cruise industry continually strive to improve different economies, increase supply, demand, and boost revenue to countries that would not normally obtain the benefits of tourism.
Interpretation/Analysis of Findings
Economic slowdown will continue to occur in the future. This affects all economies and markets, including the travel and cruise industry. Since the conception of Royal Caribbean in the 1970s, they showed ambition and promise for a bright future. In the 1980s Royal Caribbean among other large cruise industries accounted for two-thirds of the globalized cruise market, even though this ratio had not yet included the growing interest in European and Asian countries.
The National Tourism Organization appears to be of great help to large corporations trying to “break into” globalization. Their strategic planning and general “know-how” seems to be having an overall positive effect for Royal Caribbean. Their internal levels of; management, research, development and financial restructuring has helped them lead the industry and influence other corporations.
Their market strategy, entrepreneurial spirit and NTO support helps guide them. Strategy changes such as their target market of GenerationX and Baby Boomer age groups, adopting new accounting methods, and implementing new financial practices like the “Dupont system of analysis” (Block, S., Hirt, G., Danielsen, B., 2009), has proven to be successful and going in the right direction. Although, snapshots of their stock fluctuates and is currently showing a slight drop of .07% according to the Wall Street Journal (Company Research: RCL Stock Quote, 2010), internal organizational changes to become more globalized has increased their asset turnover and return on assets in addition to their enthusiasm (Block et al, 2009).
Their belief in cultural diversity within the workforce has created wonderful experiences for vacationers and executives alike. Providing a more diverse environment has proven to be successful in maintaining the excitement of consumers. Exotic entertainment and destinations, to four-star dining experiences has set Royal Caribbean apart from the average cruise line. The goal of creating that “Wow!” factor appears to be working.
Summary and Conclusions
Royal Caribbean will continue to grow, as they have for the past four decades. Keeping a competitive edge and continuing to strive for more globalization while being proactive in decision making will ensure their successful existence in the cruise industry for years to come. Although the National Tourism Organization’s strategy planning is considered a government plan by most countries, they have significantly helped Royal Caribbean and the travel industry in becoming more globalized. Working with the NTO will also help them stay focused on the continual improvements with their internal levels and capability of the organization.
Globalization is the key to Royal Caribbean’s success. Although they probably would have continued to stay in business it would have been at a smaller scale. Their expansion into European countries is what has cemented their legacy in the new millennium. Building local offices in countries like Italy and Australia, in addition to ship-manufacturing joint ventures in areas such as Finland, Germany and France has improved cultural diversity, increased fleets and intensified economies with employment, wages and tourism.
Royal Caribbean has also provided another choice for executives to mix business and the family dynamic. In this dire need of economic recovery, the “executives” or “owners” of other companies and industries should be Royal Caribbean’s next demographic to strongly focus on. Leisure travel and cruising has impacted many different economies, such as the United States and abroad by integrating and expanding regional markets, sales, supply, and demand across the globe.