Star Cruises: A Critical View on Global Strategy

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Table of Contents

Introduction
Company Background
Strategic Overview
Diversification
The Asia Market
Strategy in the Asia Market
Conclusion
Reference:

Introduction

The cruise line industry is considered as both diverse and competitive. The level of innovation is fast and improvements in customer service have been constantly changing. Among the current players in the market, Star Cruises is views as one of the largest. At present, the company ranks only behind Carnival Corporation and Royal Caribbean in terms of size and operational scope. Aside from the two main competitors, there are other cruise lines that are equally competitive. The fact that traveling is seasonal adds to the complexity in the cruise line market.

There are several methods in which companies respond to global competition. Most cruise lines depend on massive marketing and promotion to ensure public awareness. There are some cruise that that focus on widening their service scope to cater wider clients. These strategies are critical as constant changes in the industry can affect the growth and development of a certain company. Aside from the main strategies, there are firms that rely on niches in the market. For instance, cruise ships mostly operate on selected regions. Cruise companies that maintain this strategy that aim to limit cost and take advantage of booming markets.

Company Background

As of December 2007, Star Cruises controls a combined fleet of 21 ships and an additional 2 ships that will be delivered by 2010. The company maintains two main brand names which Star Cruises and Norwegian Cruise Line. The other fleets operated by the company operate under brand names NCK America, Orient Lines, and Cruise Ferries. Most of the operations of the company are centered in the Asia Pacific region. Star Cruises, however, has cruises traveling in more than 200 destinations worldwide.

The company is based in Hong Kong and has two ships operating in the area. It is estimated that at least 70% of the market in the Asia Pacific is controlled by Star Cruises. This coverage is a testament to the dedication of the company and their goal of becoming the foremost cruise ship line in the world. Financially, the company has been turning in good results. In 2007, revenues for the company reached USD2.5 billion, which is 10%, increase when compared to the 2006 figures. In addition, the capacity of the company has increase by 12% in 2007.

Strategic Overview

There are several notable strategies performed by the company during the course of their operations. The company continues to increase the fleet to accommodate the growing demand in the market. Outside the Asia Pacific, Star Cruises remains a major presence. In 2007, the company has introduced Norwegian Gem. The ship is 2,400-passenger vessel that will primarily operate in the US market. In Europe, Star Cruises is also making a strong push. The company has signed a deal with Amadeus for a distribution agreement. The deal allows Amadeus to handle bookings and reservations for Star Cruise in the UK and Ireland.

Although cruise ship is a luxury services, Star Cruise understands that there are certain groups that prefer value fares. Hence the company has been providing value cruise lines to cater the lower class of the economic society. In addition, the Company has been recognizing the value of loyal customers. There are several programs provided by Star Cruises to reward frequent travelers. Although the strategy is more promotional, the company understands that keeping these valued customers will ensure the continuous growth of the Star Cruises brands.

Constant maintenance is a major requirement for Star Cruises ships to remain intact. In 2007, the company has increased expenditures in terms of repairs and maintenance. This is important in keeping the quality of the ships and to ensure that customers are accorded with the best services. In addition, the research and development initiatives of the company have remained robust. Overall, the goal of Star Cruises is to develop ships into havens. Developments in the ships and the training of personnel are some the main strategies maintained by the company.

Diversification

Star Cruises has become a pinnacle diversification in the past years. In 2004, the company signed an agreement with Valuair. The deal has finally allowed Star cruise to enter a new market. The most important part of the deal is that Star Cruises will have access to the clients of Valuair. The exchange between the two companies is critical for the growth of the company. Moreover, the company has started penetrating the gaming industry. Star Cruises have proposed to build a boutique entertainment hotel and casino in Macau through the acquisition of Macau Land Investments.

Another line of business that the company has ventured into pertains to hotels. The company has been taking advantage of the boom in China. The budget hotels reflect to goal of Star Cruises to develop niche markets in related industries. The strategy of Star Cruises provides a clear view on the relationship of industries. Through this niche presence, the company is able to establish connection that will allow the cruise lines to grow. These ventures will introduce the cruise ships to the clients, which is the primary business of the company. Aside from these initiatives, Star Cruise expected to explore on other complementary industries.

The Asia Market

Chawla (2006) noted that until the early 1990s, the global cruise industry was concentrated around North America and the Caribbean regions. In Asia Pacific, it was in its infancy. There were ports of call such as Singapore and none originated or terminated in Asia. While there had been small regional cruises or even holiday options, these were not popular among Asians and meant low occupancy, high operating costs, and barely enough profit to cover expenses, leading to failed cruise lines ventures.

After Singapore invested $25 million to increase cruise tourism in the region and as a hub port, there had been a dramatic increase in the number of passengers passing through Singapore port from 62,585 in 1990 to 933,249 by 1995. Star Cruises from Malaysia soon invested $34 million to develop a cruise passenger hub at Malaysia’s Port Klang.

Ellis (2008) noted that, “cruising on the best-known liner in the world was no guarantee of quality or value for money.” One experience he noted when in Queen Victoria which he noted as one of “the most famous ocean liners in the world” annually cruising the Pacific and Indian Oceans. Famous, maybe, but not necessarily the best since, in cruising, the highest fare or best-known ship does not always mean exceptional value for money, or on board sophistication. Compare my QE2 experience with my cruise on Hebridean Spirit, which I had left just before in Colombo.”

Cruise culture in Asia is notably different from those in the States and in Europe. For example, Asians may think that it is boring to get stuck in a cruise for a week, there is not to do apart from burning under the sun. Ellis (2008) also noted that, “Asian cruises, as anywhere, require careful homework on both cruise lines and cruise ships. Armed with useful knowledge, an Asia cruise can be a thoroughly enjoyable experience.”

While the global cruise market is estimated at $17 billion, Asia is barely 3% represented according to the Institute of Shipping Economics and Logistics (Chawla, 2006).

Strategy in the Asia Market

There are several reasons why tourists go on a cruise. Ellis (2008) proposed that some passengers cruise for exotic destinations while others go to sea for the fun of the voyage. Still for others, fun may include professional cabaret, casinos, quizzes, and dressing down for dinner. For others, it may mean “the cultured atmosphere of a country house party with like-minded souls, quiet formal evenings, and erudite lecturers,” (Royston, 2008). As such, cruising is said to be for everyone such as for merry widows with gentlemen hosts on call for dancing.

Since many Asians such as those from China may be considered first-time cruisers, Royston (2008) proposed that they “should think carefully about what they get for their dollars before signing up for that “holiday-of-a-lifetime” voyage. While glitzy cruise liners boast lavish buffets and spectacular entertainment for their hundreds of passengers, you could be forever standing behind those hundreds of passengers waiting to get off or on the ship at ports of call, or to bag a deck chair on the sun deck. However, on a smaller ship with only one bar and restaurant, it could be difficult to avoid passengers who are seriously boring, or to find something to do instead of a jigsaw puzzle in the library.”

First of all, Ellis (2008) noted that rates for Asian cruises could include all the extras that at first seem high yet extras like the cost of every cocktail with 15 %service charge, shore excursion which could be rated more than US$100 a head, and tips of up to US$20 per day per passenger, add a lot to the cost of the cruise. He added that, “The basic component covered by a cruise fare is limited to the voyage, accommodation, meals and entertainment, so do allow for extras when comparing costs.” He also added that “Cruising is a wonderful option for the elderly – and the lazy – since unpacking (and packing) only has to be done once instead of at every destination, and getting back to the cabin at night after a convivial evening doesn’t require a taxi.”

Companies advertise discounts in their brochures and cruise travel agent come up with less than the brochure price because of early or late booking discounts, loyalty programs or volume pricing.

Some specialty ships provide premium dining in restaurants that features theme menu such as Italian, French, Thai or Japanese cuisine with premium wines

Norwegian Cruise Line (NCL) is said to have pioneered the concept of “freestyle cruising” allowing guests the option of eating in any one of several restaurants, only some of which attract a premium for extra service and broader variety of food. Some ships are child-friendly, with lots of activities and attendants to keep children busy while their parents attend to other activities.

Cruise ships carry a doctor who holds daily clinics for a fee and that some bigger ships have “more organized activities, are suitable for parents with children, as kids can be cared for by trained staff.” Star Cruises for one welcome children and have special meals and club facilities for them. Luxury smaller ships lack this and will not accommodate children below a certain age (Ellis, 2008).

It was also suggested that cruising in Asia “is the ideal holiday for solo passengers … (who may be) often invited to dine at the captain’s or chief engineer’s table and since there are usually a good batch of singletons, there are ample opportunities for ship-board romance.

Some offer three formal nights on a 14-night cruise requiring tuxedo or dark suit for men while, “Informal,” “smart” or “elegant casual” on other nights indicates that men should wear a jacket and not necessarily a tie” (Ellis, 2008). Larger ships offer buffet restaurants operating in the evenings where dress is casual.

Larger ships usually provide the “more entertainment, with lavish shows, parlour games and casinos,” but even small yachts have cabarets and comedians, while other vessels veer towards more classical evenings. Notably, many have musicians, either small groups or a bar pianist. Lectures may also be given in the ship’s theatre or, in the case of very small ships, in the bar lounge. Bigger ships “have dedicated smoking lounges while others confine smokers to defined areas on the open deck. The bigger ships sometimes feature “art auctions” with paintings perpetually cluttering up public places, and also have ship’s photographers and contrived photo opportunities (that black-tie cocktail party with the captain), which the smaller ships eschew,” (Ellis, 2008).

It was also noted that some Asian cruises operate a two-seating policy at meal times — a first sitting at 6.30pm and a second sitting at 8.30pm. Cabaret performances in two are also shown in the evenings so that all guests can see the shows.

Larger liners usually cater for the mass market. Some container ships take passengers but the voyages can be long and uncertain but not nearly as romantic as one might expect. Some cargo ships have basic to excellent accommodations and a huge selection of movies. It was proposed that there are some excellent freighter ship cruises available (Ellis, 2008).

Itinerary is another strategic consideration. Some that starts and ends in Houston, includes Asian destinations such as Jakarta, Hong Kong, Shanghai, Qingdao and Yokohama. Some do 16-day cruise from Singapore via Thailand, Cambodia and Vietnam to Hongkong and then onto Japan and that other Pacific islands such as Victoria BC.

Some voyages from Rome to Singapore with calls on the way at Mumbai (Bombay), Kochi (Cochin), Myanmar (for three days) and Phuket. She begins the return 35-day journey to Europe (Athens) from Hong Kong on 7 April 2009 visiting Vietnam, Thailand, Singapore, Port Klang (Kelang), Mangalore, Goa and Bombay on the way.

Star Cruises considered as a big player is dedicated to onboard fun that provide complete casinos, cabarets, buffets and a relaxed Asian ambience where ‘elegant casual’ dress is the most required for the gala dinner. Ellis (2008) noted “There is a “no tipping” policy but room service, dining ala carte in theme restaurants, beverages, government taxes, port charges and passenger handling fee are extra and there is a fluctuating fuel surcharge. As part of its efforts to expand medium to long-haul markets, Star Cruises has “fly cruise hubs” in Singapore, Port K lang (Malaysia), Hong Kong and Bangkok (Thailand) and 20 representative offices worldwide.

The cruise line operates seven ships in the region, the Superstars Virgo, Gemini, Libra and Aquarius, the Megastars Aries and Taurus and the Star Pisces. Cruises are short and are priced modestly to make them affordable to Asian residents who might not normally consider a cruise vacation. The various ships call at ports (some with exclusive Star Cruise Line terminals) in Malaysia, Thailand, Vietnam, Japan, China, Hong Kong, Cambodia, Papua New Guinea, Indonesia and, of course, Singapore.”

To subsidize its cruises, Star Cruise in a 2006 report (China Hospitality News), apparently opened its budget hotel brand My Inn in Hangzhou. The hotel is located near Hangzhou South Bus Station and is the first My Inn in China. It had been considered different from other budget hotels which are priced at around RMB200 per night, the room rate at My Inn is RMB99 per night, and this price remains stable throughout the year.

The hotel offered necessary business services like broadband Internet and IP phone connections. In previous years, many budget hotels from China and abroad are starting to cater to the growing number of travelers in China. Brands like Jinjiang Inn, Akena, and Motel 168 developed in the budget hotel sector (China Hospitality News, 2006).

Conclusion

The cruise industry may still be considered very young in Asia, and China in particular. The current economic status of China and its citizens acquiring more and bigger wealth comparable to their western and other Asian counterparts make them palatable for the tourism industry, specifically the cruising industry.

However, industry players such as Star Cruises are expected to draw on their own strength to attract as well as maintain a flourishing industry. Already, it has focused its market on the matured market which is North America and it knew it will not be gambling negatively on that move.

While Star Cruises may have hopes for markets such as Mumbai, Singapore and other South East Asian ports, it may do well to create momentum in China, especially as the Olympics is held there this year. China is a big consumer market and this includes even the tourism sector. Through strategic communications and marketing, and partnership with established China players, it could launch a more aggressive stance to snatch attention of eager Chinese tourists who have money to spend.

Reference:

China Hospitality News (2006). “Star Cruises Group Creates Budget Hotel.” Web.

Chawla, Taranjeet. (2006). “Star Cruises: the Growth Strategies.” ICFAI Business School.

Ellis, Royston (2008). “Carry on cruising in Asia.” Smart Travel. Web.

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