Celebrity Cruises, Inc.: A Taste of Luxury

________________________________________________________________________________________________________________ Professor Frances X. Frei, Research Associate Corey Hajim, and Christian Hempell (MBA ’03) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

 

 

 

F R A N C E S X . F R E I

Celebrity Cruises, Inc.: A Taste of Luxury

Introduction

An elderly couple, both dressed in plaid, danced to the poolside band on Deck 10 as a waiter politely cleared an empty bowl from in front of Dietmar Wertanzl, senior vice president of fleet operations for Celebrity Cruises, Inc. It was January 2003 and a beautiful day at sea on board the MS Millennium, one of Celebrity’s newer ships. The scoop of homemade chocolate ice cream had quelled Wertanzl’s appetite, but not his quandary. Gazing from his table toward the pool area, he pondered the diversity of the guests. The hot tub was brimming with 20-something men wearing baseball caps emblazoned with fraternity Greek letters. Three single young women started to join them, then reconsidered and climbed the stairs to the sun deck. A group of older women playing cards dominated a corner of the lounging area. Young parents helped their little girl swim as the older husband and wife danced beside the pool, celebrating decades of commitment to one another.

Sandwiched between mass-market players such as Carnival and luxury lines such as Crystal Cruises, Celebrity aimed to make a name for itself in the midtier premium market by offering an “upscale experience at an intelligent price.” Given this positioning, guests migrated to Celebrity’s premium cruises from both mass and luxury markets. Repeat cruisers made up about half the guests, who were further differentiated by the type of stateroom they had booked. Whereas common areas and facilities aboard its liners were fairly egalitarian, two 2,500-square-foot penthouse suites contrasted with the 170-square-foot inside staterooms.1 Suite guests were assigned extra staff and were given preferential treatment, but little of this was visible to other guests. Celebrity wrestled with the right way to treat customers who were often paying 10 times what other guests might be spending.

Celebrity’s explicit value proposition was rejuvenation, enrichment, and connection. “Royal Caribbean,” maintained Celebrity President and Chief Operating Officer Jack Williams, “is about action and adventure; Celebrity is about the spirit.” Enrichment included educational opportunities; connection meant reconnecting with family and friends and crew. “Instead of going after a demographic,” explained Williams, “we decided to create a mind-set: the savvy traveler.” These savvy travelers were profiled in Celebrity’s new advertisements, part of an $11 million integrated marketing campaign (see Exhibit 1 for the press release). Antony Papageorgiou, director of brand

1 Inside staterooms did not have a window.

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essence, described the significance of Celebrity’s logo: “The company used the brand’s logo of an X to define the commonly used variable in algebra to stand for X equals unknown. Based on consumer research, the mind-set defined by X resulted in the brand’s value proposition.”

150 New Tastes

In 2002, Celebrity launched a series of new initiatives aimed at making the on-board experience even more luxurious. One hundred and fifty offerings were tested on board. Examples included champagne during embarkation, longer meal hours, icy towels at poolside, art tours, and star gazing with an astrologer. Each was implemented, then measured in terms of guest reception (via surveys), impact on on-board operations, and cost. The objective was to add a “taste of luxury” through various low-cost, high-impact initiatives that were valued by guests. (Exhibit 2 presents a sample list of initiatives.)

Captain’s Club

Celebrity’s Captain’s Club was a loyalty program that frequent cruisers could join for $35. The club was divided into three groups based on number of previous cruises. Guests who had cruised 1 to 5 times were accorded a classic, 5 to 10 times a select, and more than 11 times an elite membership. Rewards and benefits awarded according to membership level ranged from complimentary golf clinics to a free wine seminar to vouchers for the casino and special Captain’s Club parties (see Exhibit 3). A typical cruise found from 250 to 500 Captain’s Club members on board, but the group was growing, and Celebrity was considering offering new benefits. Presently, the Captain’s Club was the only way for Celebrity to distinguish its loyal customers from other cruisers.

Concierge Class

Celebrity planned to upgrade 100 staterooms to a new class of service. As the physical layout of these staterooms could not be changed, the company was pondering how to create a differentiated experience. Ideas for Concierge Class services included adding bathroom amenities such as higher- end soaps and shampoos, higher-quality towels, and fluffy robes. The hope was that Concierge Class customers would be willing to spend up to $50 per night extra for added service features.

Were these programs the right way for Celebrity to differentiate itself within the premium market? Wertanzl debated the options and outcomes as he cha-cha-cha-ed past the lovebirds and made his way to Deck 11.

History

The Chandris Group, a Greek company with roots in the shipping business, founded Celebrity Cruises, Inc. in 1989. Celebrity began with three ships; the 47,000-ton vessels, with lower-berth capacity of 1,400 guests, cruised primarily to the Caribbean, Bermuda, and Alaska. Three additional ships were built from 1995 to 1997, each weighing 70,000 tons.

In 1997 Celebrity merged with Royal Caribbean International (in a $1.3 billion deal, the single biggest transaction in the cruise industry to date [Exhibit 4 presents Celebrity financials, and Exhibit 5 presents comparative information for the entire industry]). A larger company with a fleet of 11

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ships, Royal Caribbean was a mass-market cruise line. The decision was made to keep the two brands’ marketing and operations separate to enable each to target its market segment.

Between 1997 and 2002, Celebrity continued to build larger ships, adding four ships each weighing 91,000 tons. (Exhibit 6 provides a description of each ship.) Celebrity did not plan to build ships for the following two years (2003–2004).2

Sailing the Seven Seas

Demand and Demographics

From 1995 to 2001, demand in the North American cruise industry grew from 4.4 million to 6.9 million guests.3 Royal Caribbean and Celebrity captured about a third of the market (2.4 million guests in 2001), making it the second-largest cruise operator. Occupancy for both cruise lines was as high as 101.8% in 2001.4

Eight-five percent of cruise guests were American. In 2001, 11% of Americans had been on at least one cruise. Within the United States, approximately one-third of all “cruisers” were “baby boomers,”5 defined as having an average age of 55 and earning approximately $64,000 per year. Historically, baby boomers represented 53% of all cruisers worldwide. This segment was expected to drive cruise demand growth through 2010.

Average annual growth rate in guests over the past 20 years had been 8.4%.6 Going forward, two significant external influences stood to affect the cruise industry overall. Tightened security both on board and at ports of call was by far the potentially greatest influence. In addition, environmental regulation had changed a great deal over the past decade with significantly more stringent exhaust emission and sanitary requirements. Thus far, the tighter environmental restrictions had inspired successful innovation in engines and waste disposal. Future regulations would likely require further innovation and corresponding investments.

Luxury Market

Luxury lines offered the most diversified and varied destination options, including a world cruise that circumnavigated the globe in approximately 100 days. The crew-to-guest ratio was the highest in the industry with a minimum of one crew member serving every two guests. Ships were designed in grander style with expensive fabrics and furniture, more space per guest, and the largest staterooms and balconies in the industry. Dining was on an open-seating basis as opposed to the scheduled times that were the norm in other markets, with meals prepared as they were ordered.

2 In 2002, Royal Caribbean Cruise Lines (RCCL) attempted to merge with P&O Princess, a company of approximately equal size, but the plan was interrupted by a hostile takeover of Princess by Carnival Corporation, the world’s largest and most profitable cruise line. Carnival’s acquisition of Princess was valued at approximately $5.3 billion.

3 2001 Annual Report, Royal Caribbean Cruises, Ltd., p. 11.

4 One hundred percent occupancy meant double occupancy in each stateroom; sailing at occupancy exceeding 100% meant that third or fourth guests had been added to some staterooms (Exhibit 7 tallies North American supply and demand).

5 Individuals born between 1946 and 1964.

6 http://www.cruising.org/press/overview/ind_overview.cfm#a, accessed February 10, 2003.

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Luxury guests were encouraged to make special requests throughout their trip, with the crew doing everything within its power to satisfy their needs. Sailings ranged in price from $2,500 to more than $11,000 per person for a seven-day trip. Luxury cruises often offered all-inclusive pricing packages that included alcoholic beverages with meals and tips to the crew. These smaller ships outfitted exclusively with suites or outside cabins nevertheless afforded guests many opportunities to spend money on gaming, port excursions, spa treatments, and shopping.

Mass Market

Carnival, Royal Caribbean, Norwegian Cruise Lines, and Disney dominated the mass-market arena. Carnival, the most successful cruise company in the industry, owned 66 ships (Exhibit 8 presents Carnival’s financials). Royal Caribbean had carved a niche within the mass-market segment focused on the explorer mind-set. Cruises in this less expensive segment had limited itineraries and shorter sailings, usually between three and seven days. The ships accommodated as many as 3,300 guests per cruise. Although cabin rates and on-board spending averaged only $75–$100 (gross revenue) per person per day, the margins for the mass market tended to be the highest in the industry.

Premium Market

Floating between and sometimes drifting into mass and luxury waters, premium cruise lines such as Celebrity, Princess, and Holland America offered trips that followed standard itineraries, visiting the same ports each trip. Guest capacity on ships in the premium market ranged from 1,800 to 2,500 guests, trips from seven to 10 days. Staterooms, offered in a wide range of sizes and shapes, included inside quarters. Crew-to-guest ratio in the premium market was typically one crew member for every two guests. The space ratio of total gross tonnage divided by number of lower berths was between that of the mass-market and luxury cruise lines. Guests in this segment spent approximately $150 (gross revenue) per person per day, 20% on board and 80% for the stateroom.

Role of Travel Agents

Williams mused: “Trying to describe to someone what a cruise is like is like trying to explain what chocolate tastes like. You just can’t do it.” In the cruise industry, it fell to travel agents to describe what the chocolate tasted like. Cruises were different from most other vacations. They were complicated in terms of brands, destinations, accommodations, and activities. “This is your vacation for the whole year,” Williams emphasized. “You want to see your cabin, what you will eat, where you will go, how you will spend your time. It is not like buying a plane ticket. You would never ask to see your airplane seat prior to buying a ticket, because if you did, you’d never go. Airline seats are bought; cruise vacations are sold.”

The highest rate in the leisure industry, 90% of cruise vacations were sold through travel agents, who helped customers navigate the complexity of options and price points (Exhibit 9 provides a sampling of published prices). Agents assisted with everything from explaining the packages offered by cruise companies to helping customers choose staterooms, destinations, ships, and land tours while in port; secure airline tickets; and make other arrangements for accommodating physical restrictions or planning for special occasions. Agents’ efforts were rewarded with sales commissions of 10% to 16% of total cruise price per booking. Sales commissions were based on volume to a particular cruise company; the higher the volume, the higher the commission percentage.

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Larger travel agencies (e.g., American Express, Carlson Wagonlit) typically bought large blocks of cabins well in advance of sail dates and provided significant discounts off list price. The return policy for tickets was the same for customers as for agents (Exhibit 10 details Celebrity’s cancellation policy). Travel agencies sometimes rebated part of their commissions back to guests as an added incentive to book.

If a cruise company lowered list prices below the level a customer had already paid, the customer could qualify for a refund of the difference by proactively contacting the company. Cruise lines used price reductions to spur demand for most trips. Explained Rodney Pick, associate vice president of fleet operations planning and administration: “No one pays list price for tickets, except maybe on the most popular holiday cruises.” In contrast to premium and mass-market lines, luxury lines offered automated price protection and tended to avoid price reduction as a mechanism to fill ships because, as Wertanzl explained, “Luxury trips will sail with lower occupancies because they cannot afford to refund ticket prices. In addition, at different price points, you attract different customers who may not maintain the desired atmosphere on board.”

Shipshape

Celebrity cruises ran 6 million passenger days per year across nine ships. Standardization achieved efficiencies in many areas. Itineraries, entertainment, daily activities, and even menus were often the same across sailings. All seven-day Caribbean cruises, for example, might originate in Ft. Lauderdale, sail first to the Dominican Republic, offer the same Tuesday night dinner special, and debut the comedian on the first evening.7

Fleet operations were divided into hotel, marine technical, and marine nautical (an organizational chart is presented in Exhibit 11). According to Papageorgiou, “Hotel operations, our largest group, was responsible for what we call total guest satisfaction. They accomplish this by focusing on the three esses: safety, service, and style. Safety is the first priority of any trip, and service means delivering a quality and satisfying list of offerings to guests. Style is characterized by a gracious attitude and sophisticated presentation.”

Employees were encouraged to greet guests with a formal style, for example to bid “Good morning” instead of “Hi” or reply “With pleasure” instead of “No problem.” Dress and decorum were also important. It was important that staff and crew, comprising individuals from as many as 60 different countries, behave in consistent ways. “In some countries,” Papageorgiou explained, “smiling is considered silly, so you have to communicate to some of the staff that most guests like to see a smile and it is not a ridiculous thing to do.”8

Staff and Crew

Cruise ship employees included officers, staff, and crew. Staff members were higher in the hierarchy and included managers, officers, and members of the guest relations and concierge group, many with 15 or more years of ship experience. Crew consisted of waiters, bar staff, and stateroom attendants. A ship with 1,950 lower berths employed as many as 970 people of varied nationalities. Ships’ crews had military-style ranking systems because, although these were leisure cruises, the

7 Itinerary schedules might vary by location and season, but repeat trips were consistent.

8 Preferred phrases, a dress code, and virtually every other aspect of customer interaction were detailed in the training manual given to all employees on their first day.

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complex, technical nature of the operations made it essential that all understood who was in a position of authority. Food and beverage, the largest department, averaged 460 employees per Millennium-class ship.

Ships’ officers were responsible for the safe operation of their vessels. The captain, at the top of the organization, was ultimately responsible for ship safety, stability, and operations, both while at sea and during ports of call, as well as for most journey operating expenses, the majority being related to the movement of the vessel. Fuel, the second-largest operational cost (crew expense was first), was consumed at progressively higher rates as speed increased. The captain also had an important social role, frequently hosting dinners for 10 to 12 guests at a time.

Shipboard employees at all levels did not receive annualized salaries but were hired under contract. These employment agreements could range from four to nine months, after which employees typically took six to eight weeks off.9 Other employees signed on to see the world, travel, meet interesting people, and gain job experience in an unusual environment. “It is a difficult job,” acknowledged Renato Chizzola, a Celebrity food manager. “We work seven days a week, but we have chosen to be here so we might as well give our best. I feel that I am the luckiest man on earth because I have seen all of the world.” Even with intense schedules, employees often stayed with a particular cruise company for years.10

Training

The cruise industry typically relied on an apprenticeship, whereby knowledge was passed from incumbent to new employees. New crew members often required a period of adjustment to the job and to life on a ship where space both physical (e.g., shared cabins) and mental (e.g., personal time) was limited. Celebrity generated a wide array of manuals to help employees learn everything from mixing martinis to consoling guests whose luggage had been lost (a guest relations manual is excerpted in Exhibit 12).

Instinct and attitude were a big part of providing a satisfying customer experience. Explained Wertanzl: “Our service delivery is comprised of three employee elements: ability, function, and motivation. The first two are straightforward to manage, but people are not machines; they are emotional, and motivation is the most difficult part.” As Celebrity bar manager Hakan Oral put it: “If you use a machine you just turn it on; humans have their own minds.”

Employees were encouraged to consider creative ways to serve customers. Papageorgiou recalled an instance of this philosophy in action:

There was a woman who had just finished dinner and felt completely full. She said to her waiter when he asked if she would like dessert, “I can’t eat another bite; I don’t want anything for dessert. I want absolutely nothing.” She was seated at a table of eight, and when he delivered desserts to the others, he brought her a plate that simply had the word “nothing” spelled out in chocolate. She laughed and didn’t feel left out. We encourage that kind of initiative to do a little something extra to make a guest feel good.

9 Because cruise lines operated in international waters, income for employees from most countries was not subject to income tax. This was not the case for U.S. employees, who did have to pay taxes.

10 It was not unusual for Celebrity waiters and stateroom attendants to remain in their jobs for five to seven years.

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Compensation

For wait and housekeeping staff, 95% of their salaries was paid in tips. The system was explained to guests in the details of the vacation package sent to them in advance of their trip. Envelopes with suggested gratuities were provided to each guest on their departure date to encourage tipping (Exhibit 13). “Guests from the United States,” Papageorgiou observed, “were accustomed to tipping, but international travelers were not always comfortable with it. It makes a big difference to a stateroom attendant if one of their guests does not leave them tips for the week. How do you motivate an attendant in that situation?” Although the amounts seemed small, from $0.75 to $3.50 per day, tips added up. A successful stateroom attendant or waiter could take home $25,000 per year.

A True Departure

The Journey

A seven-day cruise typically visited four ports of call. On average, guests ranged in age from 30 to 75. There might be as many as 45 couples celebrating honeymoons and 70 anniversaries on a single trip (cruise statistics are provided in Exhibit 14).

Itineraries for the Celebrity fleet were set 18 to 24 months in advance. Ports of call and navigation schedules were calculated based on seasonal weather and expected demand for particular combinations of destinations.

The Ship

The design and building of an approximately $350 million Millennium-class ship took three years. The largest vessel designed to navigate the Panama Canal, the 1,000-foot-long, 12-deck floating metropolis was complete with a three-deck hotel lobby; a 1,200-seat dining room; many other food and beverage venues; bar, lounge, and disco areas; a 36,000-square-foot Aqua Spa; a casino; a swimming pool complex; a grand theater with seating for 1,400; an Internet café; a library; a bridge room; a 12-store shopping mall; a children’s fun factory; a medical operating room; and even a morgue. The back of the house complex included quarters for 960 crew, kitchen and food storage areas, laundry facilities, a dozen elevators, lifeboats for 3,500 people, water-treatment and garbage- disposal facilities, and mechanical and technical areas.

Celebrity’s fleet averaged less than five years in age, and ships averaged 30 years of useful life.11 The smokeless turbine engines that powered the Millennium-class ships replaced diesel engines, saving approximately 8,500 square feet per ship. Gas turbine engines were more environmentally friendly than diesel engines but burned fuel at a higher rate, 10 tons of fuel per hour at a cost of $300 per ton, compared with four to five tons of fuel per hour at a cost of $120 per ton for diesel engines. The fuel tanks on Millennium-class vessels held 3,500 metric tons.

11 After 10 to 15 years of service, a ship was often sold to a lesser cruise line and extensively refurbished to extend its useful life.

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The Stateroom

The stateroom set the tone for the entire cruise experience. Room layout, design, and size were critical elements in the rating and pricing capability of cruise lines (Exhibit 15 provides descriptions of staterooms).

All You Can Eat

Food was an important part of the cruise experience. At Celebrity, everything served on board was made from scratch. “There are no can openers in our galley,” maintained Chizzola. The main dining room served breakfast, lunch, and dinner. The two seatings available for dinner accommodated as many as 2,500 guests. The menu offered four courses, with a selection of three to five items per course. The galley was an intricate and well-planned operation. Salads and other appetizers were prepared in batches several hours before dinner. Each salad was prepared exactly the same way, with one galley member distributing the lettuce on every plate, followed by another member placing the tomatoes, and so on. At each of the more than three-dozen food-preparation stations, pictures and detailed descriptions of each plate were readily visible and used as a guide for the staff to prepare everything in a standard way. Data gathered over previous cruises for every item on the menu were used to forecast supplies for each sailing. The executive chef and his team orchestrated production: 160 people in the galley, 2 restaurant managers, 6 assistant restaurant managers, 73 waiters, 59 assistant waiters, 11 sommeliers, 31 cleaners, and 20 bar waiters.

Guests chose seating times for dinner through the travel agent prior to sailing. Preference could be specified for table size, seating time, specific company, and even location (if the guest was familiar with the dining room layout). Celebrity determined table combinations before sailing. Guests were typically seated with other people in their age group. The restaurant manager could make changes to accommodate unsatisfied guests’ requests for different seating. Tables were often the source of new friendships, even the occasional romance, as well as a place to discuss the cruise and cruise pricing. In addition to the main dining room, the Millennium offered a café poolside with spa food, a buffet for breakfast and lunch, a casual-dining dinner alternative venue with relaxed dress code, a coffee café, and 24-hour in-room dining service.

Another dining option aboard the Millennium was the Olympic restaurant, a lavish specialty venue available by reservation for $25 per person.12

Program Activities and Facilities

At almost every moment of every day guests could be found engaging in activities ranging from golf to massage, art buying, shopping, learning about wine, lounging, sightseeing, or playing games (Exhibit 16 presents a sample list of daily activities, and a sample of spa service offerings and prices is provided in Exhibit 17).

Cruisers

Notwithstanding the myriad activities available on board and exotic ports shoreside, many cruisers believed the experience to be about the people more than anything else. In 12 years Ron Deutschman and Dan Vanderpaal, regulars on Celebrity, had cruised 54 times together, 32 times on

12 In 2001, the cost was $12 per person. Olympic waiters’ tips were paid with a portion of this extra fee.

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Celebrity ships. “We don’t care where we go; the ship is our destination,” maintained Deutschman. “We care about family, and Celebrity treats us like family. For most of us getting on a cruise ship will be the closest thing we’ll come to having staff. You don’t have to make your bed, you leave your towels, you don’t have to do wash, and it is easy and safe.” Added Vanderpaal: “We’ve taken other ships, even some of the luxury lines, and they did not meet our expectations. Here we are treated like royalty.”

Cruisers were encouraged to get to know one another and make new friends. Communication often began pre- and continued post-cruise on Web sites such as CruiseCritic.com. Cruise companies and individual trips were discussed, and Celebrity organized special, on-board parties for members.

Compliments and Complaints

Guest surveys were distributed toward the end of cruises, and guests were strongly encouraged to complete them, which they did at rates as high as 85%. Managers’ bonuses as well as reputations within the company and industry were tied to survey results. Survey questions ranged from general to specific and even pointed at individuals. Explained Rojas: “I try to get the best cruise-director rating I can because that is how you get the best jobs on the best ships. Managing perceptions is the biggest job I have.” The role of the survey was admittedly twofold: to serve as a marketing tool for the brand as well as measure satisfaction. A handful of mystery shoppers visited the ships to provide management with product and service feedback. Cruisers were known to be some of the most satisfied customers in the leisure industry, nearly nine out of 10 claiming they would cruise again.13 Ninety-four percent of cruisers said that they preferred cruises or found them to be equal to or better than vacations on land.14

Most complaints were fielded and resolved by the guest relations and concierge staff. Although many complaints resulted from variables outside of Celebrity’s control (e.g., luggage lost by an airline), staff were trained to handle customer concerns with care and given dozens of policies and procedures for appeasing and empathizing (Exhibit 18 illustrates a typical complaint-resolution process).

Disembarkation

The last cruise activity was getting more than 2,000 people with more than 4,000 pieces of luggage off the ship. When they first boarded, guests were asked to submit a post-disembarkation schedule, which included departure times, destinations, and flight numbers. Some people might have early flights, others might be in wheelchairs and need help, still others might be VIPs slated for special treatment. All guests were required to pass through the local customs service before leaving the ship, which sometimes presented challenges if only a small number of customs agents were present. Chief concierge Conny Hammelmann described the process:

The whole thing is amazing. From start to finish the process takes about two hours. At 8 a.m. the first guests are taken through disembarkation. This group includes our guests in wheelchairs, early fliers, VIPs, and suite guests. The second wave, about 15 minutes later, will include Captain’s Club members. Every 15 minutes another group comes through. Guests are notified of their time by a note in their staterooms, not by intercom. By 10 a.m. everyone is

13 2001 Annual Report, Royal Caribbean Cruises, Ltd., p. 15.

14 http://www.fastcompany.com/online/32/bigboat.html, accessed February 6, 2003.

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gone, and at 11 a.m. new guests will begin arriving. The rooms are ready at 1 p.m. That means that in three hours our housekeeping staff have turned over more than 1,000 rooms with new linens, towels, fruit baskets, champagne when appropriate, and customized information for the new guests.

Just Over the Next Horizon

The seas were calm that day, as was business for Celebrity, but a few questions loomed in Wertanzl’s mind. When Celebrity was founded, the competitive landscape was much different from that in 2003. There was higher demand and fewer ships. Pick explained:

We used to be successful as a niche player, but the industry has grown so significantly that that strategy does not work anymore. We need to increase demand for our trips and be able to charge extra for rooms. We should not be a commodity. We need to decide on pricing issues in terms of whether to sell tickets cheaply to fill the ship as a cruise departure approaches or to increase prices as an increasingly scarce resource. Is it better to sail with empty rooms or to fill the ship with people who have paid lower ticket prices?

How should Celebrity cultivate loyalty and increase guests’ willingness to pay? The new 150 tastes of luxury were being tested and plans for the Concierge Class rooms being developed, but all of the operational aspects of implementation had not been decided. Would more customized service add complexity to an already intricate operation? What else might justify price increases across all staterooms?

Having served in a similar capacity at luxury line Crystal Cruises, Wertanzl understood outstanding service delivery. He wondered if enhancing the service offering made sense when the operating margins were better in the lower-end mass market. Glancing around the sun deck at the varied travelers as a waiter handed him fresh lemonade, Wertanzl pondered the new direction Celebrity should take.

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Exhibit 1 Press Release

Celebrity Cruises Launches “A True Departure” Integrated Branding Campaign

With Acclaimed Photographer Mark Seliger,

Campaign by Arnold Worldwide Portrays Cruise Line Guests as Celebrities

MIAMI—October 21, 2002—Celebrity Cruises has launched a major new consumer ad campaign created by Arnold Worldwide, a Boston-based advertising agency owned by Havas. The campaign, tagged “a true departure,” communicates the experience of a Celebrity vacation via print and television ads which showcase the line’s guests as “celebrities.”

“Our target audience—savvy travelers—are discerning guests who know what they want from their vacations,” said Celebrity’s Senior Vice President of Marketing Steven Hancock. “Our new campaign is distinctive in that it focuses exclusively on our guests and how we work tirelessly to deliver the ultimate premium cruise experience with a taste of luxury.”

Arnold enlisted renowned Hollywood photographer Mark Seliger, famed for his 15-year tenure as photographer for Rolling Stone magazine (and now Vanity Fair and GQ), for the campaign, to make “real” people appear famous.

Two-page magazine spreads portray on the left a photograph of a person with a simple, white T- shirt bearing the word, “Celebrity,” while the right side of the spread communicates how the Celebrity staff is fully aware of the guest’s individual needs. For example, one print execution shows a woman in her 40s, clad in the Celebrity T-shirt, with a list on the opposite page noting her personal preferences, as follows:

1. Sunrise Walk (5:30 a.m. wake-up call)

2. Tea with Breakfast (Darjeeling, brioche and a sliced tomato)

3. Table for two/Olympic Dining Room (9:00 p.m.)

4. Book Milk Ritual Wrap

5. Martinis (dirty, 2-3 olives, Montecristo Robusto cigar)

6.Would like Phalaenopsis orchid in room for duration of stay

(square glass vase)

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Television executions feature the same “celebrities” wearing T-shirts, with a background “soundscape” of shipboard staff conversation snippets, such as, “Mr. Marcus would like help unpacking his luggage,” and “No turndown service after 8 p.m.”

“Our campaign for Celebrity is ‘a true departure,’ as we do not use any traditional images of ships in the advertising,” said Ron Lawner, Chairman and Chief Creative Officer at Arnold Worldwide. “The executions demonstrate that a Celebrity guest will receive exactly what they want, when and how they want it delivered.”

The television campaign, which will begin running on cable, includes information on a Celebrity sweepstakes, along with a toll-free number and Celebrity’s web address. The winner of the sweepstakes will be awarded a Celebrity cruise once a year for 10 years.

Digitas, Celebrity’s loyalty marketing partner, is handling one-to-one marketing for this aspect of the campaign, in addition to media planning, the trade component and the sweepstakes associated with the campaign.

Celebrity’s redesigned logo—a new typeface with a dominant ‘X’—also is featured in the new campaign to further promote the new brand identity.

The print campaign will break in November publications including Conde Nast Traveler, Travel Holiday, Travel + Leisure, Endless Vacation and National Geographic Traveler.

Source: http://www.celebritycruises.com/pressrelease.asp?s=BC3741374C&xref=17787, accessed February 5, 2003.

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Exhibit 2 Sample of Tastes of Luxury

Welcome glass of champagne

Expanded meal hours

Casual Dining Boulevard

European breakfast and wine bar in Cova Café

Michael’s Club transformed piano bar

Public restroom attendants on formal evenings

Announcement-free disembarkation

Elegant tea in specialty restaurant

Chef D’or Concierge Program

Source: Company information.

 

 

Exhibit 3 Captain’s Club

Benefits were determined by the number of cruises with Celebrity.

Classic Member benefits

• One-category Upgrade

• Complimentary Custom Air Arrangements

• Pre-sailing Specialty Restaurant Reservations

• Priority Embarkation (where available)—Founder Classic Members Only

• Exclusive Captain’s Club Party

• Welcome Amenity, Gift with Purchase at the AquaSpaSM, and Certificates for the Celebrity Casino

• Golf Clinic and Classic Member Rate for Golf Simulator

• Complimentary Wine Tasting

• Preferential Debarkation (where available)—Founder Classic Members Only

• Reunion Cruises

• Quarterly Newsletter with Exclusive Offers

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 3 (continued)

Select Member Benefits

• Private Cruise Event for Select and Elite Members

• Behind-the-Scenes Tours

• Priority Status for Shore Excursion Waitlist

• Preferential Debarkation (where available)

• Plus All Classic Member Benefits

Elite Member Benefits

• Private Shipboard Departure Lounge with Continental Breakfast

• Plus All Select and Classic Member Benefits

Source: http://www.celebritycruises.com/captainsclub/default.asp?s=BC3741374C, accessed February 5, 2003.

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Exhibit 4 Royal Caribbean Annual Financial Information (year ending December 31; $ in thousands except per share information)

2001 2000 1999 INCOME STATEMENT Revenues $ 3,145,250 $2,865,846 $2,546,152 Expenses Operating $ 1,934,391 $1,652,459 $1,496,252 Marketing, selling and administrative $ 454,080 $ 412,799 $ 371,817 Depreciation and amortization $ 301,174 $ 231,048 $ 197,909 $ 2,689,645 $2,296,306 $2,065,978 Operating income $ 455,605 $ 569,540 $ 480,174 Interest income $ 24,544 $ 7,922 $ 8,182 Interest expense, net of capitalized interest $ (253,207) $(154,328) $(130,625) Other income (expense) $ 27,515 $ 22,229 $ 26,122 $ (201,148) $(124,177) $ (96,321) Net Income $ 254,457 $ 445,363 $ 383,853 Earning per share : Basic $ 1.323 $ 2.34 $ 2.15 Earning per share : Diluted $ 1.32 $ 2.31 $ 2.06 BALANCE SHEET Assets Cash and cash equivalents $ 727,178 $ 177,810 Trade and other receivables, net $ 72,196 $ 53,609 Inventories $ 33,493 $ 30,115 Prepaid expenses and other assets $ 53,247 $ 49,185 Total current assets $ 886,114 $ 310,719 Property and Equipment at cost less accumulated depreciation and amortization 8,605,448 $6,831,809 Goodwill less accumulated amortization of $138,606 and $128,192, respectively $ 278,561 $ 288,974 Other Assets $ 598,659 $ 396,963 Total Assets $10,368,782 $7,828,465 LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Current portion of long-term debt $ 238,581 $ 109,926 Accounts payable $ 144,070 $ 158,143 Accrued expenses and other liabilities $ 283,913 $ 200,900 Customer deposits $ 446,085 $ 443,411 Total current liabilities $ 1,112,649 $ 912,380 Long-Term Debt $5,407,531 $3,300,170 Other Long-Term Liabilities $ 92,018 SHAREHOLDERS EQUITY Common stock ($.01 par value; 500,000,000 shares authorized; 192,310,198 and 192,122,088 shares issued) $ 1,923 $ 1,921 Paid-in capital $ 2,045,904 $2,043,111 Retained earnings $ 1,731,423 $1,576,921 Accumulated other comprehensive loss $ (16,068) Treasury stock (475,524 and 435,180 common shares at cost) $ (6,598) $ (6,038) Total shareholders equity $ 3,756,584 $3,615,915 Total liabilities $10,368,782 $7,828,465

Source: Company 2001 Annual Report.

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 5 Cost Breakdown for Global Cruise Industry

2000 2001

 

Cost & Revenue ($ billions except for

guests)

Share of Gross

Revenue

Gross Revenue per Passenger

($)

Cost & Revenue ($ billions except for

guests)

Share of Gross

Revenue

Gross Revenue per Passenger

($)

 

Gross Revenue 13.49 100% 1,686 13.83 100% 1,646 Cost of Sales (commissions) 1.62 12% 203 1.5 11% 179

Airfares 1.08 8% 135 1.03 7% 123

Food and Beverage 0.66 5% 83 0.76 5% 90

Fuel 0.53 4% 66 0.55 4% 65

Hotel Supplies 0.24 2% 30 0.19 1% 23

Crew Wages 0.91 7% 114 1.17 8% 139

Port Charges and Fees 0.75 6% 94 0.81 6% 96

Vessel Maintenance and Repair 0.41 3% 51 0.39 3% 46

Other Operating Expenses 1.65 12% 206 1.75 13% 208

Total Operating Expenses 7.85 58% 981 8.15 59% 970

Advertising & Promotion 0.77 6% 96 0.79 6% 94

Administrative Wages and Salaries 0.68 5% 85 0.73 5% 87

Other Administrative Expenses 0.48 4% 60 0.41 3% 49

Total Administrative Expenses 1.93 14% 241 1.93 14% 230 Depreciation & Amortization 1.25 9% 156 1.57 11% 187

Operating Income 2.46 18% 308 2.18 16% 260

Global Guests 8,000,000 8,400,000

Source: Adapted from ICCL 2002 Economic Impact Study, pp. 11–12.

Note: Cruise length can be assumed to be approximately 6.4 days.

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Exhibit 6 Celebrity Ship Descriptions

Year Vessel Entered Service Berths Primary Areas of Operation

Constellation 2002 1,950 Europe, Caribbean Summit 2001 1,950 Caribbean, Alaska, Panama Canal Infinity 2001 1,950 Alaska, Panama Canal, Hawaii Millennium 2000 1,950 Caribbean, Europe Mercury 1997 1,870 Alaska, Caribbean, Panama Canal, California Coast, Mexican Riviera Galaxy 1996 1,870 Caribbean, Canada, New England Century 1995 1,750 Caribbean Zenith 1992 1,374 Bermuda, Caribbean, South America Horizon 1990 1,354 Caribbean, Bermuda

Source: SEC Filing 20-F, April 8, 2002.

 

Exhibit 7 North American Cruise Industry Supply and Demand

1999 2000 2001

1999–2000 % Change

2000–2001 % Change

Cabin supply Number of shipsa 149 163 169 9.4% 2.5% Number of berths (cabin) supply 148,237 165,371 173,846 11.6% 5.1% Available bed daysb 51,882,950 57,883,350 60,846,100 11.6% 5.1% Guest demand Global guests 6,850,000 8,000,000 8,400,000 16.8% 5.0% Purchased bed days 45,210,000 52,000,000 53,760,000 15.0% 3.4% Capacity utilization (occupancy) c 87.1% 89.8% 88.4% 3.1% -1.6%

Source: Adapted from International Council of Cruise Lines, August 2002.

a Capacity figures do not reflect ships owned and operated by American Classic Voyages and Renaissance Cruises, both of which declared bankruptcy in the fourth quarter of 2001.

b Bed days are calculated by multiplying number of cabins by number of available sailing days.

c Utilization is calculated by dividing purchased bed days by available bed days.

 

 

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 8 Carnival Corporation Annual Financials (year ending November 30; $ in thousands except per share data)

Income Statement 2001 2000 1999 Revenues $4,535,751 $3,778,542 $3,497,470 Costs and expenses Operating $2,468,730 $2,058,342 $1,862,636 Selling and administrative $618,664 $487,403 $447,235 Depreciation and amortization $372,224 $287,667 $243,658 Impairment charge $140,378 Total expenses $3,599,996 $2,833,412 $2,553,529 Operating Income before (loss) income from affiliated operations $935,775 $945,130 $943,941 (Loss) income from affiliated operations, net $(44,024) $37,828 $75,758 Operating income $891,731 $982,958 $1,019,699 Nonoperating income (expense) Interest income $34,255 $16,508 $41,932 Interest expenses, net of capitalized interest $(120,692) $(41,372) $(46,956) Other income, net $108,649 $8,460 $29,357 Income tax benefit (expense) $12,257 $(1,094) $(2,778) Minority interest $(14,014) Total nonoperating income $34,469 $(17,500) $7,541 Net income $926,200 $965,458 $1,027,240 Earnings per share : basic $1.58 $1.61 $1.68 Earnings per share : diluted $1.58 $1.60 $1.66

 

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Exhibit 8 (continued)

Consolidated Balance Sheet 2001 2000 ASSETS Current assets Cash and cash equivalents $1,421,300 $189,282 Short-term investments $36,784 $5,470 Accounts receivable, net $90,763 $95,361 Inventories $91,996 $100,451 Prepaid expenses and other $113,798 $158,918 Fair value of hedged firm commitments $204,347 Total current assets $1,958,988 $549,482 Property and equipment, Net $8,390,230 $8,001,318 Investments in and advance to affiliates $437,391 Goodwill, less accumulated amortization of $117,791 and $99,670 $651,814 $701,385 Other assets $188,915 $141,744 Fair value of hedged firm commitments $373,605 Total Assets $11,563,552 $9,831,320 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Current portion of long-term debt $21,764 $248,219 Accounts payable $269,467 $332,694 Accrued liabilities $298,032 $302,585 Customer deposits $627,698 $770,425 Dividends payable $61,548 $61,371 Fair value of derivative contracts $201,731 Total current liabilities $1,480,240 $1,715,294 Long-term debt $2,954,854 $2,099,077 Deferred income and other long-term liabilities $157,998 $146,332 Fair value of derivative contracts $379,683 Shareholders’ equity Common stock; $.01 par value; 960,000 shares authorized; 620,019 and 617,568 shares issued $6,200 $6,176 Additional paid-in capital $1,805,248 $1,772,897 Retained earnings $5,556,296 $4,884,023 Unearned stock compensation $(12,398) $(12,283) Accumulated other comprehensive loss $(36,932) $(75,059) Treasury stock; 33,848 and 33,087 shares at cost $(727,637) $(705,137) Total shareholders’ equity $6,590,777 $5,870,617 Total liabilities $11,563,552 $9,831,320

Source: Company information.

 

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 9 Cruise Pricing, Celebrity Millennium, 7-Night Eastern Caribbean (January 6–March 31, 2002; November 10–December 29, 2002; January 5–April 20, 2003)

Accommodations List Price Early Booking Pricea Penthouse Deck, Penthouse Suite $9,749 $6,199 Penthouse Deck, Royal Suite $6,299 $3,999 Sky, Panorama, Vista & Penthouse Decks, Celebrity Suite $4,799 $2,599 Sky, Panorama, Vista & Penthouse Decks, Sky Suite $3,749 $1,999 Sky Deck, Premium ocean-view stateroom with veranda $2,509 $1,369 Panorama Deck, Premium ocean-view stateroom with veranda $2,489 $1,359 Vista & Penthouse Deck Premium ocean-view stateroom with veranda

$2,479

$1,349

Sky & Panorama Decks Deluxe ocean-view stateroom and veranda

$2,429

$1,319

Vista Deck, Deluxe ocean-view stateroom and veranda $2,419 $1,309 Penthouse Deck, Deluxe ocean-view stateroom and veranda $2,399 $1,299 Sky, Panorama & Vista Decks Large ocean-view stateroom with veranda

$2,749

$1,629

Sky, Panorama & Vista Decks, Ocean-view stateroom $2,179 $1,239 Penthouse Deck, Ocean-view stateroom $2,099 $1,189 Plaza Deck, Ocean-view stateroom $2,029 $1,139 Continental Deck, Ocean-view stateroom $1,989 $1,109 Continental Deck, Ocean-view stateroom $1,949 $1,099 Sky, Panorama & Vista Decks, Inside stateroom $1,799 $979 Plaza Deck, Inside stateroom $1,769 $969 Continental Deck, Inside stateroom $1,749 $959 Continental Deck, Inside stateroom $1,729 $949 Third & Fourth Guests in Stateroomb $1, 049 $399

Source: Celebrity Cruises Travel Agent Guide.

Notes:

Prices are in U.S. dollars, per person, double occupancy. Airfare is not included.

Government and departure taxes and fees are additional.

Prices vary based on date of booking, sailing date, and category selected and are subject to change without notice.

a Prices shown are sample prices and are available for a limited number of sailings and staterooms.

b The price listed for third and fourth guests applies to infants, children, or adults who share accommodations with two guests paying full price. Prices shown are for inside staterooms. Prices are higher for ocean-view staterooms and suites. Single- accommodation pricing is available upon request.

 

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Celebrity Cruises, Inc.: A Taste of Luxury 603-096

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Exhibit 10 Cancellation Policy (double occupancy)

Days prior to sailing Charges per person 7-night cruises 60 or more No charge 59–30a Deposit amount ($250) 29–8 50% of total price 7 or less No refund 9-night or longer cruises 60 or more No charge 59–30 a Deposit amount ($450) 29–15 50% of total price 14 or less No refund

Source: Celebrity Cruises Travel Agent Guide.

a 89–30 days for holiday sailings.

 

 

 

Exhibit 11 Organizational Chart

Celebrity Cruises—Fleet Operations Shoreside Organization—Senior Management

 

Source: Company information.

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 12 Excerpt from Guest Relations Manual

Guest Relations was created in 1991 on Celebrity Cruises in order to give a new depth of service to the Guests. Guest Relations means that when a Guest has a query, regardless of the relayed department, we accept information and mediate on their behalf. Send Guests on their way after reassuring them that we will get back to them with the proper answer. Never say “I don’t know,” instead say “I will find out and get back to you.” Remember to follow up. Even if the problem has been resolved, send a note, ask if they are enjoying their cruise and let them know that you are available, should they require any additional assistance.

Teamwork is one of our greatest resources. When we have a positive attitude and the support of colleagues, everything will run smoother. Never leave the end of a shift with a desk swamped with people and unexplained notes. Finish all tasks and update the next shift. Also, leave detailed information for the morning shift so they can follow up on any outstanding issues.

Punctuality is necessary. Please arrive at your shift 15 minutes early. This allows time to be briefed by your co-workers about the previous shift.

Communication is the key to an effective operation and it is essential for success.

Lost Luggage

Lost luggage is a very sensitive situation for our Guests and must be treated with the utmost empathy and consideration.

For the Guest

1 Apologize to the guest for their inconvenience.

1.1 Explain to them that all luggage will be delivered up until 19.00 on embarkation day.

1.2 If they are really irate or have already filled out a claim with an airline, fill out our forms at that time.

1.3 Europe—If they already have filled out forms with airlines, immediately give the names to the CHIEF CONCIERGE so the agents at the airport can check with the airlines.

2 After 19.00, request that they bring their flight tickets and baggage claim tags to the desk so the proper paperwork can be filled out. Emphasize that the baggage claim stubs are imperative for us to source anything through the airlines. If only one of several are missing, find out the number of the tag of the missing bag. This narrows down the search for the luggage.

3 Fill out appropriate forms.

3.1 Fill out the Lost Luggage report thoroughly and have Guest, as well as you, sign it at the bottom.

3.1.1 Note under what name the luggage was checked in. This could be different from the person who actually has lost the luggage, and it will be the name on the baggage stubs. The report needs to be under the names of the passenger missing the luggage, however print at the top the name on the baggage tag.

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Celebrity Cruises, Inc.: A Taste of Luxury 603-096

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Exhibit 12 (continued)

3.1.2 Even if Guests have driven themselves to the pier, find out if they had a flight the previous day and get that information. It is needed in order to forward the luggage via an airline.

3.2 Take photocopies of the flight tickets and the baggage claim tickets as well as any claim forms if the Guest has already reported to the airline that the luggage is missing. Always return all originals to the guest. NEVER keep originals.

3.3 Fill out the Request for Onboard Search form if the luggage was last seen at the airport in the city of embarkation or at the pier and send a copy directly to the Chief Housekeeper.

3.4 Offer formal wear to everyone and fill out the form at the same time as the report.

3.4.1 Fill out the Formal Clothing Request form completely.

3.4.1.1 Tuxedos, simple black dresses, a few blouses, ladies pants, and a wrap skirt are available for adults only.

3.4.1.2 There is no casual clothing available.

3.4.1.3 If they decline, mark it on the report.

3.4.1.4 Tell them to try on items as soon as possible as some alterations and different sizes are available.

3.5 Ask if they have Travel Insurance.

3.5.1 Inform them that they can file with their insurance using the statement they will receive at the end of the cruise.

3.5.2 Celebrity Insurance covers quite extensively. CHIEF CONCIERGE can supply a copy of this policy if they do not have a copy with their cruise ticket.

3.5.3 If they are not sure, tell them that upon their return home, check with their travel agent if they have purchased travel insurance. Usually there is a daily allowance regardless of whether or not the luggage ever appears.

3.5.4 If Guests do not have travel insurance, as a courtesy, Celebrity Cruises may extend a $50.00 gift shop credit per Guest to assist with basic clothing requirements. This offer may be expanded by the Hotel Manager to a total of $100.00 gift shop credit per Guest.

3.5.5 Every claim is reviewed individually.

3.6 Give them a toiletry kit and T-shirt.

3.7 If they really do not want to eat in the dining room, arrangements can be made to have meals served in their Staterooms.

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 12 (continued)

4 Politely inform them of the following:

4.1 The information will go immediately to our ground operator, which starts the search immediately and as soon as the luggage has been located they will endeavor to make the earliest possible connection with the ship.

4.2 Inform them that our agents are personally checking on it several times daily and they are in contact with the CHIEF CONCIERGE. The guests will be notified every day as to the current status of the situation whether any new information has been obtained or not.

4.3 We will provide them with a statement on the last day of the cruise detailing the fact that the luggage did not arrive before sailing and when it did arrive.

4.3.1 They can use this statement to file with the airlines or with their insurance company regardless if the luggage was found or not during the cruise.

4.3.1.1 If it is an airline mistake they can file their claim at the airport upon their departure.

4.3.2 If they ask for compensation on board, apologize and tell them claims are processed through our head office in Miami, because claims are looked at on an individual basis in order to assess the circumstances of their loss.

4.4 They are entitled to free express laundry service until their luggage arrives on board.

4.5 The shops can provide many of the items they may need and suggest they keep their receipts to submit when they make their claim with the airline or with their insurance.

4.5.1 Note that undergarments are not displayed and must be asked for.

4.6 Assure them that the restaurant will be advised of the situation and they will naturally be allowed entrance to the restaurant, regardless of their clothing. Encourage them to go out and enjoy themselves.

5 Do not guarantee receipt of the luggage as information is received; inform Guests that the luggage SHOULD or IS EXPECTED to arrive at the specified time and port.

5.1 Do not quote any airline reimbursement allowances although most airlines do provide a reimbursement. The GRD is not able to speak on behalf of the airlines. Advise them to look at the terms and conditions on their airline ticket.

5.2 There are several reasons why luggage could not arrive immediately after location:

5.2.1 Unaccompanied luggage is the first luggage an airline will leave behind if the plane is over its weight allowance.

5.2.2 A connection cannot be made to meet a port before sailing.

5.2.3 If luggage was never carried on an airline, it is difficult to find an airline that will take it due to safety reasons. This is especially true if it has to be sent internationally.

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Celebrity Cruises, Inc.: A Taste of Luxury 603-096

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Exhibit 12 (continued)

5.2.4 If luggage is expected to be sent to a port, our agent there goes to the airport to try and clear it through customs, and then will attempt to bring it back to the ship before we sail. Sometimes it takes too long and it cannot be brought back in time for sailing.

5.2.5 In Europe, guests claim their luggage at the airport themselves to clear through customs. If they do not make a claim with the airline before they board the ship, the airlines will not forward. We cannot make a claim in the guest’s name as per airline regulations.

6 CCI Miami is only involved if it is clearly the company’s fault, and/or they have no insurance.

7 Remember that EMPATHY is the key word. Be very understanding, reassuring, and helpful.

Source: Company information.

 

 

Exhibit 13 Suggested Gratuities

Restaurant Service Per Person Per Day Waiter $3.50 Waiter Assistant $2.00 Restaurant Manager $0.75 Stateroom Service Per Person Per Day Butler (suites only) $3.50 Stateroom Attendant $3.50 Chief Housekeeper $0.50

Source: Company information.

Notes:

Envelopes were provided to each guest at the termination of the cruise, labeled to indicate appropriate recipients.

For children less than 12 years old, as third or fourth person in the stateroom, half of the above amounts were recommended.

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 14 Millennium Facts and Figures (seven-day cruise)

Ship Length 965 feet Ship Beam (width) 105 feet Ship Speed 24 knots Decks 12 Elevators 10 Penthouse Suites 2 Royal Suites 8 Celebrity Suites 8 Sky Suites (6 wheelchair accessible) 32 Stateroom with Veranda (15 wheelchair accessible) 538 Ocean View Staterooms 235 Inside Staterooms (5 wheelchair accessible) 206 Beef consumed 9,250 pounds Chicken consumed 3,000 pounds Fresh vegetables consumed 26,000 pounds Rice consumed 2,250 pounds Cereal consumed 500 pounds Jelly consumed 300 pounds Cookies consumed 1,450 pounds Gallons of ice cream consumed 600 pounds Coffee consumed 1,000 pounds Bottles of champagne consumed 150 Bottles of vodka consumed 250 Cans/bottles of beer consumed 9,900 Bottles of wine consumed 2,600

Source: Company documents.

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Celebrity Cruises, Inc.: A Taste of Luxury 603-096

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Exhibit 15 Stateroom Descriptions

Penthouse Suite

Stateroom: 1,432 square feet

Veranda: 1,098 square feet

Features foyer; separate living and dining rooms; baby grand piano; butler’s pantry; master bedrooms with two lower beds convertible to king size; exercise equipment; dressing room with vanity; marble master bath with whirlpool tub, separate shower; powder room with shower; motorized draperies, lights and security system; two interactive audio/visual entertainment systems with TVs and VCRs; outbound fax machine; Internet station; veranda with whirlpool, wet bar and lounge seating.

Celebrity Suite

Stateroom: 467 square feet

Features two lower beds convertible to a king size; floor-to-ceiling panoramic windows; separate living room with dining and sitting area; two entertainment centers with plasma-screen TVs and VCRs; Internet station; walk-in closet with vanity table; bath including tub with whirlpool jets; glass- enclosed sitting area.

 

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603-096 Celebrity Cruises, Inc.: A Taste of Luxury

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Exhibit 15 (continued)

Premium Ocean-view Stateroom with Veranda

Stateroom: 191 square feet

Veranda: 41 square feet

Features two convertible lower beds; floor-to-ceiling glass doors; large sitting area, some with sofa bed.

 

Inside Stateroom

Stateroom: 170 square feet

Features two convertible lower beds; sitting area, some with sofa bed.

 

 

Source: Celebrity Cruises Travel Guide and http://www.celebritycruises.com/stateroom_start.asp?s=6D6A6FEA12&sh=ML, accessed January 26, 2003.

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Celebrity Cruises, Inc.: A Taste of Luxury 603-096

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Exhibit 16 Sample of Daily Activities

8:00 am Walk-a-thon. Meet the cruise staff at the Mast Bar. 9:00 am–12 The library is open. Sign up for books and I-Pod rentals. 9:45 am Join Millennium Port and Shopping Guide, Tabatha, learn important customers,

beach and shopping tips for San Juan and St. Thomas. 10:00 am War Veterans Get Together. 10:15 am Having a bad hair day? An informative seminar, how to have great looking hair. 10:45 am Shuffleboard with the cruise staff. 11:00 am Celebrity Enrichment with Helen Glowack, Feng Shui and Design Today: “Why ask

questions” – The 10 questions key to good design. 11:30 am $1,000 Jackpot Bingo Bonanza. 12:30–1:30 pm Fun under the sun with our Caribbean band Prodigy. 2:00 pm Complimentary Computer class with Basil: MS Word: starting off. 2:00 pm Golf putting with your cruise staff. 2:30 pm Auction of fine art! Over 100 lots in all styles and prices. 2:45 pm Wine appreciation. Learn the art of wine tasting. 3:00–5:00 pm Future cruise information with Brenda. 4:00 pm Movie: “My Big Fat Greek Wedding,” Rated PG-13, 93 minutes. 4:30 pm Seinfeld I.Q. test. How is your “Sein Language”? 6:00–10:00 pm Enjoy a cigar under the stars as we sail into the Caribbean. 8:00–9:00 pm Family disco. Mums & dads join the children and the youth staff. 10:00–10:45 pm Singles social with your cruise staff. Meet your fellow independent travelers and

make plans for the evening. 12 Mid till Close Formal Night Dance Extravaganza with D. J. Dwight (Minimum age 21)

Source: The Millennium Daily, on-board daily newsletter, January 6, 2003.

Note:

This did not represent the full offering of activities and events and was subject to change daily or across cruises.

Exhibit 17 Sample of Fitness Schedule and Spa Services

8:00 am Cardio Step 9:00 am Pathway to Yogaa 10:45 am Eat More to Weigh Less Seminar 3:00 pm Introduction to Pilates 4:00 pm Circuit in Motion 4:45 pm Pilatesa 5:30 pm Yoga by Sunset 8:30 pm Evening Stretch and Relax 9:30 pm Kai-Bo Kick Boxinga

Notes:

Fewer fitness classes were offered when the ship was in port than when at sea.

a There is a $10.00 charge for this class.

For the exclusive use of J. Zhang, 2020.

This document is authorized for use only by Jennie Zhang in HTM531 – Spring 2020 taught by Sybil Yang, San Francisco State University from Jan 2020 to Jun 2020.

 

 

603-096 Celebrity Cruises, Inc.: A Taste of Luxury

30

Exhibit 17 (continued)

Wash and Blow Dry Short hair: $33.00 Medium hair: $39.00 Long hair: $50.00

Cut, Wash and Blow Dry Short hair: $57.00 Medium hair: $72.00 Long hair: $77.00

Highlights from $62.00 Frangipani Hair and Scalp Treatment Short hair: $62.00

Medium hair: $68.00 Long hair: $79.00

Men’s Wash, Cut and Style $32.00 Sole Delight Luxury Pedicure $61.00 Hand Ritual Manicure $44.00 Repolish $17.00

Source: Company documents.

 

 

Exhibit 18 Sample Guest Complaint and Resolution

December 30, 2002

The guests say that they have been disturbed by a continuous drilling noise that comes from underneath their stateroom for two consecutive days. The drilling starts quietly, then builds up and goes on for about an hour, then stops. About an hour or two later it starts again. They have been unable to sleep and thus are not enjoying the cruise and want us to do something about it. They say that they are sure it is not the ship’s engine, and that it is something else.

Cc: CHIEF CONCIERGE. Chief Housekeeper.

12/31 08:28 Guest came back to the desk insisting on a room change.

12/31 09:23 Offered 9014, left voice mail.

12/31 12:32 Guest moved to 9014.

Please call in the morning (Wednesday) to see how it was.

01/01 Guest very happy in new room!

Source: Company documents.

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