Holland America Line “Take a journey to reward your life”

1. Pictures & Logo Holland America Line “Take a journey to reward your life” HOME

2. Agenda • Situation Analysis • Issues & Objectives • Recommendations • Financial Projections • Conclusion HOME

3. Company Profile • Seattle-based cruise line • Subsidiary of Carnival Corporation • Leader in cruising market • Premium type of cruise brand • 90% of passengers are American • Baby boomers are the main passengers • Receives several awards & accolades HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

4. Financial crisis has led to a steep drop in consumption which affects the cruise industry. Macroeconomic Assumption 3 1 2 Financial system forced to shed asset and limit lending Lack of sufficient fund from government Undermine spending and investment Macro Assump. 6 4 5 Depress wealth and consumption Fall in stock and housing prices Result in crippling banks Economic Recovery 9 7 8 Result in impulsive lending from banks Lower of interest rate by Federal Reserve Severe Recession Consumer Behavior HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

5. Financial crisis has led to a steep drop in consumption which affects the cruise industry. Macroeconomic Assumption $US GDP in trillion Macro Assump. Recovery (1.5 yrs.) Recession (2 yrs.) Trough (1.75 yrs.) Economic Recovery 14.51 Consumer Behavior 14.28 Year 2008 2009 2010F 2011F 2012F 2013F HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

6. The Government and the Federal Reserve play an important role in rescuing the U.S. economy. Recession Trough (U-Shape Recovery) • Interest rate cut • Tax cut • Expansion of unconventional lending • Injection of equity into banks • Guarantee of bank debts • Expand deposit insurance Money market starts to function again Macro. Assump. Economic Recovery Consumer Behavior Restore consumer confidence in financial systems HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

7. There will be some permanent changes of consumer behaviors after the financial crisis. Changes in Consumer Behavior The root cause of the financial crisis => HUMAN Macro. Assump. • Unsustainable lifestyle • Overspending • Little savings • High use of future cash • Overuse of credit cards Economic Recovery CHANGES • More sustainable lifestyle • More conservative • Little use of future cash flow • More savings • Less spending on luxury items • xxx • xxx • xxx • xxx Consumer Behavior HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

8. Issues Identification Now (2009) Future (2015) • 90% of passengers are North American • Declining revenue from “Last minute booking” • Cutting prices to retain same sales growth from previous year • xxx • Passengers are various countries • More sources of revenue • Healthy revenues and profit growth • Intense marketing efforts • Expansion of customer base HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

9. Issues Identifications Objectives Issues How can HAL increase revenues without compromising its brand image? To create new values for HAL services • xxx How can HAL maximize its customer satisfaction? To implement Customer Experience Management How can HAL expand its customer base? To expand to European countries HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

10. Recommendations PICTURE Rewarding Strategy Satisfying Strategy Expansion Strategy HOME

11. HAL can increase its revenues by establishing a value of the experience on cruises to customers. “Rewarding” Concept Old Values New Values • Overspending lifestyle • Luxury item • Fun and excitement • Sustainability life • Necessity item • Happiness in life “Take a journey to reward your life” HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

12. HAL can increase its revenues by emphasizing on marketing promotional tools “Special” Concept GOAL: To raise prices back to pre-recession levels 50% of the ticket price “Take someone special with you for a HALF PRICE ticket” Ticket HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

13. Recommendations Rewarding Strategy Expansion Strategy Satisfying Strategy PICTURE HOME

14. HAL can maximize customer satisfaction by implementing the Customer Experience Management (CEM). “Satisfying” Concept • xxx GOAL: To retain and maximize customer satisfaction on board 1 2 3 New Exotic Themes New Activities & Services Track Record of Customer Preferences HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

15. HAL can maximize customer satisfaction by building a social networking via new innovative media. “Networking” Concept • xxx GOAL: To enable passengers to be socially connected to others Organize discussions or topics that target customers share same interests E.g. global warming & environmental issues HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

16. Recommendations Rewarding Strategy Satisfying Strategy Expansion Strategy HOME

17. We think that Europe is still the best market for HAL to expand its customer base. “Expanding” Concept • xxx Distribution Channels Strategic Alliance with major travel agents HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

18. HAL should create a buzz when first entering into the European markets . “Buzzing” Concept GOAL: To create brand awareness among customers in EU First phase Second phase Third phase “A Charity Cruise with Elton John” TV Advertisements E.g. BBC, & Bloomberg Tournament Sponsor E.g. Soccer & Golf HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

19. HAL can maximize customer satisfaction by implementing the Customer Experience Management (CEM). “Expanding” Concept GOAL: To enable people from EU to easily gather information from the HAL website Online Website Our solution! Customer Experience Contact Point HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

20. Implementation HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

21. Financial Justification • xxx Share of British Cruise Market HAL Others After Before HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

22. Financial Justification • xxx • NPV = $98.88 Millions • Initial investment = $900 Millions A Worthwhile Investment for Expansion Strategy HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

23. Financial Justification • xxx CAGR =21.30% $US in million $US in million Year Year HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

24. Conclusion Rewarding Strategy Satisfying Strategy Expansion Strategy HOME Company Profile Situation Analysis Issues & Objectives Recomm. Financial Projections Conclusion

25. Q & A HOME

26. Slide Index General SWOT Analysis of HAL 13 Types of Baby boomer habits Competitive Analysis Strategy 3 Why not Far East Asian countries? Why not Middle East Asian countries? Why go to U.K.? (1) Why go to U.K.? (2) Why focus on Soccer and Golf? Why focus on BCC & Bloomberg? How can we compete with competitors? Financial Justifications Sensitivity Analysis Calculation Inputs Company Profile Situation Analysis Situation Analysis (1.1) Situation Analysis (1.2) Situation Analysis (2) Situation Analysis (3) Issues & Objectives Issues & Objectives (Now & Future) Issues & Objectives Strategies Strategy (1.1) Strategy (1.2) Strategy (2.1) Strategy (2.2) Strategy (3.1) Strategy (3.2) Strategy (3.3) Implementation Plan Implementation plans Financial Projection Financial Projections (market share) Financial Projections (Rev. & profits) NPV Conclusions

27. Holland America Line • Strength: • Customer Loyalty • Quality Service • Large market share in North America • Large choices of destination and on-board services • Weaknesses: • No customer base in Europe and other non-North America • Opportunities: • Growth of aging population in North America and Europe • Small players are cheaper to buy at recession • Threats: • Change in consumer behavior towards more frugal lifestyle HOME

28. 13 Tips for Baby boomers in U.S. & EU 13 truths about baby boomers Boomers consider travel a necessity, not a luxury. Boomers have traveled more than their predecessors. Boomers see themselves as forever young. Boomers want to have fun. Boomers demand immediate gratification. Boomers are not passive. Boomers think they are special. Boomers like creature comforts. Boomers are time deprived. Boomers will pay for luxury, expertise and convenience. Boomers are skeptical of institutions and individuals. Boomers like to associate with people like themselves. Boomers are not homogenous. HOME

29. Why not East Asian countries? • Lifestyle difference-Cruise is still more popular in Europe than in Asia • Spending more on children and save more of their earning • Purchasing power is lower in Asia HOME

30. Why not Middle-East Asian countries? • Baby-boomers aging population is low • Not the right target segment for HAL HOME

31. Why expand to U.K.? • Growth of aging population • High purchasing power – top ten percent population hold majority of assets in the country • Similar leisure activities to those in the US HOME

32. Why expand to U.K.? HOME

33. How can HAL compete with competitors? Major Competitor: Royal Caribbean Cruise International • Royal Caribbean Cruise International has a number of weaknesses on its services on board as in the next two slides

34. Weakness of RCI How can HAL compete with competitors? • Caribbean have found limited selections in places to grab a bite to eat, with little available poolside and only a handful of eating areas to choose from. Also, while ice skating is a big hit on this cruise ship, the hours available for skating tend to be very limited and are often around the dinner hours. This makes it difficult to find a good time to indulge in this activity. Finally, many Royal Caribbean passengers may find that the service on Royal Caribbean is less attentive, probably due to the fact that the ships are so large.

35. Weakness of RCI How can HAL compete with competitors? • The main weakness of a Royal Caribbean cruise is that it is not the kind of cruise line that a person who wants privacy should choose. The cruise ships are large, and as such many people will be on the ship, both in the form of guests, and in the form of staff. • For example, if you are the kind of person that likes to relax by yourself at the pool, you really should not go on a cruise, because the pool is the main attraction of the ship. As such, many people will be relaxing by the pool for most of the day. The only time you might get the pool almost to yourself is if you decide to not go on a shore excursion to one of the cruise stops.

36. Why focus on golf and soccer? • Soccer is the most popular sports in Europe • Golf is a prestigious sport played by many baby-boomers HOME

37. Why focus on BBC & Bloomberg? • Target market is upper-middle baby boomers and executives who are interested in financial news and surrounding environment HOME

38. Sensitivity Analysis HOME

39. Calculation Inputs • Purchase = 3 ships -- $300m per ship • Average capacity per ship = 1,500 persons • Average ticket price = $1,300 per person per week • Operating margin = 43% • Cost of Debt = 7.5% • Cost of Equity = 6.5% • WACC is approximately 7% • A cruise can be used for 30 years HOME