Risk management in the cruise industry:
how important are customers to sustain competitive advantages?
Research Paper for Pre MSc
Author: Iman Mona Youssef Student number: S4011333 Email: i.m.youssef@student.rug.nl Supervisor: P.J. Marques Morgado
Co-assessor: -
Faculty of Economics and Business University of Groningen
Duisenberg Building, Nettelbosje 2, 9747 AE Groningen, The Netherlands P.O. Box 800, 9700 AV Groningen, The Netherlands
http://www.rug.nl/feb
TABLE OF CONTENT
Table of content ... 1
Abstract ... 2
Introduction ... 3
Literature review ... 5
The cruise industry ... 5
Main players in the cruise industry ... 6
Risk Management ... 7
The customer ... 11
The customer in the cruise industry ... 14
ABSTRACT
The cruise industry has experienced high growth within the last decades both in terms of passengers carried as well as in the number of cruise ships deployed. Thus, the industry is now one of the key areas of tourism and is expected to grow further in the future (after the current pandemic). The customer is the most important stakeholder of the industry, and their safety on board is a fundamental factor to guarantee the success of cruises and the growth of the sector. In the past, safety incidents have happened which makes an efficient risk management strategy highly important to assure customer satisfaction and hence high safety perception. Consequently, customer satisfaction regarding safety is a crucial concern for cruise ship companies seeking to sustain a competitive advantage. This research paper uses the theories of the Resource-Based View as well as the Dynamic Capabilities theory to develop hypotheses helping cruise ship companies to sustain their competitive advantage in the matter of risk management. Thus, the central research question of this paper is: ‘how do customers matter to risk management for firms in the cruise industry to sustain competitive advantages?’ There is little research done regarding the significance of the customer in terms of risk management. Therefore, this research paper attempts to provide an insight into the influence of the customers on the risk management strategies of cruise ship companies. The topic is of high relevance due to the topical threat of the coronavirus affecting industries worldwide making the provision of safety the top priority for the cruise industry. The results show four hypotheses attempting to aid firms in the cruise sector to sustain their competitive advantage. These hypotheses suggest an outstanding significance of customers to risk management in the cruise industry.
INTRODUCTION
Globalization – “a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that they are receding” (Waters, 1995, p.3). This definition of globalization is still applicable, although the statement is 25 years old. The current world in the 21st century is still driven by globalization which, in turn, fosters the
international tourism industry to continue growing as well. Many individual sectors are together forming the tourism industry, the cruise industry is one of them. The cruise industry has experienced extensive growth within the last years which made it one of the key areas of tourism (Dowling, 2006). Until the outbreak of the current pandemic, the industry continued to grow worldwide, in the number of passengers as well as in the number of cruise ships deployed. The number of passengers grew from 3.7 million in 1990 to 27.6 million in 2020, which is an annual passenger compound growth rate of 6.63 % (Cruise Market Watch, 2020). Larger passenger capacities, new builds, more local ports, and new on-board/on-shore activities that match the demand of customers drive the companies’ growth strategies. From 2018 to 2020, a total of 37 new ships with an additional passenger capacity of 99,895 have been launched (Cruise Market Watch, 2018). An analysis by the Crew Center (2017) estimated that worldwide there are around 250.000 crew members employed in the cruise industry. According to Cruise Market Watch (2018), the average cruise revenue per passenger per day for all cruise lines worldwide is projected to be $212.80, including $161.26 ticket price and $62.16 on board spending. The world’s largest and most profitable leisure travel company Carnival Corporation & plc with a portfolio of nine of the world’s leading cruise lines has generated a revenue of $20,825 million in 2019.
and a crew safety training to assure a high-safety standard and thus, a high safety perception of the customers.
The customer is the most important stakeholder for cruise ship companies. Customer motivation, price sensitivity, expectation, participation, satisfaction, and loyalty play key roles in the process of building a successful product in the cruise industry (Hung & Petrick, 2011; Testa, Skaruppa & Pietrzak, 1998). The goal to achieve customer satisfaction with perceived high service quality is well documented, mainly in highly competitive industries (Blodgett, Wakefield & Barnes, 1995). With the cruise sector continuing to grow, which also implies that cruise lines are building larger and more luxurious cruise ships, customer expectations are likely to rise in terms of services. Besides service quality and customer satisfaction, safety perception will be a fundamental concern for cruise ship companies seeking to maintain a competitive advantage (CA) (Testa, Skaruppa & Pietrzak, 1998). To operate safely and to implement appropriate risk management need to be the top priorities in order to fulfill customer expectations. On this foundation, sustainable competitive advantages followed by maximized profits can be built. In order to sustain a competitive advantage, a cruise ship company needs to ensure high customer satisfaction which leads to customer loyalty and eventually, to increased sales. To ensure high customer satisfaction, effective risk management with the result of high safety perception of the customer must be developed.
Therefore, this research paper aims to provide an insight into the influence of the customer on the risk management strategy of cruise ships in order to assure a high safety standard on board. This is done with the help of two theoretical methods: the Resource-Based View (RBV) and the Dynamic Capabilities theory (DC). These two models have been chosen as the RBV helps to create CA through the firm’s resources while the DC theory suggests a quick adaption to the environmental situations to ensure the sustainability of the competitive advantage.
Hence, the paper follows the research question (RQ) and the accompanying sub-question (SQ):
RQ: ‘How do customers matter to risk management for firms in the cruise industry to sustain competitive advantages?’
SQ: ‘How can the safety standard on board be improved to increase safety perception?’
LITERATURE REVIEW
The cruise industry
In the late ’90s, the cruise was the fastest-growing major sector with an 8 % annual growth since 1980 (Dickinson & Vladimir, 1997). Davidoff and Davidoff (1994) identified five important key points attempting to explain the huge growth of the cruise industry:
(1) Passengers have the opportunity to visit a variety of places in a short time period without the problems of other modes of travel
(2) The ships are self-contained
(3) Cruise ships have a cruise director and staff whose sole function is to make sure passengers have an enjoyable time
(4) High-quality food is served
(5) Everyone begins and ends their vacations on the same day
According to Vogel (2011), this high growth rate is a result of the cruise industry’s ability to make cruises affordable. He finds price decrease as the key factor for the sharp increase in passengers over the last three decades (Vogel, 2011). A possible and likely explanation for the decrease of the price may be the increase of the supply side by cruise ship companies. Johnson (2002) explains that cruise ships promote their product as floating hotels which bring travelers to the most interesting destinations in a relatively short time period. This promotion is intended to increase revenues instead of high ticket prices (Johnson, 2002). Klein (2005) added that cruise ship companies use cunning tactics in order to maximize offshore sales, such as charging for alcoholic beverages. A reason is that the cruise industry attempts to increase customers’ expenses on board compared to their expenses ashore in ports (Larsen, Wolff, Marnburg, & Øgaard, 2013). According to Vogel (2011), the ticket revenue does not cover the costs and therefore, the industry depends on additional expenses generated from customers on board such as making use of the Spa-area.
highly efficient business with its famous destinations. But the passenger numbers are also growing in northern Europe, Alaska, and South America (Pallis, Rodrigue, & Notteboom, 2014). Besides the price, and unlike usual tourism products, the cruise ship being the transportation device and the core element of the experience is another explanation of the rapid growth of the industry. However, this rapid growth is also accompanied by an increase of multiple risks affecting the cruise line itself, ports, destinations, passengers, and crew members (Pallis et al., 2014).
It can be inferred that the customers are the most important actors in the industry. It becomes clear that the customers and their loyalty are enormously important for the cruise ship companies to be and keep being profitable.
Main players in the cruise industry
The world’s largest cruise company is Carnival Cruise Lines which possesses 103 modern and big vessels (Cruise Market Watch, 2018). With Royal Caribbean Cruise Lines being the second biggest cruise company worldwide, it also owns the largest cruise ship in terms of lengths and passenger capacity with the ‘Symphony of the Seas’ being 362 meters long and having the capacity to hold up to 6,680 passengers (Ros, 2018). The business models differ from the ones in freight shipping markets. The high vertical integration of activities in the value chain are supplemented with greater attention to market segmentation. Therefore, the biggest cruise lines have developed different brands in order to assure product differentiation to target a variety of different target groups. Thus, Carnival
FIGURE 1
Cruise Lines is associated with among others AIDA, Costa Cruises, Holland America Line, P&O Cruises UK, Princess Cruises, and Seaburn (Pallis et al., 2014). Royal Caribbean Cruise Lines is associated with the brands Celebrity and Azamara (Cruise Market Watch, 2018). Besides these two main players, several smaller cruise companies are also represented at the world cruise market, yet having a much smaller market share and less number of passengers.
FIGURE 2
Market share Cruise Lines 2018 (Cruise Market Watch, 2018)
Risk Management
can occur for passengers and crew. It targets mainly gastrointestinal illness. Moreover, the organization scores cruise ships on a 100-point scale. A cruise ship scoring below 86 has failed the inspection as it has a lower general level of sanitation and therefore, has to be reinspected after the conditions have been improved. However, a lower score does not automatically mean an aggravated risk for gastrointestinal illness (Gibson & Parkman, 2018).
Even though cruise ships are supposed to be inspected concerning their sanitation level, an infection triggered by a virus cannot be prevented. A very recent example is the cruise ship Diamond Princess, which was quarantined for over two weeks. One person who traveled on the cruise ship and disembarked in Hong Kong was tested positive for the so-called ‘coronavirus’. Since the cruise ship was located in Japanese waters, Japanese authorities denied the 3,700 passengers and crew (17 %) on board to leave the ship when it reached Yokohama. After two weeks of quarantine, passengers could disembark and a total of 619 passengers were infected by the coronavirus (Wilder-Smith, Sjödin, & Rocklöv, 2020). More passengers had been infected than if they would have disembarked immediately. Hence, it can be concluded that the decision made by the Japanese authorities is questionable since the cruise ship conditions amplified the spread of the virus. Nevertheless, the study proves that the interventions by the cruise ship prevented more than 2,000 additional infections. Another organization, the International Maritime Organization (IMO), provides an international framework for cruise ships to ensure safety and security (Cartwright & Baird, 1999). The Formal Safety Assessment (FSA) is a tool developed by the IMO for risk assessment. The framework suggests five steps to achieve the goal of providing safety in all aspects regarding vessels (Gibson, 2006; Vidmar, Perkovic, & Brcko, 2013):
1. Hazard identification (based on potential accident scenarios) 2. Risk assessment
3. Risk control options (devising measures) 4. Cost-benefit analysis
5. Decision-making recommendation (taking all the facts into account)
The risk assessment (point 2) criteria use the following categories (Vidmar, Perkovic, & Brcko, 2013):
Intolerable: The risk level is intolerable. Risk must be reduced regardless of the cost. Tolerable: The risk level is tolerable provided that risk is managed to as low as
Partially acceptable: The risk level is negligible. There is no need to conduct a cost-benefit analysis.
This approach describes an integrated and proactive evaluation of risk based on five clearly defined steps.
In addition to that, Vidmar et al. (2013) point out that there exists a difference between individual risk and societal risk. Individual risk, on one hand, is described as the “frequency for an individual fatality per year” (p. 169), in which an individual can be a passenger or a crew member. However, a higher risk is tolerable for crew members than for passengers because they have been trained for their voluntary job activities and are more aware of the potential risk. Societal risk, on the other hand, is the likelihood of catastrophic accidents causing major societal concerns. The risk is measured by the probability of a large number of people being affected by accidents at the facility or through the cruise ship’s activity (Vidmar et al., 2013).
Table 1
Possible Hazardous Events during Operation Phases (Vidmar et al., 2013)
members and the crisis coordinator pled guilty and received sentences of less than three years, while F. Schettino did not plead guilty but was sentenced to more than 16 years in prison (BBC, 2016). This is an example, which fits two phases; cruise and docking. Even though the cruise ship was not supposed to land at the near Island, it got too close to the shore and hit an ‘unknown object’, which lead to grounding (phase 3; cruise).
When confronted with certain risks, such as the aforementioned Costa Concordia accident, individuals express anxiety (Reisinger & Mavondo, 2006). Consequently, it follows an adaption of their behavior to an approach that is for individuals an appropriate level of risk-taking. This approach can influence the decision-making processes of travelers domestically as well as internationally (Rittichainuwat & Chakraborty, 2009). Thus, a clear distinction has to be made between the definition of the actual safety standard and the safety perception by the individual. Risk perception of an individual is measured by analyzing the relationship between uncertainty and adverse consequences (Le & Arcodia, 2017):
Risk perception = Uncertainty + Adverse Consequences
Additionally, Brave and Nass (2002) explain that stress and a sense of safety are important indicators of how an individual will behave in a risky situation. Especially in the cruise industry, it is crucial that supervisors and employees are setting good examples in terms of safety behavior (Flin, Mearns, O’Conner, & Bryden, 2000), as employees’ perception of risk influences their behavior and thus, the probability of accidents (Rundmo, 2000). These facts highlight the significance of effective communication and information sharing to realize quick, concrete, and useful safety procedures.
Henthorne, George, and Smith (2013) state that risk perception has a remarkable and significant impact on an individual’s purchase intention. The visual appearance of products, the customer’s culture, their background, and their prior experiences are important indicators for product success (Crilly, Moultire, & Clarkson, 2004). Hence, creating an environment with a high level of risk perception among its passengers can lead to increased booking of cruise trips.
The customer
FIGURE 3
Customer satisfaction model according to Kano (1984)
The threshold attributes, also known as must-be qualities, are attributes that are taken for granted by customers. When these attributes are not fulfilled, extreme dissatisfaction is the result. However, their fulfilling does not lead to higher satisfaction as these attributes are ‘basic criteria’. Performance
attributes, or one-dimensional qualities, lead to customer satisfaction when they are fulfilled,
resulting in a proportional increase of satisfaction to the level of fulfillment. When they are not fulfilled, dissatisfaction is again the outcome. Performance attributes are normally demanded by the customer. The excitement attributes, or attractive requirements, have the largest impact on the level of customer satisfaction given in a specific product/service. These attributes are not explicitly demanded or expected by the customer. Yet, fulfilling of the excitement attributes leads to exponential growing customer satisfaction. Not fulfilling the requirements, though, does not lead to dissatisfaction (Kano et al., 1984).
improve product/service features. Moreover, customer-specific enhancements for different customer segments and target groups can be determined to reach an optimal level of satisfaction.
The customer in the cruise industry
Customer satisfaction represents the overall goal of cruise ship companies. In order to be able to realize high customer satisfaction, a cruise ship company should be aware of the main motivations for customers participating in cruises. ‘Motivation’ is defined as “internal psychological factors (needs and wants) that generate a state of tension or disequilibrium within individuals” (Crompton & McKay, 1997, p. 427). Hung and Petrick (2011) found that ‘escaping/relaxation’ was the strongest motivation for cruise tourists, indicating the importance of freedom, escaping from daily routines, and resting during the cruise. However, providing only escaping and relaxing services is unlikely to result in high customer satisfaction. Rather, cruise ship companies should also aim to fulfill ‘learning/discovering and thrill-’, ‘self-esteem/social recognition-’, and ‘bonding-’ desires of customers (Hung & Petrick, 2011).
Cruise ship companies being able to provide these services on a high quality level are likely to achieve high customer satisfaction. Quality is associated with absolute customer satisfaction (Gibson & Parkman, 2018). Juran and Gyrna (1980) claim that quality is judged by the customer’s perception of whether their expectations meet their experiences. Similarly, Zeithaml, Berry, and Parasuraman (1993) state that service quality and customer satisfaction are the results of the comparison between expected and perceived quality. Every company needs to understand the requirements of the customer in order to assess the organization’s ability to meet these requirements (Juran & Gyrna, 1980). Hence, the aforementioned model developed by Kano (1978) can be applied in the cruise industry. Feigenbaum (1991) defines quality as the combined product and service characteristics of marketing, engineering, manufacture, and maintenance in which the product and service in use will meet the requirements of the customer. Hence, quality is defined by the customer, which makes the customer the most important key player of success in the cruise industry.
encounter (Zeithaml, Berry, & Parasuraman, 1988). Dealing positively with complaints can turn an unhappy customer into a satisfied one, which generates positive PR.
In order to create and keep high customer satisfaction, it is crucial to provide customers with as much information as possible. In any cruise ship with a remarkable number of customers, information must be communicated effectively and promptly (Gibson & Parkman, 2018). Furthermore, innovative cruise ships use easy-to-use systems in services that expand guest choices and simplify schedules. With the help of advanced technology, a rapid procedure of boarding, luggage tracking, and shore excursions is possible and thus, passenger’s experience can be improved (Pallis, 2015).
Another important factor to ensure customer satisfaction is employee attitude (Schneider & Bowen, 1985). The relationship between employee job attitude and customer satisfaction has been statistically tested by Schmit and Allscheid (1995). The result showed that an employee’s intention to provide quality service leads to better customer service and thus, to higher customer satisfaction (Schmit & Allscheid, 1995). It can be assumed that a satisfied employee will extend the attitude to their customers, which leads to increased positive service experience and satisfaction. Three types of job satisfaction are distinguished: satisfaction with the company, satisfaction with the supervisor, and satisfaction with the work environment all influencing the attitude an employee has towards their customers (Testa, Skaruppa & Pietrzak, 1998). Consequently, cruise companies emphasize Quality Management System (QMS) elements in their strategies to achieve the satisfaction of both the customer and the employee. Integrating QMS into a companies’ strategy includes its structure, documentation, processes, and resources necessary to achieve goals in terms of quality and hence fulfill customer’s needs and requirements (Midor, 2013).
Concluding, providing an exceptional experience to reach high customer satisfaction within an environment perceived as extremely safe should be a main aspect of a cruise ship company’s business strategy and can lead to a competitive advantage.
Resource-Based View
Barney (1991) distinguishes between sustained competitive advantages (SCA) and competitive advantages (CA). The difference is that an SCA is a strategy, which adds value to the company and will not be implemented by any competitors in the future. Hence, competitors are not able to copy the exact strategy. A CA, however, indicates a strategy that creates value for the firm and is not implemented by competitors at a specific time.
To gain (S)CA, a firm’s resources must be valuable, rare, inimitable, and organizational supported.
Valuable, in terms of resources generating opportunities or respond to threats. Resources need to be rare in the industrial environment. Inimitable means that competitors must be unable to imitate the
resource easily. Lastly, resources must be organizationally supported since the resource itself does not provide any advantage for the firm if it is not organizationally supported. A firm must organize its management systems, processes, policies, organizational structure, and culture to be able to use its resources to create competitive advantages.
This theory sets a foundation to analyze a firm’s performance based on its internal situation in order to create competitive advantages. The firm is established out of a unique bundle of resources and capabilities that eventually determine a firm’s long-term strategy. Hitt, Hoskisson, and Ireland (2007) recommend five steps to implement the RBV. First, firms need to identify their resources and capabilities. Second, a firm should identify its strengths and weaknesses. Followed by emphasizing core competencies resulting in competitive advantages as the third step. Fourth, select distinct markets and industries in which the CA works best. Finally, a firm needs to create and implement a suitable strategy with the help of its CA that obtains high returns. Cruise ship companies need to be aware of the value, rarity, inimitability, and organization of their resources and capabilities to be able to develop distinct competitive advantages to create long-term strategies helping to maintain or improve their position on the cruise market.
Dynamic Capabilities
rather than on defining resources. Further, the existing internal and external competencies should be recombined to fully exploit them. Core competencies must be used to improve short-term competitive positions. These positions ought to be utilized to create sustained competitive advantages (Teece, Pisano, & Shuen, 1997). This can be done through a quick adaption to ever-changing environmental situations, especially with regards to the customer. Customers’ expectations, motivation, price sensitivity, participation, and loyalty may change based on different criteria trigged by events beyond a firm’s control.
RESEARCH DESIGN
The research design used in this paper follows the onion model developed by Saunders, Lewis, and Thornhill (2009). The model provides a clear structure of how to conduct research.
The philosophy is distinguished into positivism, realism, interpretivism, and pragmatism. In this research paper, the philosophy is defined as interpretivism as it integrates human interest into the study and claims that every reader develops their personal understanding of the topic. Hence, the focus of the study is on the meaning and interpretation of the topic shaped by the writer’s preconception. This paper aims to understand how customers matter to risk management in the cruise industry and how the safety perception of the customers can be improved. It attempts to explain and give solutions in the form of hypotheses to answer both the research question and the sub-question with the help of qualitative data to customers’ significance and how firms can use them to sustain competitive advantages.
The research paper is based on an inductive approach. First, the research- and sub-question have been created, and subsequently, literature providing information and theories have been collected. The research question aims at narrowing down the extent of the research to the significance of the customer. The sub-question highlights the importance of safety perception in risk management. Secondly, with the help of the information gained, a conceptual model has been developed and the analysis has been conducted resulting in several hypotheses aimed at answering the two research questions.
Concerning the strategy of this research, Saunders et al. (2009) suggest different types of research such as experiments, surveys, case studies, ethnography, grounded theory, and archival research. Archival research in terms of scholarly documents and materials is the most suitable type in this research. The literature review is fully based on electronic sources containing online books, journal articles, reports, and newspaper articles. Moreover, only secondary data is used throughout the research.
The time horizon used is cross-sectional, which is the measurement of the variables to a specific point in time. The time horizon has been chosen due to the short time frame of roughly three months of conducting the research.
With regard to the inner layer of the onion model called ‘data collection and analysis’, secondary data is collected through several electronic sources. Mainly, the Business Source Premier database provided by the University of Groningen as well as Google Scholar are used to gather information about the phenomena, activity, industry, topic, and theories. The elaboration of the information gathered forms the fundament of this research. Particularly, journal articles written by scholars are interpreted and compared to explain the current status within the research area of customer’s significance in risk management in the cruise industry. The keywords that have been researched are
cruise industry, cruise ship, customer, customer satisfaction, risk, security, safety, strategy, management.
ANALYSIS
Customers’ satisfaction and high safety perception have been highlighted as indicators for the relative success of a cruise ship’s risk management. The satisfaction is influenced by the level of service quality a cruise ship company is able to provide. The service quality, in turn, is influenced by the level of customer participation. Customer participation can be subdivided into three different aspects. First, a cruise ship company must be able to meet customers’ requirements for the product and the service. Second, a firm should let the customers participate in the process of building and improving the final product through communication and feedback opportunities. Third, the cruise ship should use the customer as a resource during the trip. For instance, passengers who are actually medical doctors can help saving human lives in critical situations and eventually save the cruise ship company valuable money. To ease customer participation on board, launching a tailored App for the passengers will increase the quality of services. With the help of an App, passengers will be able to among other things order services on board, book shore excursions, communicate with the crew to provide valuable feedback, complain about certain things, or offer help if needed. Hence, the first hypothesis has been developed:
H1. Customer participation delivers better services by using a dedicated App.
The service quality is not only influenced by customer participation but also by the level of skilled and trained crew members operating on a cruise ship. This involves the embarking of passengers, the services during the trips, the docking at ports, and the disembarking of passengers. Quality is differently defined within these processes, yet, simple services may be accelerated with the help of robots on board. For instance, the procedure of bringing the luggage of all passengers to their dedicated rooms might take several hours, which can lead to long waiting times and unsatisfied customers. With the help of robots who can track the luggage and complete these tasks within short time-periods, significant time savings and better services can be realized. Therefore, the second hypothesis has been developed:
H2. Skilled and trained crew members provide better services by being complemented with robots.
increase passengers’ safety. The very recent example concerning the coronavirus shows the susceptibility of ships to viruses. An outbreak of a virus infects a large number of passengers within a short amount of time and can eventually lead to death. Consequently, crew members need adequate equipment in terms of protective clothing to react fast and handle the threat accordingly; that is, being able to quickly arrange and execute the isolation of passengers. Therefore, the third hypothesis has been developed. This hypothesis relates to and answers the sub-question:
H3. Despite the increase of risks in terms of health hazards due to the industry growth, higher safety ratings can be delivered by implementing protective equipment for infectious diseases in a cruise ship’s standard equipment.
Different kinds of misfortunes can happen during a cruise trip. Passenger injuries, fires on board, terrorism attacks, collision and grounding, and medical emergencies are just a few examples. Since incidents like these attract wide media attention, (potential) customers will be informed and will react emotionally. Consequently, they may adjust their actions to a subjective appropriate level of risk-taking. As learned before, fear leads people to make a pessimistic judgment of (future) events. It has been explained how a cruise ship company can increase customer satisfaction in order to achieve high safety perception. It is assumed that high safety perception leads to sales, and sales are influenced by customer loyalty. Hence, it is crucial for cruise ship companies to improve their customer loyalty in order to increase their sales and finally sustain their competitive advantage. By doing so, to create the opportunity to virtually connect on board with the help of a social media platform, on which passengers can voluntarily share pictures, ideas, comments, and communicate with each other to build new relationships, increase customer loyalty in terms of brand identification and delivers higher sales. Furthermore, certain benefits such as booking discounts for the next journey can be offered on such a platform, which will lead to repeat visitation. Thus, the fourth hypothesis has been developed:
H4. Customer loyalty brings higher sales volume by creating a community on a social media platform for the guests of cruise ships.
CONCEPTUAL MODEL
Hypothesis 1. Customer participation delivers better services by using a dedicated App.
Hypothesis 2. Skilled and trained crew members provide better services by being complemented by robots.
Hypothesis 3. Despite the increase of risks in terms of health hazards due to the industry growth, higher safety ratings can be delivered by implementing protective equipment for infectious diseases in a cruise ship’s standard equipment.
CONCLUSION
This research paper aimed to investigate customer participation in risk management in the cruise industry to sustain a competitive advantage. The methodological approach attempts to add to the knowledge of the relationship between customers and risk management to aid develop RBV- and DC-strategies to increase the success of cruise ship companies’ risk management. The literature review has helped to develop four hypotheses impacting the relationship.
The literature analyzed indicates that the issue of safety is emotional and thus subjective. Furthermore, the high media and public attention of cruise ship incidents may influence customer’s risk perception and satisfaction. However, only eleven incidents with large cruise ships were documented in the time-period 1988-2014 (Holt & Wang, 2014), indicating the relative safety of traveling with cruise ships over the years.
Nonetheless, research has shown the significance customers may have on the success of a cruise ship company. The two most applicable hypotheses to realize an increase in service quality which leads to higher customer satisfaction are Hypothesis 1 and Hypothesis 2. The first hypothesis suggests the launch of a dedicated app to deliver better service on the cruise ship. To launch a tailored app to ease customer participation is a logical step towards digitalized services on board. An app may have a considerable impact on customer satisfaction as it provides guests with the possibility to participate and be a meaningful part of the cruise ship business concept. This allows a higher added value to be achieved.
Hypothesis 1. Customer participation delivers better services by using a dedicated App.
Similarly, the second hypothesis suggests the use of robots as additional crew elements to accelerate certain processes and procedures that can be easily done by robots and lead to enormous time savings. Researchers agree on the assumption that customer expectation/participation as well as service quality, and customer satisfaction will continue to be a fundamental concern for cruise lines seeking to maintain a competitive advantage (Schneider & Bowen, 1985; Hoffmann & Ingram, 1992; Zeithaml, Berry, & Parasuraman, 1993; Bitner, Booms, & Mohr, 1994; Testa, Skaruppa, & Pietrzak, 1998).
Hypothesis 2. Skilled and trained crew members provide better services by being complemented by robots.
especially the implementation of robots may have an impact on job tasks and responsibilities. Thus, some employees may feel threatened by automatized robots.
The third hypothesis relates to the sub-question presented. Hypothesis 3 attempts to provide a solution for the sub-question of how the safety standard on board can be improved to increase safety perception. To implement protective equipment for infection diseases within the standard equipment of every cruise ship will increase safety perception on board. Thus, employees and passengers on cruise ships will immediately be provided with corresponding equipment without depending on mainland suppliers. Consequently, their safety rating will increase which can be used as an advertisement in order to increase a customer’s safety perception.
Hypothesis 3. Despite the increase of risks in terms of health hazards due to the industry growth, higher safety ratings can be delivered by implementing protective equipment for infectious diseases in a cruise ship’s standard equipment.
With regard to the theories used, cruise ship companies ought to use both theories (RBV and DC) to develop new and adjusted strategies to be able to sustain their competitive advantage in the cruise industry. This research paper gives ideas, suggestions, and proposals on how to combine already existing resources and capabilities with challenging and changing business environments to successfully achieve high safety perception and eventually increase sales. Both theories are highly suitable to answer both the research- and the sub-question and should be integrated in a combined manner to form and adjust a company’s strategy to the rapidly changing environment driven by globalization.
Limitations
Future Research
Concerning future research, attention may be spent on the amount of investment needed to create, design, and implement the new technological devices on board as well as to integrate equipment for infection diseases. Moreover, further research could show the effectiveness and the impact the use of these new technologies and the new equipment might have on customer satisfaction and safety perception. For this matter, experiences of other competitive industries such as the aviation sector might be useful. How do airlines deal with customer participation and can the knowledge be beneficial for the cruise industry?
Another proposal for future research is the study of risks arising before and after the cruise and the influence on customers.
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