Social Media and the influence on the cruise industry

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Social Media and the influence on the cruise

industry

Master Thesis

Author: Marc Broeckelmann

Student number: 2556030

University of Groningen

Faculty of Economics and Business

MSc International Business and Management 2014/2015

Supervisor: Drs. J. (Hans) van Polen

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Abstract

The main purpose of this study is to analyze the social media activities of the cruising industry in relation to their financial performance and passenger numbers. To be able to investigate the research question, statistical methods such as regression analysis and ratio analysis have been executed. With the help of facebook as well as the results from the analysis the author has been able to receive meaningful insights in the topic. Firstly, a literature review has been carried out to determine the most significant issues from the cruising industry and social media marketing. Then, the statistical methods have been carried out to investigate the possible effect of social media activities on the firm performance and passenger numbers. In the end, an extensive discussion is provided to achieve a thorough understanding of this research.

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List of tables

Table 1: Oligopoly 6

Table 2: Marketing 14

Table 3: Social media 16 16

Table 4: Facebook fans 21

List of figures

Figure 1: Conceptual model 19

Figure 2: Indexed Revenue Comparison RCC and CC 24

Figure 3: Histogram: Indexed Revenue RCC 25

Figure 4: Histogram: Indexed Revenue CC 25

Figure 5: Social Media activity and indexed revenue of CC 26 Figure 6: Social Media activity and indexed revenue of RCC 26

Figure 7: Social Media Posts RCC and CC 27

Figure 8: Number of Passengers RCC and CC 28

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1. Introduction

The cruising industry has been recognized as a pure transport function in the early beginnings; but nowadays the industry has evolved to an absolute tourism function (Véronneau & Roy, 2009). Currently, this industry is one of the fastest growing segments worldwide with an average increase of 8.4% in passenger numbers since the 1980s (Brida & Aguirre, 2008). However, Gibson (2008) states that little research has been carried out to receive in-depth knowledge into this complex and unique industry.

In general, the cruising industry has been influenced by significant issues, such as globalization, multiculturalism and the changing age structure of the population (Gibson, 2008). In addition to that, Lois, Wang, Wall and Ruxton (2004) further argue that the key players that are part of an oligopoly market have significantly invested in the expansion of cruise capacity, to continuously balance the market and enlarge the entry barriers for potential competitors. This is in line with the research of Brida and Zapata (2010), who state that the entry barriers for the cruising industry are on a high level, particularly due to license restrictions and high capital requirements.

Based on the information mentioned above, the cruising industry still offers a large field of research opportunities for authors. The underlying study aims to contribute to a certain amount to the field of management theory as it provides issues that are relevant for the managerial decisions in organizations. First, the financial performance of multinational enterprises (MNEs) is an important pillar in firms` strategies as it represents the performance on the market and therefore among the competitors. Second, the development of passenger numbers of MNEs may act as an indicator how “good” these corporations act with regard to safety, attractive routes and destinations as well as how the reputation of the brand is. Both aspects show great importance, as the companies need to invest high amounts in, for example, social media and marketing activities, to inspire current and potential new customers. Out of this reason, the research question, which will be more closely elaborated in the theory, can be presented as follows:

“Is the target audience of cruise operators influenced by the cruise operators social media marketing activity and therefore an increase in revenue and passenger numbers can be identified and explained?”

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be used to analyze and elaborate on the research question with the help of primary and secondary data, as well as an introduction in the statistical tests that are performed. The fourth section describes the results of this study. The last part of this research deals with the discussion section, where a critical link between the theory and results section is drawn as well as research limitations are presented.

2. Theory

2.1. Cruising tourism

The current market structure of the cruising Industry includes three major corporations and multiple local smaller companies.

The largest organization is Carnival Corporation with a market share of 47% and revenue of 15.88 billion US Dollar in 2014 (Carnival Corporation, 2014; Thomson Reuters, 2015). The British-American Corporation has been founded in 1972 and is a dual listed company with headquarters in Panama and Great Britain. Furthermore, the MNE acts as a parent company of nine different subsidiaries that operate worldwide (Carnival Corporation, 2015). The wholly-owned subsidiaries are named as follows: Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, P&O Cruises UK and P&O Cruises Australia (Marketline, 2014). The second largest player in the cruising industry is called Royal Caribbean Cruises with a market share of 22 % and revenue of 8 billion US Dollar in 2014 (Thomson Reuters, 2015). Royal Caribbean has been founded in 1968 and contains a brand portfolio of 5 different cruise lines as well as a 50:50 joint venture agreement with TUI, a German based tourism and cruise operator (Royal Caribbean, 2015). The subsidiary brands are called: Azamara Club Cruises, Celebrity X Cruises, Croisières de France, Pullmantur, Royal Caribbean Cruises and TUI Cruises (Marketline, 2014). Genting Hong Kong is the third largest operator with a total market share of 9% and 570.81 million US Dollar revenue in 2014 (Thomson Reuters, 2015). Genting, a Hong-Kong based firm, has been incorporated in 1992 as Star Cruises Limited and nowadays operates two different brands under their control, which are Star Cruises and Norwegian Cruise Line Holdings (Marketline, 2015).

2.1.1. Oligopoly in industry

Definition of Oligopoly Source “An oligopoly is characterized by a limited

number of players acting in relatively predictable and coordinated ways to supply products and services.”

Clegg, Carter, Kornberger and Schweitzer (2011, p. 57)

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According to the free online database Cruisemarketwatch (2015) the three key players of the cruising industry are Carnival Corporation, Royal Caribbean Cruises and Genting Hong Kong, who account for more than 80 % of total market share in 2015. Generally, Clegg et al. (2011) argue that the players in an oligopoly market are aware of the actions of their competitors. Due to this, the strategic decisions of one firm may influence and are influenced by the decisions of the other companies on the market (Clegg et al., 2011)

Wie (2005) characterizes the oligopolistic cruise industry as a market in which the three key participants make strategically capacity investment decisions in order to increase the entry barriers, to achieve cost advantages as well as to enlarge their own market shares. However, Clegg et al. (2011) mention that markets with and oligopoly structure show characteristics for illegal collaboration for mutual benefits, nevertheless this has not been researched within the cruising industry.

2.1.2. Barriers of Entry

Based on Porter’s 5 forces framework, barriers of entry form a part of evaluating the competitive landscape of a firm in an industry (Clegg et al., 2011). Since the cruise market is an oligopoly, it is necessary to determine the amount of current and possible future competition to identify the pressure of firms to gain new customers and retain old clients. As this paper follows the accounting principle of:

Whereas Items sold are tickets of a customer to take a cruise with a specific company and price is the price of the ticket. Profit is influenced by the size of revenue and amount of cost the company faces (Brealey, Myers & Allen, 2013). Therefore it is essential to optimise costs to create enough profit to compete successfully in an industry.

Brida and Zapata (2010), Lekakou, Pallis and Vaggelas (2009), Marti (2004), Gibson (2008) as well as Véronneau and Roy (2008) have previously investigated the impacts of cruising on an economic, environmental and social/cultural level and came to the conclusion that each of the investigated levels have high influence on passenger numbers. Consequently, corporations successfully competing in the cruise market have to adapt their marketing and social media activities to be able to attract new clients for their routes and for their newly built ships. In the following, the external environment is subdivided into the three levels mentioned before and gives insights how the cruising operators influence each of the accounting variables.

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Economic Opportunities and Threats to Cruising Companies

According to Brida and Zapata (2010), the cruising industry has generally two different impacts on the destinations. It is stated that direct impacts include the sellers that serve the cruise vessel as well as passengers and the team directly. This implies costs for example for the port, food, beverages or fuel.

On the other hand, indirect impacts deal with the effect on the supplier of the direct supplier. Brida and Zapata (2010) argue that the cruising industry further has a different economic contribution, depending on the port - whether it is the port where the vessel starts and ends (homeport) or whether it is the port where the ship stops for some hours (port of call). At a port of call, passengers are usually less than ten hours.

Cruising vessels take a competitive role towards hotels and resorts at a destination as well as towards aviation industry by transporting people from one place to another (Brida & Zapata, 2010). This is due to the fact that the ship serves the four phases within the tourism industry. These four phases include “transportation, accommodation (including food and beverages), attractions and tour operators” (Brida & Zapata, 2010, p. 215).

It can be concluded that the cruising industry has the ability to give economic benefits to a destination and a port. This in conclusion may lead to a stagnation or fall in GDP that results in a discussion on whether the building of greater terminals passes a cost-profit analysis according to Gooroochurn and Blake (2005) as well as Nowak and Sahli (2007). Nevertheless, a port requires different conditions to accommodate a cruising ship, which implies a great prior capital investment and therefore costs, in order to fulfill these conditions. However, due to the rising tourist numbers, there is a trend for even larger cruise vessels that follow an identical architecture, which in return would cause additional investments for the ports and further environmental costs. This argument is in line with Weaver (2005), who states that a cruising company is able to uniform the experience of customers by having the vessels similar in size and onboard services. He further argues that the economies of scale as well as the reproduction have a significant impact on the performance of Carnival Corporation. Due to the standardization procedures the companies are able to decrease the operating costs (Weaver, 2005).

Environmental Opportunities and Threats to Cruising Companies

Despite the economic impacts of the cruising industry, environmental impacts are as important. Due to the rising number of passengers and vessels, the effects on environment and communities grow. By investigating a study composed by British Airways on the Seychelles, Johnson (2002) highlights the impacts the cruising industry has on the environment:

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 Changes in environment, both nature and city, to allow a destination to become a cruise line destination

o Cruise line destinations need to fulfill several characteristics such as access to infrastructure, suppliers and services (Lekakou et al., 2009), which results in a loss of natural habitat as well as local businesses that are in charge of changes.

 Related energy and water usage impacts as well as an accidental damage to the marine ecosystem.

 Increased aviation usage and pollution resulting from the need to enable passengers to travel to the homeport.

According to Johnson (2002), the environmental effects are most relevant in areas nearby the largest ports of call, for example in Miami, Nassau, Barcelona or the Caribbean Islands. The cruising industry faces large protests from the USA, which is the largest cruising market as well as it acts as the headquarter for the largest cruise lines.

The Ocean Conservancy (2002) presented several opportunities to control for cruise activities. These suggestions contain despite others regulations on vessel discharges in order to improve water quality or a strengthening of enforcement mechanisms.

In addition, the Det Norske Veritas (DNV) which is the world’s leading classification and advisory organization in the maritime industry has announced certain guidelines for the North Sea and Baltic Sea to protect the environment even further. These principles are valid from the beginning of January 2015 (DNV, 2015) and they are essential parts of the environment protection for the various destinations. This can be supported by Han, Hsu and Lee (2009), who argue that the customers in the tourism industry become even more conscious about environmentally-friendly behavior. Mihalic (2000), further states that the environmental quality of a destination is a key concern for tourists in travel-related decision-makings. Environmental quality includes for instance, investments into environment protection as well as the decrease of certain environmental problems (Mihalic, 2000). Therefore, Inskeep (1991) comes to the conclusion that the quality of the environment is a primary issue for the competitiveness of a holiday region and consequently an important pillar for the attractiveness.

Social and cultural Opportunities and Threats for the Cruising Industry

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cultural effects of tourism, studying the relationship between residents and tourists and the influence guests have on communities. Olsen (2002) argues that municipalities steadily create and change culture in social operations and moreover, host municipalities change the perceiving of the cultural originality.

Tourist satisfaction in a destination is dependent on the individual experience. Mannell and Kleiber (1997) confirm that experience depends on the presence and behavior of the host community.

Furthermore according to Brida and Zapata (2010), tourists, arriving by cruises, create an artificial demand in transportation, however, only for a very short period of time. This leads to a highly competitive environment, especially in small destinations such as small islands. Despite the above mentioned social and cultural impacts, one issue needs to be highlighted: the impact on labour (Brida & Zapata, 2010). Cruising lines, traveling under a `Flag of Convenience´ are not obliged to pay the legal minimum wage due to the different flag they are traveling under. This causes unequal wages and a highly competitive environment (Brida & Zapata, 2010).

The above mentioned issues take a significant role in people’s opinion on the cruising industry. It has been shown in different industries that firms need to take their environment into consideration in order to keep the customers (Han et al., 2009). This customer satisfaction takes a significant role in the cruising industry, as this is the main selling point (Mannell and Kleiber, 1997). Therefore, if these issues have not been observed by the MNEs, the passenger number might decrease. Moreover, when customers generally perceive a cruise line as sustainable and caring it can be seen as the basis of decision making for going on a cruise (Brida & Zapata, 2010). Further motives for making a cruise trip will be discussed in the following, due to the fact that it is an important influencing factor on the passenger numbers.

2.1.3. Current and future trends in the cruising industry

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explanation for this shift is the increased marketing activities and the creativity of the society as well as the change onboard, from a floating hotel to a resort (Véronneau & Roy, 2008). In addition to that, extensive marketing campaigns by the organizations have led to the fact that many niche markets have been discovered, not just in terms of different destinations but also in terms of new target groups (Dickinson & Vladimir, 2008 as cited in Véronneau & Roy, 2008). Due to this increased pressure and as the entry barriers are enlarged especially in terms of license restrictions and significant capital requirements (Brida & Zapata, 2010), only a few companies, namely the three key players mentioned before, dominate and control the market and therefore scholars have identified this market to be an oligopoly (Wie, 2005 as cited in Véronneau & Roy, 2008).

One major opportunity that the current development with rising passenger numbers gives is to increase the fleet by adding new ships (Marketline, 2014). Passenger numbers of people aged 45 years and older is expected to increase by about 12% in the US and 10% in Western European countries (Marketline, 2014).By increasing the number of vessels with similar plan of architecture, the cruise line can improve its leadership position by taking advantage of the economies of scale (Weaver, 2005). New vessels should on the one hand replace old and non-efficient ships and on the other hand increase the number of ships (Marketline, 2014)

Another opportunity that exists deals according to Marketline (2014), with the current trends in demographics in large cruise markets. First of all, the average age of cruise passengers is expected to increase (Marketline, 2014). Moreover, in emerging markets the middle-class consumers grow very fast and therefore, they are purchasing entertainment, travel and luxury products (Marketline, 2014).

On the other hand, the environmental regulations and legislations build a considerable threat for the cruising industry, and need to be observed strictly (Marketline, 2014). Marketline (2014) states that the US Congress, the Environmental Protection Organization of the US as well as the International Maritime Organization have recent debates on further regulations for cruise vessel pollution. These regulations would lead to necessary changes to reduce or prevent pollution by oil, garbage and air emission (Marketline, 2014). This in turn would lead to major influences on profitability due to rising costs for cruise lines (Marketline, 2014). Moreover, the International Convention for the Prevention of Pollution from Ships (MARPOL), specifies rules and regulations as well as limits for the pollution of ships to protect the environment (Marketline, 2014).

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Furthermore, growing competition affects firm’s growth (Marketline, 2014). Despite the increasing competition from other cruise lines, different competitors such as hotels, tours or resorts increasingly try to gain market share and therefore can also be seen as a threat for cruises (Marketline, 2014). Competition for cruise lines is recognized in terms of pricing or travel agency preferences.

2.1.4. Motives for making a cruise trip

In the article by Hung and Petrick (2011), it is referred to the study by Pearce and Caltabiano (1983) who took Maslow’s hierarchy of needs into consideration to investigate motivations of travel tourism; the authors concluded that tours and trips are more used by regular and experienced travelers than by people who do not travel much. Pearce and Caltabiano (1983) as cited in Hung and Petrick (2011) further state that people needs and wants are the bottomline motivation for traveling. However, only few studies exist that investigate the travel motivation within the cruising industry. Nevertheless, Hung and Petrick (2011) argue that prior research within the cruising industry concentrated on economic aspects, such as in Henthorne (2000) or Dwyer and Forsyth (1998). More recently, Hung and Petrick (2011) state that studies, for example from Duman and Mattila (2005) or Li and Petrick (2008), investigated factors that influence the cruising decision-making.

By taking interviews as well as surveys, Hung and Petrick (2008) try to understand the motivation behind of people to go on a cruise. A developed measurement scale for motivation of cruising has been developed and assisted in elaborating the influence of motivation on travel intentions.

Hung and Petrick (2008) have found out that the feeling of relaxation leads to the highest motivation due to both, interviews and surveys. This leads to the conclusion that cruises are seen in relation to freedom and relaxation, which gives the opportunity for the marketing of cruises to use advertisement that promotes these associations (Hung & Petrick, 2011). Furthermore, Hung and Petrick (2011) suggest actions to satisfy the travelers’ needs for discovery, self-esteem and bonding. The authors suggest that the need for discovery can be satisfied not only off-board, when being at a destination, but also during the time on board for example by offering back-stage tours. To be able to satisfy self-esteem, Hung and Petrick (2011) suggest to give passengers a certificate and therefore a memory at the end of the cruise. For the need of bonding, it is further suggested to offer discounts for people who promote the cruises to family members and friends (Hung & Petrick, 2011). Moreover, younger passengers, with an average age of 50 years since 1975 (Petrick, Lee & Park, 2007), can be seen as the reason for the above mentioned changes in motives.

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social media will be investigated as it is seen as a simple tool with great effects on customers. However, to provide such conclusions at the end of the research, the term social media should be investigated as well as its effects on firm performance.

2.1.5. Target audience

In general, Carnival Corporation, Royal Caribbean and Genting Hong Kong try to target everyone who is interested in making a cruise trip. To be more specific, Carnival Corporation offers a wide range of product portfolio together with its subsidiaries around the world (Carnival Corporation, 2015). This portfolio ranges from satisfying the desires of the different cultures, offering numerous languages onboard, meeting the demand for entertainment and any other vacation preferences that tourists might have. In addition, price preferences take also a significant role and vary from contemporary until ultra-luxury (Carnival Corporation, 2015).

Instead, Royal Caribbean provides their customers with various destinations and onboard services and facilities as well. However, their target group consists of families and parents who are looking for a different kind of vacation, as well as couples who want something extraordinary (Royal Caribbean, 2015). Due to this, Royal Caribbean (2015) concludes that their target group aims for male and female with an age of 25-54. Genting Hong Kong, with its subsidiaries Star Cruises and Norwegian predominantly serves the Asian market and English-speaking countries (Norwegian Cruise Line, 2015). The target audience mostly consists of both, families and couples; whereas Norwegian also follows an aggressive price strategy with high discounts (Wood, 2000).

To conclude Royal Caribbean and Carnival Corporation target the higher end consumers, whereas Genting Hong Kong with its subsidiaries targets the middle class. This is in line with a research from Ahmed, Johnson, Ling, Fang and Hui (2001) who conducted a study on Star Cruises and Royal Caribbean Cruises. In addition, the authors argue that the difference between the target audience cause that the employed marketing activities vary in terms of cruise themes as well as onboard activities and services (Ahmed et al., 2001). For this reason, the adjustment of social media and marketing activities according to the customer needs are an essential part for the success of the company and is explained in the following section.

2.2. Marketing

2.2.1. What is marketing?

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Definition of Marketing Source “Marketing […] represents an internally integrated but externally

focused set of choices about how the firm addresses its customers in the context of a competitive environment.”

Clegg et al. (2011, p. 150)

“Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

American Marketing Association (2004) in Gundlach (2007, p. 243)

“Marketing is to establish, maintain, enhance and commercialize customer relationships (often but not necessarily always long-term relationships) so that the objectives of the parties involved are met. This is done by a mutual exchange and fulfilment of promises.”

Grönroos (1989, p. 57)

Table 2: Marketing

2.2.2. Types of marketing and the target audience

As the cruise industry is growing rapidly and the competition in terms of passenger volume increases, the cruise companies have to adapt their marketing strategies to the new customers, for example students and young couples (Sun, Jiao & Tian, 2011). The targeting of a certain group of customers is “the evaluation of each market segment including an analysis of its potential to grow, its competitive industry and the firm`s ability to access and serve this particular group of customers” (Clegg et al., 2011, p. 156). Especially, the young generation paid more attention to cruise holidays in recent years. Therefore, the cruise operators need to adjust to the new customers by at the same time keeping the standards for the current travelers (Sun et al., 2011). In order to assess the needs of the target group, the market requires a deep investigation about the type of people that use the market. The marketing strategies can either aim at targeting a group of people more generally or the people individually, by expressing feelings and emotions (Clegg et al., 2011). Next to this, firms have to establish a distribution plan, which is in line with a promotional plan that assists in the implementation of the correct advertising strategy. For the actual consumers, the traditional way of marketing has been very successful, which can be seen in the rising passenger numbers and the increased number of vessels (Gibson, 2006). This traditional way of marketing includes catalogue marketing and event marketing.

Catalogue marketing

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(Balasubramanian, 1998). Balasubramanian (1998) further states that this direct marketing approach is based on interaction or one-to-one communication between the firm and its customers. In order to offer a wide range of insights into their portfolio, the cruise liners present pictures of and destinations, show their itineraries, give an overview about possible day trips at the ports of destination as well as indicate the prices in their catalogues (Sun et al., 2011). The target group of this form of marketing consists predominantly of married couples in the early 50s (Kotler & Armstrong, 2010).

Event marketing

Event marketing is a promotion strategy, used by several companies that are willing to present their product portfolio on for instance exhibitions or other events (Close, Finney, Lacey & Sneath, 2006). One key feature of event marketing is the face to face contact with the potential consumers (Close et al., 2006). Out of this reason the marketing strategists of the cruise liners are able to promote their brand in the best possible way to create empathy as well as desires for going on a cruise vacation. In general, it can be argued that event marketing addresses all groups of the public; however it is dependent on the executed strategy of the marketers (Close et al., 2006). Event marketing therefore targets people aged from 35-49 (Kotler & Armstrong, 2010). Nevertheless, special events for young people exist as well and follow the aim to build an opportunity for the audience to network and educate (Sneath, Finney & Close, 2005).

However these traditional marketing strategies both target rather experienced people that belong to the middle class and are aged between the 30ies and 60ies. As the new customers gain more interest in cruises, the marketing strategies needed to be adapted to the needs of younger people. Due to this, internet marketing has become increasingly important in the previous years.

Internet marketing

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and the brands that aim at attracting potential new customers (Ellis-Chadwick & Johnston, 2009). However, the marketing through social media channels allows for a higher level of interaction between the organizations and their customers

2.3. Social Media Marketing 2.3.1. What is social media?

Definition of Social Media Source “Social media is a group of Internet-based

applications that build on the ideological and technological foundations of Web 2.0”

Kaplan & Haenlein (2010, p. 61)

Table 3: Social media

Social media marketing in this context deals with twitter, youtube or facebook (Kaplan & Haemlein, 2010). The social media marketing strategies by the cruise companies, for example through facebook, can attract a significant amount of people as more than one billion people use facebook worldwide. The users and potential passengers can be attracted by posting images and videos of destinations as well as special offers specially created for facebook users. Despite the attraction of more and younger potential passengers, social media can be used in terms of marketing purposes to increase the awareness and market penetration of a company. Therefore, the target-group marketing can be applied more effectively with the help of facebook, as the message of the company will not be sent out randomly with a slight chance that someone reacts; instead, the marketing messages of companies can be adjusted to the target group easily (Weinberg, 2012), which means for the cruising industry to post more information and pictures of cruises to Turkey, for those group of people that are identified as travelers who prefer Turkey. In addition to that, a facebook page is easier to develop than a website and predominantly focuses on the young generation with an age between 18 – 34 years (Weinberg, 2012). Nevertheless, facebook does not exclude a website; however the facebook pages are accessed by young people faster and are more present in the social media life of people. Moreover, the number of facebook users is constantly growing and therefore, Kaplan and Haenlein (2010) argue that social media and facebook marketing especially can be seen as a new trend that is of great importance for organizations. This becomes obvious in the attraction of possible customers as well as the satisfaction of all desires that are required by the public (Weinberg, 2012).

2.3.2. The Social Media User

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the social media use by the younger as well as older generation has increased significantly. In 2009, 73 % of the teenagers in the United States of America (USA) have utilized social media; whereas 72 % of young adults aged 18-29 have done so as well. Moreover, Duggan and Brenner (2013) state in their study, that the number of young adults who use social media in the USA has enlarged to 83 %. Next to this, Duggan and Brenner (2013) argue that 77 % who are aged 30-49 years and 52 % of the 50-64 year old people use social media. In addition to that, the educational background of social media users does not really matter, as 66 % have a high school degree or less, 69 % have a college degree and 65 % have more than a college degree (Duggan & Brenner, 2013). These results show that especially in the USA, where Carnival and Royal Caribbean are based, exists a high potential for social media among all parts of the society. Therefore, both organizations might gain significant benefits through the use of this relatively new advertisement mechanism and according to Kietzmann, Hermkens, McCarthy and Silvestre (2011) social media has a strong influence on the firm´s brand, revenues and the survival on the market.

2.3.3. Social Media and its influence on firm performance

In the previous years, organizations have engaged and invested increasingly in e-commerce actions and the rising online business to stay competitive (Subramani & Walden, 2001). It can be assumed that, the internet activity of people in the web increased significantly from 2000 to 2015 (Kaplan & Haenlein, 2010). Green (1999) has argued that this growing number of internet users gives significant opportunities and reasons for firms to engage in e-commerce.

Culnan, McHugh and Zubillaga (2010) further state that the great success of internet-based companies such as Amazon.com or eBay is an indication for a rising market and therefore, opportunities for the consumer (B2C) e-commerce. Furthermore business-to-business (B2B) e-commerce can create efficiency in supply chains (Subramani & Walden, 2001). Subramani and Walden (2001) moreover suggest that increases in market value of a firm and its stockholders can be referred to e-commerce. As a result, it is concluded that investments in e-commerce can lead to future benefits for the organization. However, firms cannot only rely on these investments; they also have to figure out what their core competencies and capabilities are.

Generally spoken, capabilities are sets of skills and knowledge that are included and deeply rooted in the processes that occur within the organization (Helfat & Peteraf, 2003). Out of this reason, they are critical indicators for success, for example in the achievement of sustained competitive advantage and superior performance on the market. Marketing in this sense, as a capability, has reached a key role in establishing company value.

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From a firm perspective, it is essential to identify the core competencies as only the capabilities that fulfill each criteria of the so-called VRIN (valuable, rare, inimitable and non-substitutable) framework support the firm to gain a market leading position. The VRIN framework results out of the resource-based view of the company and states that resources need to be valuable, rare, inimitable and non-substitutable (Barney, 1991). In addition, Grewal and Slotegraaf (2007) argue that the embedding capabilities lead to a creation of entry barriers on the market as well as it provides the firms with a sustainable advantage over their competitors on the market.

In another study by Verhoef and Leeflang (2009), Homburg, Workman and Krohmer (1999) have examined the positive effects of marketing within the firm. The research has been conducted among US and German based companies and leads to the fact that marketing has had a significant influence on firm performance the previous ten years. Moreover, marketing deals with unpredictable external market changes as well as the identification, selection and consequently execution of competitive strategies (Homburg et al., 1999 as cited in Verhoef & Leeflang, 2009). Next to this, marketing is positively related to the company's financial performance and assists in new product development performance that goes beyond the market orientation of the corporation (Moorman & Rust, 1999 as cited in Verhoef & Leeflang, 2009).

In contrast, the role of marketing has received increased attention in academics due to the fact that the marketing function in corporations experiences a significant decrease (Leeflang, 2004). This assumption can be supported and confirmed by a research of Murphy (2005) who has interviewed the former LEGO CEO and who argues that marketing has lost the strategic importance and only a few marketers stay engaged in implementing strategies and plans. Out of this reason, Sheth and Sisodia (2005), as cited in Verhoef and Leeflang (2009), examine that marketing employees predominantly perform tactical decisions that are referred to advertisement and promotion, sales support and publicity work.

2.4. Development of Research Question

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hosting opportunities such as airplane or resorts. Another aspect for choosing the cruising industry is that according to Sun, Jiao and Tian (2011), very little attention in research has been put on this industry. Furthermore, the research of the effect of social media on firm performance within the cruising industry is lagging. As it has not been clearly identified whether social media has an effect on firm performance, it shows another interesting aspect for this study, such as the investigation whether the cruising industry is able to attract new target groups effectively. Therefore, a main aspect of this study is to find out whether corporations can already profit from social media activities or not.

The lack of research combined with the new trend of social media developed the motivation for this paper. Based on the discussed theoretical framework around the cruise industry and social media marketing the following research question evolves:

“Is the target audience of cruise operators influenced by the cruise operators social media marketing activity and therefore an increase in revenue and passenger numbers can be identified and explained?”

3. Methodology

3.1. Conceptual Model

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The underlying methodology is based on three different possible analyzing methods. Firstly, the assumptions are created, followed by a data description and the statistical analysis. The statistical analysis includes the regression analysis as well as the accounting ratio analysis. Social media is the independent variable, which will be explained in more detail during the data description. The two dependent variables are firm performance and number of passengers that will be further explained in the data description as well. Two assumptions developedfrom this conceptual model.

1. Assumption regarding revenue generation of cruise operators:

A0a= Social Media activity has increased revenue of cruise operators

A1a = Social Media has not increased revenue of cruise operators

2. Assumption regarding passenger numbers of cruise operators:

A0b = The use of Social Media has increased passenger numbers of cruise operators

A1b = The use of Social Media has no influence on the passenger numbers of cruise

operators.

The conceptual framework furthermore is in line with the overall research question of this paper.

3.2. Data description 3.2.1. Sample

The sample of this research consists of the quarterly financial accounting and market data of the three market leaders of the cruising industry according to market share as well as financial performance. The result has been the investigation of Royal Caribbean Cruises Ltd. (RCC), Carnival Corporation & Plc. (CC) as well as Genting Hong Kong Ltd. However, no financial information for the period from 2004 – 2014 could be found for Genting Hong Kong Ltd publicly, furthermore, the company has established a Hotel and Resort Brand, which makes the available data incomparable with regard to the other corporations. Out of this reason, Genting Hong Kong Ltd. has been excluded from the sample that leads to data in the sample of two companies.

3.2.2. Social media

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or CC. Most of the social media activities has started in the beginning of 2009, as facebook has become popular around the world at that time. On 9 May 2015 the overall facebook fans have been counted and can be seen in Table 1 underneath. A facebook fan is someone, that “Liked” the facebook page of the company and therefore, is kept up-to-date with company information such as pictures, discounts or other activities automatically. However, someone does not need to “Like” the company’s facebook page in order to see such information, when “Like”-ing you only receive notifications as soon as the firm put something new on their page.

Carnival Corporation & Plc Royal Caribbean Cruises Ltd AIDA Cruises: 837,000 fans Azamara Club Cruises: 158,300 fans Carnival Cruises: 3,070,000 fans Celebrity X Cruises: 489,000 fans Costa Cruises: 710,000 fans Croicières de France: 88,500 fans Cunard: 129,500 fans Pullmantur: 347,000 fans

Holland America Line: 1,256,000 fans Royal Caribbean Cruises: 2,880,000 fans P&O Cruises UK: 249,000 fans TUI Cruises: 105,000 fans

P&O Cruises Australia: 390,500 fans Princess Cruises: 1,633,100 fans Seabourn: 232,600 fans

Table 4: Facebook fans - retrieved at 09 May 2015

3.2.3. Firm performance

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make them comparable. The indexation has been based on the profit of the first quarter of 2004 for each company, as 2004 is the first year of analysis.

In addition, EBITDA is according to Bloomberg databases (2015) an “indicator of a company's financial performance which is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.” Due to this, this ratio is utilized in this research, as it is an appropriate measure to determine the level of firm performance to receive an overview of the financial activities of the two corporations. However, EBITDA will not be compared to the facebook activities as this indicator is generally not accepted under the accounting principles of US GAAP and it does not take all individual costs into account that occur in the meantime of doing business.

3.2.4. Number of Passengers

The term passenger is defined as a person that undertakes a cruise vacation on each of the different cruise lines of the market leading companies. This variable has been chosen in order to determine the significance of the fast growing cruise industry, as well as to analyze whether the key players of this market, RCC and CC, further attract and satisfy people that are willing to go on a cruise ship holiday. The graph below shows how the numbers of passenger onboard of RCC and CC have developed between 2004 and 2014. However, it has to be pointed out that some passenger numbers have not been quarterly available and therefore they have been estimated based on the annual figure of the certain year.

3.3. Statistical Analysis 3.3.1. Regression Analysis

The underlying analysis has been performed with the help of the Simple Linear Regression Model for each hypothesis. However, due to the time series data that has been used, the Durbin-Watson test assisted in the investigation of analysis (Keller, 2008). It has been chosen to do separate regression analyses to be able to interpret the data more closely. More precise, one reason has been to receive detailed and separate indicators for alpha (α), as it shows how many other factors are influencing the variable social media (Keller, 2008). Out of this reason, this way of analyzing has been chosen to be most applicable and the used formula is as follows:

𝑌 = 𝛽0+ 𝛽1𝑋 + 𝜀,

Where y is the independent variable social media, 𝛽0 is the intercept. Moreover, 𝛽1 describes

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simple linear regression has been conducted four times individually the X value has changed each time. In the first analysis the X value has been the firm performance of RCC and in the second analysis the variable number of passengers of RCC has been included. The third and fourth analysis included the corresponding X values for CC.

The 𝜀 described the residual, which is an error prediction term. 3.3.2. Accounting ratio analysis

The accounting ratio analysis describes the revenue per post during the investigated time period, as well as the passenger numbers per post per period. This method assisted in further determining the effect of the dependent variables on the independent variable.

The formula for the ratio analysis for revenue per post is stated as follows:

Ratio = indexed Revenue / Number of facebook posts

The indexed revenue as well as the facebook posts have been taken quarterly from RCC and CC for the time period of Quarter 4, 2008 to the end of 2014. This time period has been chosen as the social media activity of both firms started at this point of time.

The formula for the ratio analysis for passenger numbers per facebook post is stated as follows:

Ratio = number of passengers / number of facebook posts

The numbers have been taken quarterly from both underlying companies for the time period of Quarter 4, 2008 to the end of 2014. This time period has been chosen for the same reason as stated above.

4. Results

The detailed data for the variables of the underlying analyses can be found in Appendix 1. Appendix 2 provides the data of the regression analysis and Appendix 3 contains the information of the ratio analysis.

4.1. Assumption regarding revenue generation of cruise operators

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cruising accident in the beginning of 2012 of the Costa Cruise Line, which is a subsidiary of Carnival Corporation (CBS News, 2011).

Figure 2: Indexed Revenue Comparison RCC and CC

4.1.1. Skewness of indexed revenue data of RCC and CC

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Figure 3: Histogram: Indexed Revenue RCC

The histogram of CC (Figure 4) is also positively skewed, which means that it is right-skewed. This is similar to the histogram of RCC (Figure 3); however in this histogram the small number of data becomes more obvious as the figure shows sudden changes in the level of frequency. Next to this, a trend to enlarged revenues and facebook posts can be identified which leads to the fact that there still exists a high demand for cruise trips. Finally, the frequency of observations shows a leptokurtic tendency as well.

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For the first part of the research question, the social media activities of both firms have been compared to the development of the indexed revenues as it can be viewed in Figures 5 and 6.

In Figure 5, the social media activity in terms of facebook posts starts in 2009. For 2009 and 2010 it can be seen that the two variables increase and decrease shortly after each other. In 2011 the social media activity of CC has been relatively low compared to previous and following years namely at a maximum of 200 posts. Before, the peak of posts has been at about 270 and after 2011 the peak of posts has been in 2013 at more than 300 posts.

In Figure 6, a similar development can be observed, meaning that social media activity and firm’s revenue increase and decrease with a short difference in timing. Nevertheless, at three points of time it can be observed that the social media activity as well as the revenue reached a peak. This happens in the first quarter of 2012, the third quarter 2012 as well as in the third quarter of 2013. The number of posts in general stayed under 200 post per quarter.

Figure 5: Social Media activity and indexed revenue of CC

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4.2. Assumptions regarding passenger numbers of cruise operators

The following aims at giving response to the second assumption with the help of statistical methods. The figure 7 below shows the quarterly number of posts from RCC and CC for the time period between 2004 and 2014. It can clearly be seen that at the end of 2008 and at the beginning of 2009 the posts increased rapidly, as well. From 2009 to the second quarter of 2011, the posts of both firms had similar developments. However, as CC has more subsidiaries, more information has been posted. From the second quarter 2011 to the first quarter 2012 the development of the number of posts varied between the firm and it can be observed that after the first quarter 2012, RCC’s number of posts increased or decreased about one quarter after the number of posts from CC. In 2014 however, both corporations faces a downturn in posts with a following increase again at the end of 2014.

Figure 7: Social Media Posts RCC and CC

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However, the difference between the summer quarters two and three, which last from beginning of April until the end of September, and the winter quarters are quite significant. The explanation of this phenomenon is similar to the case of RCC, as CC particularly operates with AIDA Cruises and Costa Cruises on the European market and especially in autumn and winter the weather is not as appropriate as desired for cruising. Out of this reason, a lot of destinations in Scandinavia and also in the Mediterranean area have already finished their season for incoming tourists.

Figure 8: Number of Passengers RCC and CC

This part deals with the facebook activities of RCC and CC in relation to the carried passengers between 2004 and 2014. Figure 9 represents the social media activities of RCC where it becomes obvious that the use of facebook as an instrument to attract customers starts in the beginning of 2009. From 2004 until 2009, only a few posts have been published by RCC although cruise vacations have already been quite popular with 800,000 to 1,000,000 passengers carried quarterly. The highest amount of posts has been achieved in quarter three 2012 and quarter one 2014. In comparison, the peak of carried passengers by RCC is particularly in quarter three between 2011 and 2014. This may be a first indication that the use of facebook has a positive effect on passenger numbers, as most of the posts are made during a cruise trip and if special destinations are reached.

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facebook posts of CC have increased and achieved its maximum in quarter two of the years 2012 and 2013 with around 300 posts. By considering the development of the passenger numbers in figure 10, it is obvious that the maximum values are reached in quarter three between 2012 and 2014 with approximately 2,600,000 to 2,800,000 carried passengers. However, this correlation and also the time lag will be considered in the next section to be able to determine whether the variables are in fact highly correlated or coincidences exist.

Figure 9: Social Media Activity and Passenger Numbers of RCC

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4.3. Correlation

According to Thomas (2008), correlation determines the union of two variables. It is stated that variables are correlated if they increase and decrease at the same point of time.

The correlation coefficient ranges from 1 to -1, which can be seen as extremes that can rarely be found in reality (Thomas, 2008). If the correlation coefficient is 0, this means that no correlation between the variables exists. Thomas (2008) further states that variables with a correlation coefficient that is higher than 0.5 or lower than -0.5 can be seen as significantly correlated.

After having drawn the graphs for social media above (Figure 5 till 10) it has been recognized that the effects of the social media activity occur time-delayed. Out of this reason, a simple correlation could not be computed. Instead, the lagged correlation has been chosen, as suggested by Sims and Wilkerson (1977). The lagged correlation deals with the correlation of two variables or time series that differ in time with relation to another. One important factor of the lagged correlation is that it studies series that might differ due to a delay in response to the other series. Out of this reason, the simple correlation coefficient can be seen as an inappropriate measure between two time series.

The cross-correlation coefficient has been calculated for the variables indexed revenue and social media posts of RCC from a time period of 2009 to 2014, as the social media activity only started in 2009. This coefficient is 0.58 with a time difference to the front of one quarter (see Appendix 2). Furthermore, the cross-correlation coefficient of social media posts and number of passengers of RCC is 0.55. Out of this reason there exists a significant correlation between the variables. The cross-correlation coefficient of CC has proven as not significant with a value of 0.45 with a time difference of one quarter ahead between social media activity and their indexed revenue. Other time differences have shown a lower coefficient. The variables social media posts and passenger numbers of CC have shown a significant simple correlation coefficient of 0.52 (Appendix 2). Out of this reason, the correlation between indexed revenue and social media activity could not be proven to be significant for CC but for RCC with a time difference of one quarter. However, the correlation between social media posts and passenger numbers is significant for both firms.

Nevertheless, the α from regression analysis indicated that also other factors act influential. The regression analysis of RCC including the social media activity as well as the indexed revenue has a α of 0.39. CC including the same variables has a α of 0.6. This means that in both cases, other factors influence this relationship, which needs to be investigated in a future research.

4.4. Regression results

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of α has a value of 0.00039. This is both lower than the significance level of 0.01 and can therefore be seen as highly significant.

The output of the corresponding regression analysis of CC has indicated a p-value of 0.057, which is higher than the significance level of 0.05 but lower than the significance level of 0.1. Out of this reason it can still be seen as significant. However, the p-value of α is 0.00051, which is below the significance level of 0.01.

Moreover, during the regression analysis of RCC with the variables facebook posts and number of passengers, the p-values for α as well as for the posts can be seen as significant with values below 0.001.

When including the same variables for CC in the regression analysis, the p-value of α reached a p-value below 0.001 as well. Nevertheless, the p-value of facebook posts lies below the significance value of 0.05. Out of this reason, all p-values are significant.

From regression analysis of CC it can further be stated that per post 2027 more passengers went on a cruise and moreover, per post the indexed revenue increases by 0.0015.

The results from regression analysis of RCC state that per post the number of passengers increases by 1343 people. The indexed revenue enlarges per post by 0.003.

4.5. Accounting ratio analysis results

The ratio analysis showed that the indexed revenue of RCC increases on average for the period of 4/2008 – 4/2014 by 0.0075 per one facebook post; the indexed revenue of CC increases on average for the same time period by 0.0094. The analysis furthermore indicated an increase of passengers on average for the mentioned time period of 13375 passengers for RCC and 27403 passengers for CC. The detailed calculations for the analysis can be found in the Appendix 3.

5. Discussion

The overall aim of this study was to explore and analyze the key players of the cruising industry and how they make use of social media in their strategy to attract potential customers. In addition, it has been investigated whether the social media activities are related to their financial performance or the passenger numbers.

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this reason it can be stated that both assumptions (A0a+b) can be accepted. All in all, it can

be concluded that both, regression and ratio analysis, show that the social media activities of firms in the cruising industry influence the firm performance and passenger numbers positively. However, it can also be seen that the social media activities of the firms can be improved and should be further customized to the target audience.

5.1. Theoretical implications

The use of social media can be generally described as “capturing the wisdom of the crowd” (Luo, Zhang & Duan, 2013, p. 146). There is no doubt that the role of social media has emerged significantly and therefore a high popularity has been achieved among consumers but also among the companies. Due to this, Divol, Edelman and Sarrazin (2012) as cited in Luo et al. (2013) state that corporations aim to transfer their business together with social media, while at the same time capitalizing on the financial value. One of the most important features of social media is that it provides customers as well as shareholders with up-to-date information on the company’s products, services and the brand itself (Luo et al., 2013). In the underlying research this has become obvious as a significant amount of posts, published by the corporations, has dealt with photos, images or videos that have been taken onboard of their cruise ships. Out of this reason, the individual brand of the firm as well as the destination is advertised in the best appropriate manner.

To be able to discuss the second assumption of this research, which refers to the effect of social media activities on passenger numbers, another research that has been carried out by Parra-López, Bulchand-Gidumal, Gutiérrez-Tano and Díaz-Armas (2012) assisted in supporting the issue that social media has received tremendous attention. In addition, managers of all firms that take part in the tourism industry need to understand the usage of social media by tourists before, during and after the vacation, as it may be an essential tool to attract further customers for the offered services or products (Parra-López et al., 2012). Furthermore, the study of Parra-López et al. (2012) identifies three main benefits that occur with the use of social media:

1. Functional benefits: Refer to the fact that tourists are highly motivated and interested to receive information for their planned trips.

2. Social benefits: Refer to the development of relationships as well as the degree to which information is exchanged.

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Based on these benefits and the acceptance of the second assumption, one may argue that the creation of a facebook account and the execution of social media activities offers a unique opportunity to attract a wide range of customers as fast as possible. In addition, the posts that are made during the cruise vacations seek to address potential newcomers in the cruising business as well as the already experienced society. This can be seen in the Appendix 1, where the quarterly posts of the corporations are listed together with the “likes” as a reaction on the posts. All in all, this research contributes to the already existing literature, as it allows for an acceptance of the underlying assumptions. The ratio analysis proved that the cruising industry is able to generate additional revenue with each post. For RCC the additional indexed revenue on average for the time period of Quarter 4, 2008 till the end of 2014 is 0.0075 and for CC it is 0.0094. Therefore, these insights in how the MNEs are positioned, as well as how marketing is executed on the basis of social media contribute to the current literature. Moreover, this study is the first one that has carried out the calculation of all quarterly facebook posts and likes on the official fanpages of the different subsidiaries that in the end form the multinationals RCC and CC.

5.2. Managerial implications

This research also contains practical insights for managers that are employed in the cruising industry and predominantly active in research and development as well as marketing. First, the findings of this research present that the use of appropriate social media is not only short-term oriented but also a long-term oriented approach to attract customers by keeping them up-to-date with the latest information about the company, destination and the cruise vacation itself. Out of this reason, social media activities should be improved to be able to serve the growing demand of the cruise industry that is predicted by several analysts.

Second, it has been observed during the execution of primary research that firms that post on facebook all two to three days received more likes than those that posted more often. This can be due to the fact that users might be disturbed by a constant penetration and pay less attention to information posted by these firms (Treadaway & Smith, 2012). Out of this reason, an appropriate balance of the facebook posts is needed not only on the quantity level but also on the quality level (Treadaway & Smith, 2012). In general, it can be argued that pictures of destinations or newly built cruise ships and special cruising trip offers mobilize and attract the community.

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5.3. Limitations and further research

Limitations of this research include the access of information. During the research it has been found out that one investigated corporation does not make its results public. Therefore, the limitations of this project mostly refer to the access of information. However, other articles and journals helped the author to receive a similar quality of research and an objective view on the topic.

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Social Media and the influence on the cruise industry