Carnival Cruises 2014 Annual Report Download - page 48

substantial investments in our existing ship enhancement programs to improve our onboard product offerings and
enrich our guests’ vacation experiences. Furthermore, in 2014 we sold four of our smaller, less efficient vessels:
Costa Celebration,Costa Voyager,Grand Holiday and Ocean Princess.
We benefited from a reduction in fuel prices, which resulted in $126 million of savings. In addition, we had an
almost 5% reduction in fuel consumption per ALBD thus saving another $107 million of fuel expense compared
to 2013, which continued our multiple-year cumulative unit fuel consumption savings trend that has reached 25%
since 2007. We achieved our stated goal of delivering a 20% reduction (per unit) in the intensity of carbon
dioxide emissions from our shipboard operations one year prior to our target date and are currently developing
new goals aimed at protecting the environment and further reducing our fuel consumption. We are installing new
exhaust gas cleaning systems on our ships to achieve environmental objectives and mitigate the financial impact
of the new 2015 low sulfur regulatory requirements. We are also implementing a series of new energy saving
technology initiatives across our fleet in areas such as propulsion, air conditioning and waste heat recovery
systems as well as more efficient lighting in order to help reduce our carbon footprint and costs.
Our ability to generate significant operating cash flows allows us to internally fund our capital investments. We
generated $3.4 billion of cash from operations, 21% higher than last year, and used $2.5 billion to fund investing
activities, leaving us with almost $1.0 billion, most of which was returned to shareholders through our regular
quarterly dividend. Our goal is to return “excess free cash flows” (defined as cash flows from operations less
investing activities and regularly scheduled quarterly dividends) to our shareholders in the form of additional
dividends and/or share buybacks.
We identified new strategies and tactics to strengthen our cruise ticket revenue management processes and
systems across our portfolio of brands, such as optimizing our pricing methodologies, improving our pricing
models and increasing our brands’ coordination of our global fleet deployments. Our objectives are to drive
greater penetration, more effective capacity management and improve revenue yields. In addition, we have
started to implement various demand creating initiatives as we strive to create additional demand for our brands
that far outpaces supply, ultimately leading to higher revenue yields.
Our goal is to consistently exceed our guests’ expectations while providing them with a wide variety of
exceptional vacation experiences. To this end, we are conducting psychographic segmentation studies to gain a
more insightful and impactful understanding of our guests’ needs, wants and expectations. We will then target
our advertising and promotions toward these specific guest segments in order to drive demand for our offerings
and better guide our guests to the cruise brand experience that best matches their tastes. These studies should
enable us to better differentiate each brand in the minds of vacationers and consumers-at-large and adjust the
product and service offerings of our brands.
Strong relationships with our travel agents are also vital to our success. In 2014, we continued to strengthen our
relationship with the travel agent community by increasing our communication and outreach, implementing
changes based on travel agent feedback, increasing our trade marketing presence and improving our educational
programs to assist agents in stimulating cruise demand.
In 2014, our operating income in China significantly increased due to a combination of capacity growth and
revenue yield improvement. We believe that we have significant opportunities to continue to grow our presence
in China due to its large and growing middle-class population and expansion of their international tourism. Due
to the high strategic importance we place on the China cruise market, in 2014 we relocated our Chief Operations
Officer to China to more closely oversee our brands’ strategic initiatives, coordinate our growth strategy in China
and the surrounding markets and liaise with Chinese government officials. With the introduction of Costa Serena
in 2015, we will have four ships home ported in China, which will represent a 140% increase in guest capacity
over a two-year period and will offer our Chinese guests diversified cruise products with two brands targeting
two different segments of travelers. As part of our China cruise strategy, we are exploring opportunities aimed at
the development of a domestic cruise company and the formation of a domestic cruise shipbuilding company, as
well as port development, talent development and training, enhanced relationships with our distribution partners
and sharing of supply chain and logistics expertise.
46