Ted Arison Case

In 1972 cruise industry pioneer, Ted Arison and the owner of American International Trade Service (AITS), Meshulam Riklis, formed Carnival Cruise Lines as a subsidiary of AITS. They purchased their first ship for $6.5 million and renamed it to the Mardi Gras. The Mardi Gras’ first trip was along the Florida coast with travel agents. In 1974, Mr. Arison bought out his partner’s share with $1 and assumed the $5 million debt of the company. In order to compensate for the debt and reduce costs, Mr. Arison decided to reduce the speed of the ship and the amount of stops it made through its voyage. As a result, Mr. Arison added additional on-board activities for passengers such as a disco, casino, movie theater, etc. Quickly afterwards the ship was known as the “Fun Ship”. Little did he know that this cost reduction tactic would transform the company’s marketing strategy for Carnival Cruise Lines and the cruise industry as a whole.
By 1978, Carnival had three ships, Mardi Gras, Festivale, which was purchased in 1977, and the Carnival, which was purchased in 1975, doing voyages of seven day cruise throughout the Caribbean and Florida.
The company fourth ship called the Tropicale was purchased in 1978 and completed in 1982. In 1979, Ted Arison’s 30-year-old son, Micky Arison, was named president and chief executive officer of the company. By 1982, all four boats were carrying about 200,000 passengers and earning $40 million in revenues of $200 million and growing 30% every year. This growth was said to be three times faster than any average cruise line company
was. Once another three more ships were purchased during the 1980’s called the Holiday, Jubilee, and Celebration, Carnival Cruise Lines had the world’s largest cruise line fleet with a total of seven ships. As part of an advertising strategy, Carnival would monetary compensate travel agents if they recommended cruise vacations or suggested passengers to travel with Carnival. Offering economical and shorter trips was another marketing tactic they used to attract younger and middle class passengers to cruise with them. In 1987, Canival completed its initial public offering of 20% of its common stock generating approximately $400 million. Because of the increase in capital, the company was able to continue expanding doing what it does best, acquisitions. The company latter acquired Holland America Line in 1989, Seabourn in 1992, an Italian-based brand called Costa Cruises in 1998, Cunard Line in 1998, and finally, P&O Princess Cruises in April of 2003. Effective July 3, 2013, Micky Arison began serving as the Chairman of the Board of Directors while Arnold W. Donald transitions from a member of the Board of Directors to the role of the Company’s Chief Executive Officer. By 2014, Carnival’s fleet is comprised of more than 100 ships including eight new vessels scheduled to be delivered by early 2017. Carnival Corporation made history again in 2016 by becoming the first cruise line to sail from the United States to Cuba in over 50 years.