Case Study
The better the question The better the answer The better the world works
Case Study

How digital transformation opened new channels for growth

With the physical limitations of their fleet holding back growth, EY helped Royal Caribbean create new digital revenue streams.

Person surfing on board a cruise liner
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The better the question

How can digital drive growth when there’s no scope to expand?

As cruise passenger numbers are growing globally, Royal Caribbean is striving to meet increased demand and digitalize without downtime.

In the hospitality industry, fully booked rooms point to a thriving business. However, in this transformative age, it’s essential that businesses constantly monitor trends. Innovative companies know the minute they rest on their laurels is the moment they start to sink.

The challenge of duality — finding a way to maintain your existing business while developing new revenue streams in parallel — is acute. When you are reliant on physical space for revenue, taking that physical space out of service for upgrades and redesigns can present a significant business risk.

Royal Caribbean Cruises found itself in this position. The company has long been an innovator in their industry, particularly in maximizing the physical spaces on board its cruise ships to accommodate the ongoing significant global growth in cruise passengers (from 17.8 million visitors a year in 2009 to an expected 27.2 million in 2018).

The challenge the company faced was in finding new ways to drive growth and attract a new generation of customers in the digital age. While cruises may have a reputation for appealing to older holidaymakers, nearly 41% of cruise passengers in 2017 were under the age of 34 — and millennial passengers expect digital on-board experiences.

the past, the hospitality and leisure space had catered to growth by increasing capacity. Build more rooms and pools, and when space to build is limited, put on more shows and rethink your use of space to get more customers through the doors. For cruise lines in particular, such upgrade work can also lead to ships being out of service for months, making the work uneconomical.

“Our ship design and our guest experiences are all cutting-edge, but it was time to consider digital transformation, something we haven’t spent a lot of time thinking about in the past,” says Lisa Lutoff-Perlo, President and CEO of Royal Caribbean’s Celebrity Cruises division.

This is all too common an experience for CEOs, with EY finding that 50% of CEOs do not believe their companies have implemented the necessary steps to counter disruption. Failure to do so is putting market leadership and capitalization at risk.

Executing this kind of transformation is no small task. “The cruise business is an amalgamation of many different industries,” explains Cheryl Grise, EY Advisory Lead, Southeast Region. “It’s media and entertainment, health meets hospitality, and retail meets transportation. It’s all of those industries coming together — industry convergence at its finest.”

This meant EY had to tap into its knowledge and experience across multiple sectors and service lines to unpack and address the core challenge.

The SeaSeeker mask was custom engineered by Royal Caribbean, and allows the wearer to take and share photos while underwater.
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The better the answer

Finding the right approach to exceed customer expectations

Looking at digital from every angle is helping Royal Caribbean to transform customer experiences and business operations.

“Often, EY clients will come to us, and they’ll say, ‘We want to rethink the customer experience in a new digital way,’” says Grise. “And as you start to probe and ask more questions, you realize they’re saying a lot more than that. What we realized is that they weren’t just asking for the customer experience to be digitized; they were also asking how to become a fully equipped digital organization.”

What Royal Caribbean had begun to understand was that true digital transformation is “an opportunity to rethink how to go to market and how to operate the entire business,” says Raj Mirchandani, EY Account Lead, Royal Caribbean Cruises Ltd.

The real challenge was how a floating city could transform itself digitally beyond the obvious — by thinking about digital from every angle, from end to end throughout the company’s entire business. And then to undertake this with a duality mindset, enabling existing operations to continue undisrupted even as the digital transformation got under way.

“People today expect the ease of technology in everything they do,” says Richard Fain, Chairman and CEO of Royal Caribbean Cruise. “They find it saves them time and effort, especially when on vacation, where time is one of the most important commodities they have.”

“This was an opportunity to think differently about connecting with their guests, with their employees and also with new revenue streams,” Mirchandani explains. Done right, this could lead to new ways of operating that provide not just what today’s digitally savvy customers expect, but something that fundamentally changes their perception of what it means to go on a cruise.

Moving beyond just meeting expectations

“Royal Caribbean and EY understood that the primary focus of this project was guest experience,” says Adam Goldsmith, President and Chief Operations Officer, Royal Caribbean. “It starts with a tremendous amount of attention to the on-board guest experience that the emergence of these digital technologies could make possible.” 

To help enable digitally savvy customers to have their most fundamental expectations met and maximize their vacation time, an app was conceived. Designed to connect with guests before, during and after cruises, it allows them to book and manage their time on board. Its core functionality was relatively simple but supported a seamless experience from the connected world of land to the internet-free open seas via an on-board local network.

In addition, by embracing other digital technologies, such as virtual reality, Royal Caribbean will be able to expand the type of activities it can offer on board without the need to take ships out of service for long periods of time to install new facilities.

Crucially, there is now a more radical underlying data-capture and digital infrastructure that offers Royal Caribbean a greater understanding of guests’ behaviors and preferences.

Customer eating sushi with VR headset on
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The better the world works

How digital can power greater customer experiences

Adopting a digital mindset is helping Royal Caribbean deliver more valuable customer experiences around the world.

Beyond delivering new digital customer experiences, Royal Caribbean has set a course for digital to enhance how it operates from end to end — throughout its business. By transforming itself to put digital at its core, it is not only becoming better-prepared to meet customers’ current digital needs, but it is also becoming capable of adapting to future technological disruption to its business and services.

The app makes it easier for guests to discover and book on-board activities, increasing revenue. But the data being generated will also help the company understand where it needs to focus its on-board resources to improve customer experience

Adopting a new mindset

At the heart of this project was the understanding that businesses must be prepared to encourage digital disruption within their own sector or face the consequences of disruption themselves and that businesses need to adopt the mindset of duality to cope — adopting new approaches and innovating in parallel to maintaining their traditional business models so that those business models can seamlessly adapt.

These values will be essential to the future success of all sectors, not just hospitality and leisure. Companies must develop the ability to critically analyze their level of exposure to disruption and their ability to initiate it.

By adopting a digital-first mindset in both customer experiences and business operations, companies can position themselves to adapt and improve into the future, as technology and customer expectations continue to evolve.

As Jay Schneider, Royal Caribbean Senior Vice President, Digital says, “Digital doesn’t disrupt our business but accelerates our business... we’re constantly as a company thinking about how to transform every aspect of the guest journey, whether it’s at home, whether it’s on board, whether it’s post vacation, and then the same thing for the crew journey."  

Royal Caribbean Innovation and Transformation Lead Joey Hasty sums up digital technology’s role: “If I do my job right, you won’t even notice the technology. You’ll just notice really amazing experiences.”

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