Company Breakdowns - Cruise Day 2 - Where is the biggest opportunity?

This is a 5 part series, to jump to the different parts click below:

Part 1 -Disrupting the Cruise Industry

Part 2 -Finding the biggest opportunity

Part 3 -Deciding on the business model

Part 4 -Designing the offer and customer journey

Part 5 -Designing the Facebook Offer

Okay. Recap.

Essentially, we've identified four main areas of potential disruption. These areas include:

1) How do we improve our scheduling flexibility such that we are able to better handle scheduling roadblocks due to changes in regulatory environment

2) How do we improve our environmental impact on cruises such that consumers are more like to take a trip

3) How do we improve the lead generation business for Cruises so more people go

4) How do we elevate the in-cruise experience.

In tomorrow's post, we will gauge the pros and cons of each of these different fields and settle on a specific vector to explore further.

In today's edition, we are going to quickly run what I like to call "back of the envelope math". Before we start going down the market validation route, we need to answer a basic question:

Is this market even worth it?

The idea is pretty simple. Let's try to work some quick back of the envelope math for each of these different buckets to get an idea of how big the potential market is:

Improving schedule flexibility

So the core problem here is that demand is pretty inelastic for cruises. The supply is very static, and require a high degree of coordination between the different places the ship will visit.

If one of these places is no longer viable (whether for political or economic reasons), it risks the entire trip and the itinerary.

The number of stops that the cruise industry does in a year is mind-boggling. Running some quick numbers, there likely are around 50,000 port stops scheduled per year.

Port fees run in the 10s of thousands of dollars, which means that if we can deliver enough value, we can likely charge in the hundreds of dollars.

So this means we can likely charge in the hundreds of dollars for this mythical service. But how big is the market?

Now likely there is a bigger market for scheduling port stops for ships, but for this exercise, this doesn't seem like a big enough market to follow.

Improving environmental impact of Cruises

Consumers are becoming more sensitive to the environmental impact of cruises. This sensitivity is leading to declining attitudes towards cruises.

Now there's really only two kinds of solutions to this.

1. Lower the environmental impact of cruises. While this is the preferred route, it's likely a very capital intensive route and requires new technologies. Not something we can scope in a week
2. Offset the environmental impact. There's probably a way to offset the impact of your cruise through existing carbon capture programs.

Number 2 is the more likely path. It's something that we can likely do given that most of the major Cruise companies don't implement this on their own.

Without going too much into detail, I think the best bet would be to create a service that connects the Cruise ship companies with these providers.

Running some quick numbers:

Looks like a much bigger opportunity than the first one. Assuming ~25% of consumers would seriously consider taking up this offer, then we are looking at ~50M in yearly revenue potentially from consumers.

However, the main thing to consider here is that the profit margins are likely very narrow with a feature like this. Consumers would consider this a type of charitable investment, and perhaps would not be open to a large profit.

Let's look at some of the other

Improve the lead generation business for Cruise ships

Remember all of those early internet viruses luring you in with a free cruise?

Clearly there is an inherent demand for cruise ships among the population. However, the age group of cruises inherently skews towards the older.

As the demographics shift, there will be more pressure on the cruise companies to fuel growth through millenial and younger generations.

There could be a world where a marketing analytics company could be created in order to optimize the customer acquisition funnel for cruise companies.

In reading the investor reports, there seems to be a large emphasis on using travel agents and paying out commissions for customers. This leads me to believe that there is very likely a world where a lead generation business could be created where a company is built out to resell tickets for cruise ships, but with a different brand.

No need to size this one out - this can be a very large business, and scales to as big as needed.

Elevate the in-cruise experience.

The in-cruise experience likely offers a large number of opportunities for improvement. From booking and RSVP-ing events, keeping track of expenses and charging for items, there are numerous areas where technology could help improve the experience.

The problem though with this vector is that it requires a deep understanding of the different business processes and consumer experiences inside a cruise ship. In addition, every ship has its own proprietary classes, and events.

What this leaves is pretty limited. Likely an app that works on checking in, checking out, etc. Essentially any process that is standardized across the different ships.

But I'm not too excited about this problem. While I think there are likely big improvements to be had for the in-ship experience, I don't think this would have a high ROI. It's too dependent on the cruise ship operators, and it's hard to see why this would be something they would look outside their core business as a solve.

Where do we stand now?

I think the most exciting business right now is the lead generation business for Cruise ships.

I'll take some time tomorrow to think about how to make this happen. In tomorrow's post, we will explore how to start our MVP.