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Hurtigruten: Sailing into Warm Water

Student’s Name
Professor’s Name
Institute Name
Date
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Hurtigruten: Sailing into Warm Water

Question 1:
Describe the demand and supply characteristics in the expedition cruise industry, both at
the time the case is written and in the near future.
1. In 2019, at the time of the case: (Demand)
a) The appeal of Polar adventures: The desire for secluded and unspoiled locations such
as Antarctica and the Arctic was seen in the strong demand for polar adventures.
Customers were looking for unusual and daring experiences.
b) Emphasis on Education and Environment: Passengers are becoming more appreciative
of educational features and environmentally friendly activities. Companies that offer
environmentally responsible expedition cruises have grown in popularity.
c) Development of the Market: As more tourists looked for expedition cruises, the market
grew. The demand for real and immersive travel experiences drove this expansion.
Near Future (Estimated):
a) Continued Growth: It was anticipated that there would be a continued demand for
expedition cruises. Experiences outside from the established route were sought after by
customers, and emerging markets were predicted to fuel this expansion.
b) Diversification of Destinations: Traveling to warmer regions was becoming more
popular than polar excursions. Businesses expected customer tastes to change, which
resulted in a wider variety of itineraries.
c) Sustainability Concerns: Travelers who expressed a preference for eco-friendly cruise
options showed a critical understanding of the environment. Businesses that prioritized
sustainability in their operations were probably going to take a larger chunk of the
market.
2. In 2019, at the time of the case: (Supply)
a. Growth in Capacity: With an emphasis on polar regions, the business saw a
growth in the capacity of expedition cruises. To accommodate the demand for
these exclusive excursions, new ships were ordered.
b. Cruise firms' Specialization: To set themselves apart from conventional cruise
lines, specialized expedition cruise firms arose. This specialization made it
possible to address the expedition travel sector with greater precision.
Near Future (Estimated):
a) Capacity Expansion: It was anticipated that the trend of capacity growth would
continue, particularly with polar-class boats. The goal of cruise lines was to
satisfy the growing demand for adventurous voyages.
b) Innovative Ship Design: It was hoped that ship design would continue to evolve,
combining eco-friendly technologies and distinctive facilities. Businesses made
an effort to provide unique onboard and onshore experiences (238 Words).
Question 2:
Evaluate the attractiveness of the market for (all) expedition cruises.
1. Is this an attractive market today?
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The market for expedition cruises is now attractive. The market for expedition cruises is
currently very appealing for several reasons:
Growing Need: Travel experiences that are immersive and distinctive are becoming more and
more in demand. Expedition cruises have become increasingly popular as a result of consumers'
desire to go to far-flung and uncharted locations.
Profitability: Businesses have shown to be profitable even with the specialized nature of
expedition cruises. Together with rising demand, the premium cost of these distinctive itineraries
makes the sector financially sustainable.
2. How is the attractiveness of this market changing?
A shift in the market's attractiveness
Destination Diversification: As cruise itineraries are expected to become more varied, the
market is expected to become more appealing. To appeal to a wider audience, cruise companies
are expanding their operations beyond polar adventures and into warm-water destinations.
Environmental Sustainability: As sustainability gains traction, it becomes more appealing to
consumers. The long-term appeal is increased when ecologically conscious practices are adopted
and promoted by expedition cruise lines in line with shifting consumer preferences.
Then, consider the various segments of the market.
1. Within this market, is the polar expedition cruise segment currently more or less
attractive than the warm-water expedition cruise segment?
2. How do you expect the relative attractiveness of the two segments to change in the
future?
1. Present Attractiveness: Because there is little competition, a large demand for arctic
experiences, and a niche clientele, the polar expedition cruise market is currently more
appealing. There is increased competition and uncertainty for warm-water cruises.
2. Future Outlook: As cruise lines, such as Hurtigruten, expand into warm-water areas, it is
anticipated that the relative appeal will change. More competition could pose problems for the
arctic segment, but more market access could make warm-water excursions more alluring. Both
markets are expected to expand, but warm-water expeditions might become more well-known
(243 Words).
Question 3:
How does Hurtigruten's cost structure in expedition cruises compare to the cost structure
of a typical expedition cruise company (like the one shown in Exhibit 7)?
1. Start with the cost structure provided in Exhibit 7 for a typical 150-bed expedition ship
sailing to Antarctica.
2. Use information in the case to estimate the costs incurred by a 500-bed Hurtigruten
vessel making the same voyage.
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3. Calculate Hurtigruten's costs assuming that the Hurtigruten ship has the same
occupancy rate (90 percent) as the ship in Exhib1.
1. The cost breakdown for an average 150-bed expedition ship traveling to Antarctica is shown in
Exhibit 7. If Hurtigruten uses a 500-bed ship for the same journey, let's compare this to their
pricing structure:
1. Straightforward Comparative Analysis:
Realized Price: Hurtigruten may be able to reduce the cost per passenger compared to a
traditional cruise liner because of its bigger scale, which may allow for cost reductions in areas
like procurement.
Operating expenses: Hurtigruten may have more initial operating expenses because it runs
hybrid-powered ships and has made investments in environmental projects. On a per-passenger
basis, economies of scale could, however, lessen this.
With its larger vessels and emphasis on sustainability, Hurtigruten's cost structure may be
favorable or even competitive when compared to that of a normal expedition cruise operator.
Economies of scale, possible benefits in negotiations, and a powerful brand could make
Hurtigruten's cost structure more effective.
3. Cost Estimate for Hurtigruten's 500-Bed Vessel:
Using the cost structure for a standard 150-bed Antarctic expedition ship from Exhibit 7, we can
calculate the approximate costs for a 500-bed Hurtigruten vessel:
a) Realized pricing: Using the average value of $826 from Exhibit 7, we can estimate
that Hurtigruten's realized pricing per passenger cruise night is similar to that of the
average cruise business.
b) Operating Expenses (Each Night of Passenger Cruise):
Travel Agent Fee: $32 (representing 8% of the actual cost; see Exhibit 7)
Food & Drink: $21 (5.3%), as shown in Exhibit 7.
Fuel ($148%, Exhibit 7): $148
$177 (22%), Other Operations (Exhibit 7)
$43 (5.3%), marketing (Exhibit 7)
$20 (assumed to be 2.5%) for general and administrative (G&A)
a) Occupancy percentage: Hurtigruten's 90% occupancy percentage is assumed to be
constant.
4. Hurtigruten's 500-bed vessel's 90% occupancy calculation:
The anticipated expenses for a 500-bed Hurtigruten ship traveling in a manner akin to that shown
in Exhibit 7 can be computed, assuming a 90% occupancy rate. Travel agent commission ($32),
food and beverage ($21), fuel ($148), other operations ($177), marketing ($43), and general &
and administrative expenses ($20) make up the larger vessel's total operating costs, which come
to $441 per passenger cruise night, with a realized price of $826 per passenger cruise night. As a
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result, the net revenue per passenger cruise night is $385. This is determined by subtracting the
realized price from the overall operating costs. This estimate helps assess the economic
feasibility of such an expansion by illuminating the financial effects of operating a larger vessel
under similar circumstances (304 Words).
Question 4:
1. Does Hurtigruten have a competitive advantage in the market for expedition cruises?
2. If so, what is the source of competitive advantage? If not, why not?
Hurtigruten's Competitive Advantage Analysis:
Competitive Advantage: Hurtigruten has an advantage over other companies in the expedition
cruise industry. The company's strength is rooted in its experience, history, and well-established
brand in polar expedition cruises. The case demonstrates its accomplishments in turning around
the Norwegian coastal company and its quick expansion in the Expedition market.
Sources of Competitive Advantage: a. Heritage and Expertise: Hurtigruten has a distinct
advantage because of its history as a provider of coastal services in Norway. The company's
decades-long personal understanding of the Arctic regions is a significant asset. Expedition
cruising requires authenticity and trust, and this heritage offers both.
b. Environmental Leadership: Hurtigruten's competitive advantage stems from its dedication to
environmental projects and sustainability. It shows a pioneering attitude to be the first cruise line
to do away with single-use plastics, switch to cleaner fuels, and look into alternative energy
sources. These kinds of programs are in line with the rising desire for environmentally conscious
travel.
c. Polar Expedition Specialization: Hurtigruten is positioned as an expert in the polar
expedition industry due to its success, particularly with the launch of new hybrid-engine vessels.
The organization can customize its offers and develop specialized competencies by concentrating
on polar regions.
d. Agile Digital Development: By improving ship capabilities and connection through agile
digital development, Hurtigruten enhances customer-centric experiences. This fits with the
current trend of using technology to streamline processes and enable personalization.
In summary, Hurtigruten holds a unique position in the expedition cruise industry thanks to its
heritage, environmental leadership, specialization in polar excursions, digital investments, and
dedication to sustainability (221 Words).
Question 5:
Consider the risks and opportunities associated with expanding into warm-water
expedition cruises for Hurtigruten.
1. Should they expand? Defend your view.
I Think: Assessing Hurtigruten's Growth into Warm-Water Expedition Cruises
Risks:
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Dilution of Brand: Hurtigruten's distinctive stance as a polar expedition specialist may be

lessened and clients may become confused if it expands into warm-water areas.
Operational Difficulties: Entering uncharted warm-water regions presents a number of
operational difficulties, such as adjusting to various environments, ecosystems, and cultural
norms, which could put a burden on the business's current resources.
Opportunities:
Market Growth: Of all the expedition cruise markets, the warm-water expedition segment
accounts for a sizable portion (45%). By tapping into this substantial market, expansion can open
up potential prospects outside of the polar segment.
Diversification: By expanding into warm-water locations, one can diversify their product
offerings and lessen reliance on polar trips. The risks connected with relying too much on one
particular specialty may be reduced by this diversification.
Should they expand?
Hurtigruten ought to gently get into warm-water expedition voyages, in my opinion. Expanding
the product line, extending the market reach, and bringing in steady income are all attractive
possibilities. The business must, however, carefully manage the risks involved, particularly
concerning operational difficulties and brand erosion. These risks can be reduced by strategic
planning, market research, and a gradual strategy for expansion, which will help the business
maintain its basic values while seizing new opportunities (220 Words).