a.)Consider specific aspects of Celebrity's operations. How well does the design of its operations support its strategic position and service concept?

b.)Which of the three alternatives Celebrity is considering do you most recommend? Why is this the best option?

c.) What are the most significant obstacles facing the cruise industry? What do you recommend to overcome these obstacles?

An elderly couple, both dressed in plaid, danced to the poolside band on Deck 10 as a waiter politely cleared an empty bowl from in front of Dietmar Wertanzl, senior vice president of fleet operations for Celebrity Cruises, Inc. It was January 2003 and a beautiful day at sea on board the MS Millennium, one of Celebrity's newer ships. The scoop of homemade chocolate ice cream had quelled Wertanzl's appetite, but not his quandary. Gazing from his table toward the pool area, he pondered the diversity of the guests. The hot tub was brimming with 20-something men wearing baseball caps emblazoned with fraternity Greek letters. Three single young women started to join them, then reconsidered and climbed the stairs to the sun deck. A group of older women playing cards dominated a corner of the lounging area. Young parents helped their little girl swim as the older husband and wife danced beside the pool, celebrating decades of commitment to one another. Sandwiched between mass-market players such as Carnival and luxury lines such as Crystal Cruises, Celebrity aimed to make a name for itself in the midtier premium market by offering an "upscale experience at an intelligent price." Given this positioning, guests migrated to Celebrity's premium cruises from both mass and luxury markets. Repeat cruisers made up about half the guests, who were further differentiated by the type of stateroom they had booked. Whereas common areas and facilities aboard its liners were fairly egalitarian, two 2,500-square-foot penthouse suites contrasted with the 170-square-foot inside staterooms. Suite guests were assigned extra staff and were given preferential treatment, but little of this was visible to other guests. Celebrity wrestled with the right way to treat customers who were often paying 10 times what other guests might be spending. Celebrity's explicit value proposition was rejuvenation, enrichment, and connection. "Royal Caribbean," maintained Celebrity President and Chief Operating Officer Jack Williams, "is about action and adventure; Celebrity is about the spirit." Enrichment included educational opportunities; connection meant reconnecting with family and friends and crew. "Instead of going after a demographic," explained Williams, "we decided to create a mind-set: the savvy traveler." These savvy travelers were profiled in Celebrity's new advertisements, part of an $11 million integrated marketing campaign (see Exhibit 1 for the press release). Antony Papageorgiou, director of brand 1 Inside staterooms did not have a window. Professor Frances X. Frei, Research Associate Corey Hajim, and Christian Hempell (MBA '03) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be