How Do Cruise Line Employees Rate Their Employers?

Another piece of the puzzle to figuring out which of the following cruise lines is best of breed: Royal Caribbean, Carnival, or Norwegian Cruise Line.

Feb 3, 2014 at 4:00PM

In the article "Best (and Worst) Cruise Line Based on Traveler Reviews," it was established that travelers ranked the cruise lines in the following order in regards to experiences: Disney, Royal Caribbean (NYSE:RCL), Carnival (NYSE:CCL), and Norwegian Cruise Line (NASDAQ:NCLH).

That was an important study, as it helped us determine that Disney and Royal Caribbean were the most likely to see sustainable demand. If travelers enjoy their cruise, then they're going to spread positive word of mouth. The same holds true for those who don't enjoy their experience. Looking at traveler ratings for cruise lines is imperative information for investors, but we have to see what employees think as well.

One study on its own might be important, but in order to establish a strong thesis on best of breed in the cruise line industry, we need to look at many different factors. In this case, instead of looking at traveler opinions of the cruise lines, we will take more of an inside look and see what the employees think. This is a good indication of company culture. When company culture is strong, the business is more likely to thrive because happy employees tend to be more productive and offer better customer service. If employees aren't happy, then they tend to simply go through the motions, not producing at their full potential or offering quality customer service.

Another Fool contributor, Brian Stoffel, recently pointed out in one of his articles that companies with strong company cultures tend to outperform the market. For instance, the top five company cultures would have returned $10,000 into $65,000 since 2009 (through December 16, 2013). By comparison, a $10,000 investment in the S&P 500 would have turned into $20,400. Those five companies: General Mills, Netflix, Adobe, Whole Foods Market, and Google

The results below are based on anonymous employee reviews at Glassdoor.com. Note that Disney Cruise Vacations only had 12 reviews and ratings. While a 4.1 of 5.0 rating is high, these results have to be excluded due to a small sample size. 

Royal Caribbean
Employees rated Royal Caribbean a 3.6 of 5.0, and 73% of employees would recommend the company to a friend. The average company culture rating is 3.2 (based on 250,000 companies.) Therefore, Royal Caribbean sports an above average rating for company culture.

Positives mentioned include cruise compensation, excellent compensation if you can sell, benefits, a growing brand, and amazing ships.

Negatives include long hours, slow responses to requests, strict rules (this could be looked at as a positive in a certain light, though), high turnover, difficulty to move up due to politics, and the need for more inter-department collaboration.

Prior to moving on, note that Royal Caribbean sports a return on equity of 5.54%. Return on equity is a good way to gauge management effectiveness. Let's see if it goes hand-in-hand with company culture ratings for the cruise line companies. 

Carnival
Employees rated Carnival a 3.4 of 5.0, which is slightly above average. Additionally, 62% of employees would recommend the company to a friend.

According to anonymous employee reviews, positives include likable coworkers, understanding management, cruise benefits, and good pay if you're exceeding your monthly goals.

Negatives include long hours and no room for growth due to politics. It's worth noting that one anonymous employee mentioned that Carnival is now heavily focused on data analysis to improve customer satisfaction. This is a good sign.

Carnival's return on equity stands at 4.45%, slightly lower than Royal Caribbean, as is the company culture rating. Likely not a coincidence. 

Norwegian Cruise Line
Employees rated Norwegian Cruise Line a 3.1 of 5.0, which is slightly below average, and 55% of employees would recommend the company to a friend. These aren't terrible numbers, but Norwegian Cruise Line once again scores lower than its peers. 

Unfortunately, it was difficult to find many positives. One was cruise and health benefits.

Negatives greatly outweighed the positives, however. These negatives include a very strict policy toward the usage of technology and socialization in general, lead theft, low pay, negative coaches, favoritism, antiquated working procedures, suggestions not being welcomed, and a lack of ethics.

Norwegian Cruise Line's return on equity: 2.95%, coinciding with the lowest company culture rating. 

Based on anonymous employee reviews, it seems as though Norwegian Cruise Line's company culture is subpar.

The bottom line
The above results coincide with "Best (and Worst) Cruise Line Based on Traveler Ratings." If you exclude Disney, Royal Caribbean is the most impressive cruise line, Carnival squeezes into the middle, and Norwegian Cruise Line lags its peers.

Travelers and employees feel the same way about these three brands, and return on equity matches these trends. This isn't a coincidence, and it's an indication that Royal Caribbean is the best-run cruise line of the three. While stock prices might fluctuate for a considerable amount of time, if you're looking to invest in the cruise line with the greatest odds of long-term success, then you should look into Royal Caribbean. Also note that Royal Caribbean, Carnival and Norwegian Cruise Line are trading at 23, 28, and 104 times earnings, respectively. Combining results and valuation, Royal Caribbean still looks the most appealing. Please do your own research prior to making any investment decisions. 

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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