Growth strategy case: CruiseQuest
CruiseQuest wants to grow profit by at least $100M a year and is weighing buying a private Caribbean island as a stop on its cruises. The CEO wants to know if the island would pay off. The full solution is below: the structure, every exhibit, the math, a model answer and the mistakes to avoid.
- Type
- Growth strategy
- Difficulty
- Easy
- Length
- About 30 minutes
- Format
- Interviewer led
The case
The interviewer reads this aloud. Try it before you read on.
Our client is CruiseQuest, a cruise line with 10 ships sailing 7-night Caribbean cruises. Each cruise stops at three public ports, where passengers go ashore for the day. Ticket prices are under pressure from competitors, so the CEO wants to grow profit by at least $100 million a year without raising fares. One proposal is to buy and develop a private island and use it as one of the three stops on every cruise, instead of a public port. The CEO has asked us whether the island would pay off.
Facts the interviewer gives if you ask
- How many passengers does CruiseQuest carry?
- Each ship carries 3,000 passengers and sails 50 cruises a year, so 1.5 million passengers a year across the fleet.
- What would the island cost?
- $360 million to buy and develop: a pier, beaches, restaurants, bars, cabanas and water sports. Running it would cost $30 million a year in fixed costs, plus a variable cost per passenger.
- Can it take the whole fleet?
- It can host two ships a day. The fleet makes 500 calls a year, fewer than two a day on average.
- How much do passengers spend ashore?
- About $150 per passenger per port day on average, counting those who stay on the ship. At a public port most of it goes to local restaurants, shops and tour operators.
- Does CruiseQuest earn anything at public ports today?
- A commission on the excursions it sells, about $15 per passenger per port, and it pays the port about $25 per passenger in fees.
The solution, step by step
How the case runs in the interview, in 5 steps. Each step has the interviewer's question, the exhibit or data shown, and what a strong answer says.
- 1
Structure the problem
The interviewer asks: “How would you decide whether the private island would pay off for CruiseQuest?”
A strong structure
- 1Where passengers spend: ticket, on board, and ashore, and who keeps each part
- 2Island economics: revenue and costs per passenger against a public port day
- 3Investment: purchase, development, fixed running costs, payback
- 4Risks: guest experience, weather, capacity, environment and local relations
A strong answer
A structure that compares one stop at the island with one stop at a public port: what passengers spend ashore and who keeps it, CruiseQuest's revenue and costs per passenger at each (commissions, port fees, island running costs), scaled to the fleet, then the investment and payback against the $100 million goal, and the risks (guest experience, weather, capacity, permits, local relations). A strong candidate hypothesizes that the value comes from keeping spending that today goes to others ashore.
- 2
Read the exhibits
The interviewer asks: “Here is how an average passenger's spending splits over a 7-night cruise. What do you notice?”
Exhibit 1
Where an average passenger's money goes on a 7-night cruise
Share of an average passenger's total spending on a cruise, about $2,500 in all.
- Ticket60%
- Spent on board22%
- Spent ashore at ports18%
Where an average passenger's money goes on a 7-night cruise Category Share of spending Ticket 60 Spent on board 22 Spent ashore at ports 18 What to notice
- 60% is the ticket and 22% is spent on board, both kept by CruiseQuest.
- 18%, about $450, is spent ashore, mostly with local businesses: about $150 per port day.
A strong answer
60% of a passenger's spending is the ticket and 22% is spent on board, both kept by CruiseQuest. But 18% is spent ashore at ports, and that mostly goes to local businesses. If an average passenger spends about $2,500 in all, 18% is $450, about $150 for each of the three port days. A private island would let CruiseQuest keep one of those three days of spending.
- 3
Do the math
The interviewer asks: “Here is what CruiseQuest makes per passenger at a public port and on the island. What would the island add to profit each year, and how long would it take to pay back?”
The interviewer adds
- 1.5 million passengers a year. Every cruise would stop at the island once.
- The island costs $360 million to buy and develop and $30 million a year in fixed costs.
Exhibit 2
What CruiseQuest makes per passenger at one stop
Per passenger per port day, public port against the private island, $. Island fixed costs of $30 million a year are not included.
What CruiseQuest makes per passenger at one stop Per passenger per stop Public port Private island Revenue to CruiseQuest 15 150 Variable costs 0 60 Port fees 25 0 Net to CruiseQuest −10 90 What to notice
- At a public port CruiseQuest nets minus $10 per passenger.
- On the island it keeps the $150 of spending and nets $90 after variable costs.
- The swing is $100 per passenger.
A strong answer
At a public port CruiseQuest earns $15 of commissions and pays $25 of port fees, so it nets minus $10 per passenger. On the island it keeps the $150 of spending, minus $60 of variable cost, so it nets $90. The swing is $100 per passenger. Times 1.5 million passengers is $150 million a year, minus $30 million of fixed costs, so $120 million a year of extra profit, above the $100 million goal. Payback is $360 million over $120 million, 3 years.
Every number, worked out15 calculations
Every number, worked out Number Worked out Result Passengers a year 10 × 3,000 × 50 1,500,000 Ship calls a year 10 × 50 500 Average calls per day 500 ÷ 365 1.37 Spending ashore per cruise ($) 2,500 × 0.18 450 Spending per port day ($) 450 ÷ 3 150 Net per passenger at a public port ($) 15 − 25 −10 Net per passenger on the island ($) 150 − 60 90 Swing per passenger ($) 90 − (−10) 100 Gain before fixed costs ($M) 100 × 1,500,000 ÷ 1,000,000 150 Gain after fixed costs ($M) 150 − 30 120 Payback (years) 360 ÷ 120 3 Profit lost per $10 less spending ($M) 10 × 1,500,000 ÷ 1,000,000 15 Gain at $130 of spending ($M) ((130 − 60) − (−10)) × 1.5 − 30 90 Payback at $130 of spending (years) 360 ÷ 90 4 Spending in the downside test ($) 150 − 2 × 10 130 - 4
Brainstorm the options
The interviewer asks: “What could go wrong, and what would you do to make the island succeed?”
A strong answer
Organized ideas. Guest experience: some passengers want real towns and culture, so keep two public ports and make the island a highlight, check satisfaction scores. Revenue: the $150 spend is an assumption, so design paid options (cabanas, water sports, premium beach clubs) and bundle them before sailing. Operations: weather and hurricanes can close the island, tender or pier capacity for two ships a day, fresh water and waste. Environment and permits: reef protection, building rules, local hiring. Local relations: the ports that lose calls lose income, and governments may react. Competitors may respond with their own islands. A strong candidate sizes one: each $10 less spent per passenger costs $15 million a year.
- 5
Make the recommendation
The interviewer asks: “The CEO wants your answer. What do you recommend?”
A strong recommendation
Buy and develop the island and make it one of the three stops on every cruise. At a public port CruiseQuest nets minus $10 per passenger, while on its own island it keeps the $150 passengers spend ashore and nets $90. That $100 swing on 1.5 million passengers is $150 million a year, $120 million after $30 million of fixed costs, above the $100 million goal, and the $360 million island pays back in 3 years. Risks: passengers may spend less than $150 (each $10 less costs $15 million a year), storms can close the island, and guests and the ports that lose calls may push back. Next steps: survey passengers on what they would pay for on the island, assess sites for weather and permits, and decide which public ports to keep.
The model answer
A strong candidate's whole answer, as it sounds out loud. The marked phrases are explained below.
- 1Goal and structureConfirm the $100 million goal, then compare an island day with a port day, with a hypothesis about keeping spending ashore.
- 2Read the spending chart18% of spending, about $150 per port day, goes to others ashore.
- 3Island economicsA $100 swing per passenger, $120 million a year after fixed costs, and a 3-year payback.
- 4Sensitivity and risksEach $10 of spending is $15 million a year, plus guests, weather, operations and local relations.
- 5RecommendationBuy the island, the numbers, risks and next steps.
Thanks. So CruiseQuest has 10 ships on 7-night Caribbean cruises with three public port stops, ticket prices are under pressure, and the CEO wants at least $100 million more profit a year without raising fares. The idea is to buy a private island and make it one of the three stops. The question is whether it pays off. Is the $100 million a year the main test, and does the CEO have a payback period in mind? Thanks, so the $100 million is the test, and a payback of a few years would be welcome.
I'd compare one day at the island with one day at a public port. First, where passengers spend money that day and who keeps it. Second, what CruiseQuest makes per passenger at each kind of stop, including commissions, port fees and the island's running costs. Third, scale that to the fleet and compare it with the cost of the island to get a payback. Fourth, the risks, like guest experience, weather and local relations. My hypothesis is that the value comes from keeping money that passengers spend ashore today, which mostly goes to other businesses.
Looking at the spending chart, 60% of what a passenger spends is the ticket and 22% is spent on board, and CruiseQuest keeps both. But 18% is spent ashore. Thanks, so an average passenger spends about $2,500, and 18% of that is $450, or about $150 for each of the three port days. Today almost all of it goes to local restaurants, shops and tour operators. So an island would let CruiseQuest keep one of those days. I'd assume the ticket and on-board spending stay the same, since the cruise is still seven nights with the same ship, so the island only changes that one day.
Now the math. At a public port CruiseQuest earns about $15 in excursion commissions and pays $25 in port fees, so it nets minus $10 per passenger. On the island it keeps the $150 of spending and pays $60 of variable costs, so it nets $90. The swing is $100 per passenger. With 1.5 million passengers a year, that is $150 million. Take off the island's $30 million of fixed costs and it's $120 million a year, above the $100 million goal. The island costs $360 million, so it pays back in 3 years.
Let me test the main assumption, which is the $150 of spending. Each $10 less per passenger costs $15 million a year. So even at $130, we'd still make $90 million, close to the goal, and the payback would be 4 years. That tells me spending on the island is what to design for.
On what could go wrong, I'd think about four areas. Guest experience: some passengers want real towns, so I'd keep two public ports and make the island a highlight. Revenue: design paid options like cabanas, water sports and beach clubs, and sell them before the cruise. Operations: storms and hurricanes can close the island, and it has to handle two ships a day with water and waste. And relations: the ports that lose our calls lose income, and permits and reef protection need care. Competitors may also build islands of their own.
So my recommendation is to buy and develop the island and make it a stop on every cruise. At a public port CruiseQuest nets minus $10 per passenger, and on its own island it nets $90. That $100 swing on 1.5 million passengers is $150 million a year, $120 million after fixed costs, which beats the $100 million goal, and the $360 million pays back in 3 years.
The main risks are that passengers spend less than we expect, that storms close the island, and that guests or the ports push back. Next steps are to survey passengers on what they'd pay for on an island, assess sites for weather and permits, and decide which public ports to keep.
Why this answer works
Follow the customer's money
Passengers already spend $150 a port day. The island doesn't create that spending, it moves it to CruiseQuest.
Compare against today, not zero
The gain is the swing from minus $10 at a port to plus $90 on the island, not just the island's $90.
Size the key assumption
Each $10 of spending per passenger is $15 million a year, which shows what to design and test before buying.
The phrases that do the work
“My hypothesis is that the value comes from keeping money that passengers spend ashore today”
Hypothesis. Names the mechanism that makes the island worth buying.
“The swing is $100 per passenger.”
Incremental thinking. Compares the island with today's port day, including the fees and commissions.
“Each $10 less per passenger costs $15 million a year.”
Sensitivity. Turns the main uncertainty into a number the CEO can weigh.
“the $360 million pays back in 3 years”
Answer with the number. Closes the investment question clearly.
Common mistakes on this case
- 1Counting only the island's $90 per passenger as the gain, when CruiseQuest nets minus $10 at a public port today, so the real swing is $100.
- 2Forgetting the $30 million of fixed costs, which overstates the gain at $150 million a year.
- 3Assuming the island brings new spending on top of port spending, when it replaces one of three port days.
- 4Using the full $450 of shore spending per cruise instead of the $150 for the one port day the island replaces.
- 5Recommending the island without naming guest experience, weather or the ports that lose calls as risks.
Now run this case out loud
Soreno's AI interviewer gives you this case, shows each exhibit when you ask, follows up on your math and scores each part.
Questions people ask
Is CruiseQuest a real company?
No. CruiseQuest is an invented client, and every number is case data written for practice. The numbers reconcile, so you can check your math against the solution.
How long does this case take?
About 30 minutes out loud, the length of one interview case. It is rated easy.
How should I use this solution?
Try the case first. Read the prompt and the facts, write your structure and work the numbers, then compare each step with the walkthrough and the model answer.
Can I practice this growth strategy case out loud?
Yes. Soreno's AI interviewer runs this case with you, shows the exhibits when you ask, follows up on your answers and scores each part.