(THIS ARTICLE IS COURTESY OF SHANGHAI CHINA’S SHINE NEWS AGENCY)
Cruising through a stretch of rough seas
By land, by air and now by sea, the Chinese have come to dominate world tourism. Cruise lines are now capitalizing on that travel bug, despite some rough seas this year.
“China’s cruise industry is on the cusp of rapid growth that has enormous potential,” said Wang Younong, chairman of the Shanghai Wusongkou International Cruise Terminal.
Last year, 18 cruise vessels were operating out of Chinese ports, carrying 2.4 million Chinese passengers. That was up from four vessels and 200,000 passengers in 2012.
Numbers, however, are expected to decrease to 14 vessels and 2 million passengers next year.
Royal Caribbean Cruise Ltd, the second-largest cruise line worldwide, will operate its Spectrum of the Sea and Oasis of the Seas liners in China in the near future. Spectrum of the Seas will be the biggest and most expensive cruise ship in Asia, with industry cutting-edge technologies.
Costa Cruises, an arm of US-based Carnival Corp, plans to bring two tailor-made ships in 2019 and 2020 to China, according to Mario Zanetti, president of Costa Group Asia. The company introduced cruising to China in 2006 and currently holds 26 percent of China’s cruise market.
MSC Cruise, the industry leader in the Mediterranean, South Africa and Brazil, will operate its MSC Bellissima, a cruise ship featuring rich entertainment, in China, and Genting Group will deploy two 204,000-ton cruise ships that can accommodate 9,500 passengers at the Shanghai port in 2021.
The commitments to the China market may be impressive, but there is an underside to the glowing prospects.
US-based Norwegian Cruise Line, a service with a history of more than 50 years, announced that it is withdrawing Norwegian Joy — the first-class cruise ship tailor-made for Chinese passengers — from the market after one year of operation here.
Cheng Juehao, deputy professor at the Shanghai Maritime University and deputy head of the Shanghai International Shipping Institute Cruise Economy Research Center, said some cruise companies may have miscalculated in their strategies for the China market.
“The Chinese cruise market saw soaring growth of similar products by almost all global cruise operators trying to expand their business here,” Cheng said. “In order to compete with each other, ticket prices nose-dived from 20 percent higher than sophisticated markets such as Europe and the United States, to between 30 percent and 40 percent lower.”
Low ticket prices are the results of sales channels, according to Ye Peng, vice director of sales for Costa.
In China, 90 percent of tickets are sold through cruise agents, who buy up all the berths on a ship and then redistribute tickets by various channels. However, in Western markets, 30 percent of tickets are sold through direct sales by cruise lines.
In China, travel agents make only about 6 percent profit from sales of cruise tickets, a much lower percentage than with other travel products.
As a result, some operators are finding it difficult to remain profitable, and the customer experience is being sacrificed to low expenditure.
Industry officials in China said competition is undercutting business performance in the market. Only operators who improve the quality of cruises and cater to the needs of passengers will come out on top.
Zhang Zhendong, general manager of Tianjin International Cruise Home Port, said China’s cruise industry is in a period of transition.
“In 2017, the market entered adjustment phrase that will last until 2020,” he said. “That will be followed by a 10-year golden age of cruising. Next year may see a temporary trough in the market. However, the market is 10 times larger now than it was in 2012, and the compound growth rate is almost 30 percent, which is rare in the world.”
Roger Chen, chairman in China for Carnival Corp, said his company remains upbeat on the China cruise market.
“We are here to stay in China,” said Chen, speaking at the 13th China Cruise Shipping Conference and International Expo in Shenzhen earlier this month.
Market fluctuations this year are a bit exaggerated, he said, and it’s natural for any industry to have adjustment periods.
“We are collaborating with China State Shipbuilding Corp to build the largest made-in-China vessel as part of a joint venture, and we will operate this vessel in the Chinese market,” Chen added.
Costa China’s Ye said his company needs to advertise cruises as a lifestyle and spend time and effort building and differentiating its brands.
“When Chinese passengers leave the cruise vessels,” he said, “they often don’t even know the ship’s name. We have to work on the branding of the vessel and providing diversified choices.”