International cruise companies pull out of China, but some still see market potential

By Zhang Dan Source:Global Times Published: 2019/3/5 17:43:40

○ Norwegian Cruise Line (NCL) will end its China venture soon and head to Alaska

○ Rapid market entry, poor performance, and unattractive cruise routes are main reasons for some international cruise companies leaving China, industry analysts said

○ Some cruise giants still have hope in the Chinese market, and want to explore potential in lower-tiered cities

The Costa Venezia, a Venice-themed ship specially designed for Chinese tourists, leaves port from the Italian company Fincantieri shipyard in Monfalcone, Italy on February 28. Photo: VCG

The cruise ship Joy of the US-based Norwegian Cruise Line (NCL), one of the world's three largest cruise brands, made its penultimate trip from Shanghai on Monday as it headed to Naha, Japan. 

After its last cruise, which will began on Thursday, the ship will pull out of the Chinese market and head to Alaska, a staff member at the China Travel Service Shanghai branch, which is responsible for NCL's cruise reservations, told the Global Times on Monday, adding that approximately 5,000 seats on the trip had been booked by companies as opposed to individual travelers. 

According to a person on the cruise, the internal decoration in Joy is very luxurious. "The ship has Chinese, American and French restaurants. Customers can also try kart-racing, VR activities and enjoy the water park on the ship," he said.

NCL's withdrawal from the Chinese market reflects the difficulties facing international cruise companies operating in China, industry analysts said. 

"Rapid market entry, poor performance, and unattractive cruise routes are the three biggest reasons for some international cruise companies pulling out of the Chinese market," Cheng Juehao, deputy chief of the Shanghai International Shipping Institute Cruise Economy Research Center, told the Global Times on Monday. 

Don't blame dama

NCL celebrated the launch of its first China-based ship in 2017, but made the decision to change course to the more lucrative Alaska in April, the company announced in July 2018. 

"China's a good market. But it's not as good as Alaska," Norwegian Cruise Line President and CEO Andy Stuart told travel media platform Skift. "In this business, particularly when we're not the biggest, we don't have 100 ships where we have to have a significant deployment essentially in every region around the world. We can be a little more opportunistic in how we deploy the fleet."

Chinese tourists enjoy shows and go-karting on an international cruise ship that departed from Shanghai in 2016. Photo: VCG

However, some media blamed China's dama - middle-aged and senior Chinese women - for literally eating away at the company's profits. A columnist from Tencent's Dajia cited a passenger as saying Chinese dama on the cruises always rushed to grab much more food than they needed at buffets, resulting in a shocking amount of waste. 

The news triggered public anger last year. An internet user who had taken a cruise on Joy commented online that one passenger took over 15 bags of oatmeal back to her room, and some took three to four dishes of shrimps whether they could finish them or not. Meanwhile, some defended those passengers by saying the people who wasted food on the ship were the minority.

"It is nonsense to blame Chinese dama, because every cruise line has decided the dining standard in advance. The food expense has already been included in the ticket price," Cheng said.

He did concede that most of the passengers were elderly people who may not be used to eating Western food buffets on international cruises. 

"The Chinese market has its own features and it seems some international cruise companies have not understood the market well. For example, some Western entertainment forms are not popular in China, so the companies should not judge the market performance according to criteria that are not suited to China," Cheng said. 

Reasons for failure

2018 witnessed the first time in 13 years that both the numbers of cruises and inbound and outbound cruise passengers in China have seen a decline. Last year, the number of cruises that stopped at China's 13 ports dropped by 19.03 percent on a year-on-year basis, according to statistics from the China Cruise & Yacht Industry Association. 

Industry insiders said it makes sense for some international cruise companies to leave the Chinese market for now, based on their poor performance over the past one or two years. 

In addition, Cheng pointed out that due to geopolitical reasons, cruise trips in the Chinese market could only go short distances. 

"After the deployment of the THAAD missile system, cruises from China skipped South Korean ports. The same situation happened in the island of Taiwan," Cheng noted, "That's why international cruise companies could only develop Japanese routes, which lack diversity. These short-distance routes may have been unattractive to some Chinese travelers."



 

"What's worse, travel agencies often sell cruise tickets at a relatively low price to Chinese customers, who should not be cruise ships' target customers at all. These customers are unwilling to spend anything extra, which is deemed an important part of cruise ships' revenue," Zhang Lingyun, director of the Tourism Development Academy at Beijing Union University, told the Global Times in a previous report. 

Industry analyst Yan Chunfeng told Chinese media Jiemian that on the cruise-selling platforms, the profit per person for a Chinese cruise route is 300 yuan ($44.78) while for the Alaska cruise route, the profit per person would be 1,500 yuan. 

This Global Times reporter searched "cruise trip" on ctrip.com, an online travel agency, and found that the cheapest cruise trip in March costs 1,979 yuan for a five-day-four-night trip from Xiamen, East China's Fujian Province, to Okinawa, Japan. The trip is operated by Costa Cruise, the Italian cultural brand of Carnival Corporation, one of the world's largest travel and leisure companies. 

Hope remains

Even though some international cruise ships have decided to sail away from China, some are still enticed by the huge market. 

Costa Cruise is placing its bets on the huge potential of the Chinese market in the coming years, as it recently designed and built a ship specifically for this market. 

"Costa Venezia will feature other unprecedented innovations, designed specifically to offer Chinese customers an immersive Italian holiday experience, marking a new era for both Costa and the whole China market, which is among the most promising in the world in terms of future growth," Mario Zanetti, president of Costa Group Asia, told the Global Times on Tuesday. 

Chinese tourists enjoy shows and go-karting on an international cruise ship that departed from Shanghai in 2016. Photo: VCG

"About 15 percent of Chinese customers will consider buying the cruise trip again, while 85 percent are first-time customers, statistics showed. That means Costa will have huge space to develop the market in second- and third-tier cities," he said. 

According to Cleo Liu, head of Ctrip's cruise business, the company had over a million cruise trip customers in China last year. Global cruise companies, such as Royal Caribbean, Costa Cruise, Princess Cruises, MSC Cruise and Dream Cruises, are all striving to attract Chinese passengers, Liu told the Global Times on Monday. 

"The majority of passenger groups are elderly couples and parents taking children. Special demands such as wedding and graduation-themed cruises are also growing," Liu said, "The Chinese market prefers new and large ships, which means this type of ship could still perform well in China."

However, she warned that prospects for cruise ships in China will weaken in 2019, especially in the second quarter.

When asked whether global cruise giants' moving out of the market gives more opportunities to domestic cruisers, Cheng said the latter are still at a disadvantage compared with established overseas brand names. 

 



 

Newspaper headline: Sailing away



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