Overseas cruise companies look forward to 'second golden age' in China

By Xie Jun Source:Global Times Published: 2019/4/17 19:23:40

Overseas operators look forward to ‘second golden age’ in the market

The stern of the Explorer Dream, the newest cruise launched by Genting Cruise Lines at Shanghai's Wusongkou International Cruise Terminal Photo: Courtesy of Genting Cruise Lines

After a temporary chill in the Chinese mainland cruise market with the exit of several cruise lines, it seems that the industry is ready to set sail again as overseas cruise companies increase investment with larger ships and longer itineraries.

On Thursday, Genting Cruise Lines under the Hong Kong-based Genting Hong Kong launched its latest cruise ship, the Explorer Dream, with Shanghai's Wusongkou International Cruise Terminal as its home port. It is the first cruise ship Genting has launched during what it described as a "post-recalibration period" in the Chinese mainland cruise industry. 

On Thursday, the 75,338-ton white cruise ship berthed quietly at the Wusongkou port. Although the cruise liner has not yet started operating, the 13-deck ship had a lively atmosphere with piano music floating in the background and servers offering wine and drinks to people on board. The interior of the cruise ship featured golden pillars, wall paintings and luxurious carpets. 

Another Genting cruise ship, the World Dream, has dual home ports in Guangzhou in South China's Guangdong Province and Hong Kong.

Genting Cruise Lines' launch of the Explorer Dream, which targets the mainland's rising middle-class, is an example of how overseas cruise companies are increasing their investment in the mainland. Cruise operators are pushing into the market by launching larger ships as well as designing longer travel itineraries for mainland customers.

US-based Princess Cruises said in a statement it sent to the Global Times on Friday that it is launching a new 9-day travel itinerary from Shanghai to Japan for this year's summer season. The company already offers a 5-day Shanghai-Japan cruise itinerary in summer. 

In May, the Costa Venezia cruise ship will also make its first departure from Shanghai, stopping at locations throughout Asia. The 135,500-ton cruise ship is Costa Cruises' largest vessel in its mainland fleet. The company will introduce another new ship, also tailored for the Chinese market, in 2020, the company revealed to the Global Times recently. 

Genting Cruise Lines is heading in a similar business direction. The company told the Global Times that after the Explorer Dream, the company will launch a 200,000-ton Global Class cruise ship, set to debut in 2021, for the mainland market. The ship will feature cutting-edge technologies such as facial-recognition for onboard check-in and intelligent stateroom controls.

Second golden age 

Overseas cruise companies have been testing the waters in recent years.

In April 2018, the 3,883-passenger ship Norwegian Joy left China for the more lucrative waters of Alaska in the US, a little more than one year after the Norwegian Cruise Line celebrated the first ship it had customized for the Chinese market. 

The Sapphire Princess, a cruise ship owned by Princess Cruises, also exited the Chinese market in April 2017, according to media reports.  However, the domestic cruise market has been reinvigorated this year, with overseas companies stressing their optimism about the market as well as their determination to increase investment, despite rises and falls in the market. 

"We are here (in China) not just as passersby. We are here to be a serious player. We don't stay when the market is good and leave when the market is bad. Instead, we look at things on a long-term basis," Tan Sri Lim Kok Thay, chairman and chief executive officer of Genting Hong Kong, told the Global Times in an interview on Wednesday.

Cherry Wang, vice president and general manager of Princess Cruises China, told the Global Times on Friday that cruise companies need to adjust their strategies and create a second golden age as China's cruise industry transitions from a period of rapid development to one of healthy, sustainable development.

"From 2017 to 2018, China's cruise market growth slipped below 20 percent for the first time in history, which means that the domestic cruise market has reached a crossroads for the next decade. But this change, I think, is in line with the curve rule in any industry - from the starting period to the peak of rapid development, followed by a small low ebb, and then a climbing stage to a saturation period at the end," she said. 

A representative from Costa Cruises also noted in a recent interview with the Global Times that China's slowing growth in the cruise industry is "temporary." 

"It (now) remains in the exploring and adjusting period but has promising potential in the upcoming years," the company said in the statement. 

The companies' positive analysis of the Chinese cruise market was also echoed by some domestic industry workers. Shao Yuhua, the general manager of the Asia Pacific division of the Shanghai-based Spring Travel Agency, told the Global Times on Wednesday that she felt that overseas cruise companies were making a "normal strategic adjustment" when deciding to exit the mainland market, and this did not mean that China's overall cruise market was facing a chill.

"So far, the penetration rate of cruise products is still low in the mainland compared with many overseas markets. I think the market supply in this sector will adjust according to market demand and will fluctuate all the time," she said. 

Sales model change 

Despite the market chill, positive signs are also emerging in the domestic cruising market, such as efforts by cruise operators to adopt a more sustainable sales model.

Yang Yong, dean of the School of Tourism at East China Normal University, said that the key reason for the domestic cruise industry's plight in recent years was its chartering sales model, in which a cruise firm out sources all ticket sales on a boat to one agent. To relieve sales pressure, intermediate agents often sell the tickets at a very low price and cruises have to earn money by forcing extra spending, such as onshore shopping, onto customers. 

A Shanghai-based doctor surnamed Qian told the Global Times on Sunday that she had spent 5,000 yuan ($745) for a 5-day cruise from Shanghai to Okinawa, Japan in the summer of 2012, but in January 2016, when she went on a similar 5-day cruise trip from Shanghai to Fukuoka, Japan, she only spent about 3,000 yuan. 

Qian recalled that for the second trip, she was taken by the tour guide to only one scenic spot in Fukuoka, along with several local shopping centers. Because the schedule was too tight, she didn't even have time to eat. 

Lim also commented that such chartering sales models have "messed up the market,"with heavily marked-down cruise fares causing the market to heat up too fast in a distorted manner. 

Recently, however, he has observed changes throughout the industry as cruise firms start to embrace more sustainable sales models. 

Genting, for example, is mounting efforts to develop direct sales by encouraging customers to book trips directly at the company's reservation centers. It is also developing e-booking via online channels like WeChat. According to Lim, Genting is trying to increase the proportion of e-commerce ticket sales to about 20 percent of total ticket sales from 10 percent.

More sophisticated customers

Lim also noted that domestic cruise customers are becoming more sophisticated, another good sign for cruise companies like Genting, which hopes to educate domestic consumers over the long term. 

Lim said he has seen tremendous changes over past decades in China's cruise market. At first, domestic consumers were primarily attracted to cruises for the food, but now they are starting to look more for experiences when travelling, he said.

Some domestic media reports said that overseas cruise lines had left China because middle-aged female customers had eaten too much on the ships. 

But according to Qian, who is in her 70s, food is just one of the joys of cruising. "I'd rather spend more time on the cruise than onshore," she said, recalling that she had a lot of fun watching performances like ice ballet and acrobatics during her first cruise to Japan on the Voyager of the Seas, operated by the US-based Royal Caribbean cruises. 

Yang also noted that as more Chinese travelers opt for cruises, it won't be hard for overseas cruises to fill their existing and soon-to-arrive ships in the country. 

According to Lim, although Genting is currently focusing more on the premium middle-class market in the mainland, in several years the company might invest more in its mass market cruise line, Star Cruises,as more Chinese consumers become educated about cruise travel.
Newspaper headline: Cruise companies return to China


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