Cruise ships need right strategy for Chinese market

By Chris Dalby Source:Global Times Published: 2017/6/27 21:58:39

Illustration: Peter C. Espina/GT

Cruise ships are becoming an ever more popular way to see the world. Mexico, the Bahamas, the Seychelles, even Cuba are seeing these outpourings of tourists as major sources of revenue, even if the impact on local economies can be disproportionate. But China does not feature as a must-stop destination, even on Asian routes. A number of cruises stop off in Shanghai and Hong Kong but other coastal destinations remain unvisited.
There is one important reason for this. The cruise market is focused on capturing Chinese passengers to take them abroad, not the reverse. It is estimated that Chinese cruise ship passengers could reach 2.5 million by 2020, and 7 million by 2030. Yet China could play both sides. Signing up with cruise companies to both encourage tailor-made options for Chinese travelers and promote Chinese destinations like Xiamen or Nanjing could prove to be a very worthy cash cow down the line.

From being almost nonexistent, Chinese passengers on cruise ships have reached millions in a few years. In 2015, they broke the 1 million passenger barrier for the first time, after a 40 percent year-on-year hike. On the surface, there is little to be surprised at here. The Chinese luxury spending market remains strong, despite a government crackdown to discourage it. China buys more luxury cars and smartphones than any other country. Cruise ships are a natural extension of this.

However, the challenge of such a rapidly rising market is to understand the desires of its passengers. Do they want to travel on short or long journeys? Do they prefer their own backyard, such as South Korea or Japan, or can they be coaxed further afield?

While summing up the cruise habits of millions of Chinese travelers demands some generalization, a few trends have emerged. According to cruise company data, Chinese passengers are younger than their US counterparts; 40 percent of Chinese cruise ship passengers are under 40 years old. Furthermore, they often go aboard with their entire immediate families, including parents and children.

Adam Goldstein, president of Royal Caribbean, also told Bloomberg of an important difference: that Chinese travelers tend to view cruises as more of a shopping experience than pure tourism.

"There's much more of an emphasis on shopping. Plus we know that they're shopping energetically in the ports of call," explained Goldstein, adding that Chinese passengers spend "two or three times as much in the on-board stores."

He reasoned that another advantage encouraging these spending excursions was that cruise ships do not charge for additional pieces of luggage, unlike flights.

For the moment, cruise companies have been more than happy to plan dedicated itineraries, menus and ships for Chinese travelers. Costa Cruises was one of the first to cater to this market directly, with journeys beginning in Shanghai and Tianjin, fully kitted out to please Chinese consumers, including fluent staff, tailored menus and the right choice of boutiques.

They have been successful so far. The proof of China's newly discovered cruise obsession can be seen across the country though. Its top 10 cruise ports - Shanghai, Dalian, Tianjin, Yantai, Qingdao, Zhoushan, Xiamen, Guangzhou, Haikou and Sanya - saw 58 percent more cruise ship arrivals in 2016 than in 2015, for a total of 996. However, 913 of these were ships returning to their home port to let off passengers and pick up more.

Now, the challenge for Royal Caribbean and its competitors will be to turn Chinese cruise passengers into appreciative recipients of broader offerings. The shorter stays on board favored by the Chinese, five or six nights, makes it difficult to take them too far from home.

Trips to Japan and South Korea are enticing but the likes of Royal Caribbean know the real money lies further out at sea. 

The author is a Mexico-based analyst of Chinese politics and economics.

Posted in: INSIDER'S EYE

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