Sail of the century

Cruise companies hope for onboard bonanza from Chinese tourists

Quantum w

Royal Caribbean’s new flagship sets sail for Chinese waters?

It perhaps says something about the limited origins of the Chinese cruise industry that the word for a luxury ship is youlun or “mail steamer”. Until recently the only boats offering all-inclusive tours were domestically-built ferries plying the Yangtze River. But demand for more glamorous excursions has been growing. Foreign companies have been the main beneficiaries, but now the Chinese government wants local firms to pair up with the international players and learn the ropes of the trade.

Last month, Carnival Corp, the world’s largest cruise operator, signed a deal with China State Shipbuilding Corporation and China’s sovereign wealth fund, China Investment Corporation, to develop the country’s “first world-class, multi-ship domestic brand”. The agreement, signed during Xi Jinping’s visit to the UK, is intended to accelerate “the development and growth of the overall cruise industry in China, which is expected to eventually become the largest cruise market in the world,” according to a statement on Carnival’s website.

Carnival has also announced it is relocating two of its Miami-based ships to China, while its brand new vessel Majestic Princess is setting course for the east too. It has been specially kitted out for Chinese passengers with more shopping opportunities, a glitzier casino and kitchens primed for Asian food.

Carnival’s rival Royal Caribbean is also basing its new 168,000-tonne flagship Quantum of the Seas in China and plans to do something similar with Ovation of the Seas (currently under construction). The operator plans to run five different cruises from Tianjin, Shanghai, Xiamen and Hong Kong.

A recent study by the Hong Kong Tourist Board suggested there are now at least 83 million potential cruise-takers in China. A more conservative estimate by the  China Communications and Transportation Association says that 1.7 million Chinese will pay for a cruise this year, while the China Cruise and Yacht Industry Association says the number is likely to be about 1 million – with about 750,000 passengers setting sail from Chinese ports.

Of course, the Chinese government has also identified the cruise-ship industry as an area it wants to see commercially developed, predicting 4.5 million passengers by 2020. An article published on the State Council’s website last month said: “The luxury liner is the pearl in the crown jewel of shipbuilding. The design and construction of a domestic luxury cruise ship is an important symbol of any shipbuilding power.”

It added that Shanghai’s Waigaoqiao, the shipyard chosen to build the Carnival-CSSC ships, was just one of 10 yards in a position to launch new vessels.

But as the Financial Times also pointed out last month there are signs that China’s middle classes aren’t quite ready to replace American and European baby boomers as the cruise industry’s main market. New ships are being filled via discount deals, it said, while unpredictable relations with Japan – one of the main destinations for Chinese cruisers – means that demand could suddenly drop or routes could be cancelled. Another problem is that port investment in Japan and South Korea – the other main destination – isn’t keeping pace with the growth in vessel numbers. This means that China-originated cruises remain short on ports-of-call.

All the same, cruise boss Liu Zinan is bullish about the industry’s prospects. The China and North Asia head for Royal Caribbean told China Daily that his firm has enjoyed 80-90% growth in Chinese demand in recent years and “this cheerful performance has repaid our investment here”.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.