Stuck in the doldrums, Chinese cruise lines plan for growth

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A couple on the Majestic Princess, a ship built for the Chinese market. It is now based in China only in the summer.
A couple on the Majestic Princess, a ship built for the Chinese market. It is now based in China only in the summer.

BEIJING -- The word of the day was "adjustment."

The slowing of the Chinese economy, which buffeted a cruise industry already feeling the effects of a politically motivated port closure, bad weather, bad luck and badly-timed bets, has forced those left standing to reevaluate, refocus and adjust to unexpected market conditions.

At Travel Weekly China's CruiseWorld on Monday, top cruise executives, travel agency leaders, port authorities and association chiefs gathered before a ballroom full of Chinese travel agents to share how they are reshaping their businesses.

Like much of the Chinese economy, the national cruise industry seemed to have near-limitless potential five years ago but has today slowed to about 5.5% growth -- respectable in mature cruise markets but providing returns far below what was expected from previous heavy investments.

Weihang Zheng, executive vice president and secretary general of the China Cruise & Yacht Industry Association, said media articles guessing which lines might survive another round of consolidation were overdramatizing the situation. (In the past 18 months, Norwegian Cruise Line moved the Norwegian Joy, which had been purpose-built for China, out of the country. The Majestic Princess -- also built for Chinese waters -- is now based there only in the summer. SkySea, a one-ship cruise line that was a joint venture between Royal Caribbean Cruises Ltd. and Chinese OTA Ctrip, shut down.)

Zheng recommended several steps to respond to changing market conditions. Although some lines provide high-quality, destination-focused shore excursions, he said others leave it to travel agents to package off-ship activities, with the default option being shopping trips. "It's not an onshore tour," he pointed out. "It's onshore shopping."

(Although Chinese passengers love to shop, post-sailing surveys reveal they find these types of shopping packages disappointing, said Dr. Zinan Liu, Royal Caribbean's president of China and North Asia.)

Zheng also suggested that the government institute a star-rating system to help consumers better understand that they get what they pay for. Several speakers mentioned that repeat business has been curtailed by the unmet expectations of early cruisers who assumed they would be getting a glamourous vacation for cheap, then enduring a budget-level experience. A star system, he said, would help lines get the pricing they deserve.

One of his recommendations -- longer itineraries -- was later supported by Bernie Ye, Costa's vice president sales and commercial for greater China and Southeast Asia. He said a 53-day South Pacific itinerary sold out in five minutes. (Sales were made to passengers worldwide, but Chinese represented a significant number among those who bought.) 

Similarly, a Los Angeles-Shanghai-Los Angeles itinerary was very popular and sold out quickly, said Cherry Wang, Princess Cruises' vice president and general manager for China.

Finally, Zheng advocated for a native-born cruise line, started with Chinese money. Previous attempts at home-grown lines were low-end enterprises, offering poor experiences and ending in bankruptcy, he said. Four Chinese companies have approached him recently for advice about starting such a line, and he reported that he counseled, "Pay attention to timing."

Many speakers said they found the downturn to be a time of opportunity. Royal Caribbean International has not reduced capacity and is replacing older ships with newer ones. It has abandoned the policy of full-ship charters to large travel agencies, which had traditionally been standard operating procedure for all lines in China. Royal Caribbean now sells individual cabins, small groups and partial charters through agencies, as well as bringing direct sales up to 20% of total sales, Liu said.

Speakers at Travel Weekly China's CruiseWorld, left to right: Susan Li, Travel Weekly China; Zhiquan Gao, China CYTS Tours; Dr. Zinan Liu, Royal Caribbean International; Wei Tong, Tuniu.com; Cherry Wang, Princess Cruises; Younong Wang, Shanghai Wusongkou International Cruise Terminal Development Co.; Bernie Ye, Costa Cruises; Zhendong Zhang, Tianjin International Cruise Home Port Co.; Weihang Zheng, China Cruise & Yacht Industry Association; Kent Zhu, Genting Cruise Lines; and Arnie Weissmann, Travel Weekly.
Speakers at Travel Weekly China's CruiseWorld, left to right: Susan Li, Travel Weekly China; Zhiquan Gao, China CYTS Tours; Dr. Zinan Liu, Royal Caribbean International; Wei Tong, Tuniu.com; Cherry Wang, Princess Cruises; Younong Wang, Shanghai Wusongkou International Cruise Terminal Development Co.; Bernie Ye, Costa Cruises; Zhendong Zhang, Tianjin International Cruise Home Port Co.; Weihang Zheng, China Cruise & Yacht Industry Association; Kent Zhu, Genting Cruise Lines; and Arnie Weissmann, Travel Weekly.

Next year, Costa will deploy the new Venezia to China, and it will be the cruise line's largest ship in the market. And Genting is upping the number of ships from the two lines it has sailing in China, Dream Cruises and Star Cruises.

Executives from all lines said that they have increased or maintained capacity, and that their positions have strengthened in the wake of the ships that have left.

Still, there was agreement that the days are long gone when a cruise line could take demand for granted simply because China's middle class was already as large as the U.S.'s, and growing faster. "Demand must be driven by us," Liu said. "We must cater to consumers."

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