Norwegian Cruise Line to begin retail sales in China

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The Norwegian Joy was built for the Chinese market.
The Norwegian Joy was built for the Chinese market.

Norwegian Cruise Line has secured an operating license in China that it allows it to sell directly to consumers rather than through wholesale travel companies.

In a conference call with analysts to discuss third-quarter financial results, CEO Frank Del Rio said the license had been granted within the last 10 days.

"Now we move into efforts to monetize that," Del Rio said.

Norwegian will lean heavily on its partnership with Chinese e-commerce giant Alibaba Group and its data-mining expertise to locate retail customers in China, Del Rio said. 'We are very conscious of that opportunity," Del Rio said.

To date, Western cruise operators have had to charter their ships to Chinese wholesalers, who then fill the ships. Pricing is worked out in annual negotiations.

"Certainly, having another strong channel to distribute our branded products directly to consumers where the cruise line has more control over pricing would be a good thing," Del Rio said.

In addition, Norwegian would gain more control over how cruises in China are marketed. Del Rio said they're currently pitched as shopping excursions, so the cruise line benefits from higher onboard retail spending, but gets no shore excursion revenue, a high-margin product according to Del Rio.

He said that if Norwegian can resume calls in South Korea, which were suspended earlier this year in a dispute with China, that could help. Currently Norwegian's four-day cruises go to Japan, using up a sea day on each end, and leaving little time for both shopping and shore excursions. Being closer to China, South Korea could help with the shopping/shore excursion mix, he said.

Norwegian began sailing in China on July 1 with the debut of the new Norwegian Joy in Shanghai.

Norwegian said it set single-quarter records for profit, revenue and passengers carried in this year's third quarter. Net income was $400.7 million, up from $342.4 million. Revenue rose 11.2%, to $1.65 billion.

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