Given that no cruises departed from China’s shores just six years ago, Royal Caribbean International’s decision to move one of the world’s largest cruise ships to the country in June 2012 is making big waves.
The 138,000-ton, 3,114-passenger capacity Voyager of the Seas, which is currently cruising around Europe, will soon sail into Shanghai. It will bring passengers on a series of four- to 10-night sailings that will likely make stops in Fukuoka and Kobe in Japan, and Busan and Jeju in Korea. The US$750 million vessel is twice the size of any other passenger vessel currently operating regularly out of China.
“Royal Caribbean was not the first international cruise operator to enter China, but we’ve come at the right time,” said Liu Zinan, Royal Caribbean’s managing director of China and Asia. “Chinese tourists are looking for more mid- to high-end travel products to match their preferences. They want something beyond land-based tours and traditional travel groups.”
The Miami-based cruise operator is not alone. According to the China Cruise & Yacht Industry Association (CCYIA), 95 cruises departed from Chinese coastal cities in 2010. Costa Cruises – which, in 2006, was the first international cruise company to take passengers at Chinese ports – is also enhancing its capacity in the region, with plans to bring its 2,394-passenger Costa Victoria, one of its most coveted vessels, to China in spring 2012.
As Liu noted, timing is everything. Travel trends among Chinese consumers are at a turning point – shifting from group travel focused on snapping scenic photos and buying designer goods, to more high-end and specialized travel options. This is an opportune moment; but the cruise industry must first face its biggest challenge if it is to cash in on its expansion bets: educating the Chinese market.
The market for international cruises in China is still in its infancy. Last year, only a small slice of the 57 million Chinese tourists who went overseas made their voyage by sea. Nearly 790,000 Chinese passengers traveled internationally on a cruise ship in 2010, up from 50,000 in 2005. In the US, about 10 million people traveled on cruises last year.
“Chinese travelers have not really explored the advantages of going on a cruise. It is a new and young market,” said Melvyn Yap, Asia regional director of Silversea Cruises, an Italian-owned luxury cruise company. “As more of them discover the conveniences and value of a cruise holiday, the interest will grow accordingly.”
Those in the tourism industry argue that Chinese outbound tourists – a market that the World Tourism Organization predicts will reach 100 million by 2020 – predominantly book land tours and group travel. And that is largely due to the perceived difference in prices, where a traditional hotel and airfare package may cost as little as half the price of a cruise.
Convincing Chinese travelers otherwise is the key to further growth, Liu said. “If you’re simply comparing prices, cruise vacations might not look very competitive. But when you calculate the cost of transportation, accommodation, meals and entertainment, you then see very good value for money,” he said.
“This is still one area we need to work on. We have to inform travel agents of these benefits and help consumers realize this.”
While cheap group travel will likely remain the most popular choice for Chinese outbound tourists, analysts believe there is a growing segment of increasingly savvy independent travelers – couples, families and small groups of friends – who are willing to spend more for richer experiences.
And that is part of the appeal of cruise ships, which offer more than a scenic tour of landmark sites. Royal Caribbean’s Voyager of the Seas, for example, features a shopping promenade, ice rink, rock-climbing, a mini-golf course, basketball court and three swimming pools.
Fang Xuan, information department editor at CCYIA, said the maturing cruise market will help meet the demands of various travelers in China today. The Chinese market is not only appealing for cruise companies because of rising income levels, but also its increasing number of retirees. The population of those aged 65 and over is expected to grow from an estimated 180 million in 2009 – the population of Russia – to 350 million in 2035 – bigger than the present population of the US.
China’s aging population may fit well with its burgeoning number of cruises, which offer travelers a chance to see several destinations while only having to unpack once.
Steering into the future
There are already promising signs for some cruise giants. For example, Royal Caribbean’s market share for home port sailings from China has grown to about 50% this year, from roughly 30% in 2010. By next year, Liu expects that figure to reach 70%.
As cruise companies prepare to go deeper into the Chinese market, operators are learning to tailor their services while also maintaining their international brand. This includes increasing the number of Chinese staff to overcome language barriers, adding authentic Chinese meals to menus and focusing on more visual entertainment – such as dancing and Broadway performances, rather than comedy shows.
But Liu stressed that Royal Caribbean still needs to uphold its international image. “People like to taste and experience different cuisine and typical Western entertainment – that is why they select an international cruise line,” he said. “We pick and choose formats that are better for Chinese tastes, but we’re not replacing it with Chinese things that they can see and taste at home.”
International cruise companies have one feature that won’t need much change, though – casinos. Zeng Xianyun, president of Sanya Phoenix Island Development, a cruise and tourism operator, said that one of the major bottlenecks for growth among domestic cruises is the government’s ban on casinos on domestic ships.
“Chinese people love gambling, and casinos are pretty much universal on international cruises,” Zeng said. “I think the government should pay greater attention to gambling on Chinese cruises, and guide and open the gambling market so domestic cruises can grow.”