Carnival Corp. in preliminary deal with Chinese group

Carnival Corp. signed a memorandum of understanding with China Merchants Group (CMG) to pursue a possible domestic Chinese cruise line and to develop cruise ports.

Carnival said it formalized a strategic partnership with CMG at a signing event at the Hilton Shenzhen Shekou.

CMG is already developing a flagship port called Prince Bay Cruise Terminal in Shekou. Carnival said the partners would work to have cruise ships sail from this flagship port, while also developing other cruise destinations across China and northern Asia.

In addition, Carnival and CMG will explore a joint venture that would own and operate its own cruise ships as part of the first domestic Chinese cruise line targeted to the Chinese market. The joint venture would explore the possibility of sourcing new ships that are designed and built in China, along with the possibility of acquiring existing cruise ships.

Carnival last year signed a separate memo with China State Shipbuilding Corp (CSSC). to design and build a cruise ship in China in partnership with Fincantieri. That memo also contemplated the exploration of other possible joint venture opportunities with CSSC, including the potential to form a domestic cruise company, port development, talent development and training as well as supply chain and logistics.

It isn’t clear how that agreement would be affected by the one announced with CMG.

“The MOU we signed today signifies a great opportunity to take the next step in the future of Chinese cruising, while addressing some key needs for both the cruise industry and its passengers in China,” said Alan Buckelew, COO of Carnival Corp.

CMG, China’s oldest state enterprise founded in 1872, focuses on transportation, infrastructure, financial services and real estate development.

Learning from RCCL’s cruise line partnerships

By Tom Stieghorst
*InsightForming partnerships to operate cruise lines is a tricky business that can have hard-to-predict consequences.

Take, for example, two cruise lines that Royal Caribbean Cruises Ltd. (RCCL) got involved with in Europe.

One, Spain’s Pullmantur, has been a qualified disaster. As the economy in Spain soured over the past decade, Pullmantur’s results worsened. Because RCCL had acquired Pullmantur outright in 2006, it had to accept the subsidiary’s losses as its own on profit or loss statements.

Last year, RCCL took a $414 million writedown of Pullmantur’s assets. The only positive has been Pullmatur’s growing business in Latin America.*TomStieghorst

The other cruise line Royal took an interest in is Germany’s TUI. It remains 50/50 partners in TUI with TUI AG, which means it can’t incorporate either losses or profits directly in its bottom line.

In this case, it wishes it could. Unlike Spain, the German economy has mostly been strong and TUI has been highly profitable.

“TUI Cruises has been a very solid performer,” RCCL Chairman and CEO Richard Fain said in a recent conference call with Wall Street analysts. “I dearly wish they were included in our yield stats because it would make them look very good.”

Royal Caribbean reported $18.8 million of “other income” in a third quarter in which it earned $490.2 million. Most of that came from TUI, CFO Jason Liberty said.

The exact structure of how cruise line partnerships are formed is worth keeping in mind as both Royal Caribbean and Carnival Corp. negotiate joint ventures in China to further their interests in that key country.

The devil is in the details, as they say. It should be interesting to see what the details are if and when these Chinese ventures are finalized.

Luxury on the rise on Southeast Asia’s rivers

By Michelle Baran

The temples of Bagan, Myanmar.After Europe’s busy ship-christening season this spring, the river cruise spotlight is shifting to Southeast Asia for the fall, where the latest lineup of river ship launches is showcasing an ever-escalating level of luxury, service and amenities. So much so that it begs the question of whether this new crop of vessels could actually surpass the standards that have been set by Europe’s river vessels.

“It’s a very fair question to ask if [the ships currently launching in Southeast Asia] are in fact more luxurious that what is on offer in Europe. I wouldn’t say that they are more luxurious, but it’s a different definition of luxury,” said Tom Markwell, managing partner, sales and marketing, at Haimark Travel, which this month launched the first two vessels to set sail for the exotic river and small-ship cruise company.

In September, Haimark launched the 68-passenger Mekong Navigator in Vietnam and Cambodia, and the 16-passenger Irrawaddy Explorer in Myanmar (the country formerly known as Burma), vessels that are helping to usher in a new generation of luxury service and amenities on river cruises in this part of the world.

Others are raising the bar higher, too, such as Sanctuary Retreats’ 42-passenger all-suite luxury vessel the Sanctuary Ananda, debuting next month in Myanmar, and AmaWaterways’ 56-passenger AmaPura, which sets sail in Myanmar in November.

Those will be followed by more impressive river cruise launches in Southeast Asia in 2015 (see related story, “The latest batch of Southeast Asia ships”).

Vietnam vs. Vienna

What these new vessels represent is not just continued growth in demand for river cruising in Southeast Asia — where new ship launches on Myanmar’s Irrawaddy River are shadowing an initial boom on the Mekong River that began several years ago — but an elevation of product in those destinations that is bringing it closer to what river cruisers have come to expect in Europe.

Life on the Mekong.Not long after introducing the Mekong in 2009, AmaWaterways created a separate business division for its non-European product called AmaVoyages. The idea was to manage expectations a bit — a subtle way to let passengers know that river cruising in destinations such as Southeast Asia and Botswana, where the company has exotic river itineraries, does not mimic the product in Europe.

It’s not that the product is inferior; it’s just different. In fact, river cruise operators have noted that while some things are harder to deliver in Southeast Asia, such as decent docking facilities (a challenge that is mostly out of their hands), other things can be easier, such as high service levels. And then there is the biggest difference: the destinations themselves.

“The Mekong, Tonle River and Tonle Lake are a much more important lifeline for the locals than European rivers,” said Rudi Schreiner, president of AmaWaterways, about the major waterways of Vietnam and Cambodia on which the company sails.

“In Vietnam and Cambodia most of the daily life happens on the water. There are floating markets, floating villages, and fishing is a main source of local nutrition. Many sightseeing excursions are by boat, whereas in Europe, the ships are used as luxurious floating hotels to take you from city to city. On the Mekong more happens on the river than in the towns.”

River cruising in Vietnam vs. Vienna is not surprisingly a vastly difference experience. And despite the economic and infrastructure disparity between Europe and Southeast Asia, river cruise passengers “should not expect anything subpar” in Southeast Asia, Schreiner said.

Bigger staterooms, better service

Angkor Wat, CambodiaIndeed, as river cruise operators such as AmaWaterways continue to improve the product in Southeast Asia, the results mark a consummate change from the region’s earlier generation of ships and the sophisticated vessels being rolled out today.

Schreiner noted that the company’s 124-passenger AmaDara, debuting on the Mekong next year with twin-balcony staterooms and two restaurants instead of just one, “is a testament to how AmaVoyages is able to continuously improve in exotic destinations.”

Another prime example is the Sanctuary Ananda, which Sanctuary Resorts, a company owned by Abercrombie & Kent, is launching next month in Myanmar. The Ananda marks Sanctuary’s first project in Myanmar, and the company is giving ample attention to the hardware.

For one, the suites will range from 291 square feet to a 721-square-foot suite, a marked increase in space compared with many European river vessels. That added spaciousness is possible in Southeast Asia because there are no locks on the waterways and thus fewer restrictions on ship dimensions.

River lines with product in Southeast Asia are also putting a much bigger emphasis on service than they have in the past, providing private butler service for some of the highest category suite guests, for instance.

The spa element is becoming an increasingly important part of the Southeast Asia river cruising experience, as well, and river cruise operators have been steadily amping up their spa service offerings.

“It’s the hospitality factor that will allow us to surpass European river cruise product along the rivers of Asia,” said Haimark’s Markwell.

“It’s the gentle, kind and most of all sincere willingness to serve the guests that blows veteran cruisers among the European waterways out of the water.”