China and the cruise industry’s ongoing globalization

By Tom Stieghorst
*InsightThe news that Royal Caribbean International is putting its new ship in China made a big splash. But sometimes it takes a surprising development to show an underlying trend that has been slowly taking shape for years.

The North American share of the world cruise passenger base has been declining, even though in absolute terms it is growing and it still remains far larger than any other source market.

Cruise lines are hungry for new growth, and China is the current gravy train that everyone is hoping to ride. But it isn’t only China. While the Quantum of the Seas is headed for Shanghai, Royal’s Voyager and Rhapsody of the Seas are spending a good part of the year taking Australians on vacations from Sydney.

And Royal is hardly alone. Carnival Cruise Lines is sending its Legend of the Seas to Australia later this year too.*TomStieghorst

Some higher-end cruise lines, such as Azamara Club Cruises, draw more than 50% of their passengers from outside North America.

The international sourcing of passengers is drawing industry attention and resources away from its historical roots in the U.S. and Canada. Cruise officials take pains to assert that North America remains a vital interest for the cruise industry and takes a back seat to no region.

It is obviously true, and yet there is a shift going on that can’t be ignored. It has implications for passengers, for travel agents, suppliers and employees of the cruise lines.

Driving the decision to diversify internationally is the public ownership of the big North American lines. The loyalties of the management of those companies isn’t to country, region or tradition as much as it is to the shareholders that they work for. As Royal Caribbean Cruises Ltd. President Adam Goldstein told me, it is the shareholder’s interest in long-term profit growth that was the primary factor in deploying the Quantum full time to China.

Ironically, as Royal and other U.S.-based cruise lines are looking abroad, privately owned MSC Cruises is knocking on the door, trying to gain more purchase in North America.

MSC is the line adding to its sales force, making its pitch to travel agents here to funnel clients to its small but growing North American capacity. So even as the U.S. loses a new ship (after a short season in New York) it may soon gain a new ship from a Swiss company with an Italian product.

Call it two faces of the same coin, both manifesting the further globalization of the cruise industry.

Travel business leaders warned not to fall behind on technology

By Travolution
By Travolution

Travel and tourism business leaders must embrace the challenge of constantly changing technology or fail, according to a leading technology consultant.

Jerry Noonan, global consumer practice leader at Spencer Stuart, told the World Travel and Tourism Council Global Summit:

“The change in strategic importance of technology to business is a challenge for business leaders.

“It is a rapidly changing dynamic and there are countless examples of businesses that have been slow to change.”

He said: “It requires business leaders to remain curious and continuously learning.”

Noonan insisted: “It is something everyone who leads in travel needs to think about.”

“The primary purchase pattern that defined the travel industry has fundamentally changed. This is not a static moment. This is an accelerating set of forces.”

Value Retail chief executive Desiree Bollier said: “Technology is disruptive but if we don’t make it part of our business we will fall behind.”

However, Henrik Kjellberg, president of travel website Hotwire and chairman of Chinese online travel agent eLong, argued: “The consumer is just in a much better position than 15 years ago and who would want to go back?”

He added: “I sit on the board at eLong. At the start we were saying ‘This is what you should think about.’ Now I just steal everything and take it back to the US. In China they are just way ahead of everyone.”

Kjellberg also suggested: “The sharing economy will have a profound impact on the industry. It is a bandwagon and will grow. It is something technology does really well.”

Jami Timmons, president of nSight, argued: “There needs to be ongoing investment. It is no good to invest in technology and then never look at it again.”

She argued: “There is a ton of ways to use the massive amount of data in hospitality.”

Kjellberg was less impressed, arguing: “Big data does not necessarily give you big insight. It can be very costly from a time perspective. It is easy to get distracted by Big Data.”

– See more at: http://www.travolution.com/articles/2014/04/29/7752/travel-business-leaders-warned-not-to-fall-behind-on-technology.html#sthash.u27DZCJS.dpuf

Comment: Cruise industry must take China’s rise on board

Comment: Cruise industry must take China's rise on boardFollowing the announcement of the deployment of Royal Caribbean’s newest ship year-round from Shanghai next year, David Selby assesses the significance of the decision and the impact on established markets

China is vast – it has a population over 20 times that of the UK and is the world’s second largest country by land mass.

Between 2007 and 2011, its economy grew at the rate of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States combined – and while we dither in the UK about where the next commercial airport capacity will be situated, around two-thirds of the world’s airports are being built in China, with 55 planned between 2013 and 2015!

Shanghai is China’s biggest city, with a population of over 22 million, according to the last National Population Census in 2010. While a significant number of residents still have insufficient income or interest in cruising, it was perhaps only a matter of time before a major international cruise line would announce year-round deployment from the city, as Royal Caribbean has done.

The fact that it is its newest and “shiniest” ship, Quantum of the Seas, does make it interesting. It goes against the traditional idea of growing “new to cruise” markets typically using older tonnage, and keeping the key markets fresh with the newest innovation hardware.

During last week’s announcement, Adam Goldstein, Royal Caribbean’s president and chief operating officer, said: “Every trend we are seeing in China tells us we can achieve real long-term competitive advantage and appealing returns on our investments in this fast-growing market by accelerating our presence there. We will have to be nimble, but the ability to move fast is one of our strengths.”

I agree! It comes from having – in my view – the strongest single international cruise brand in the world.

Meanwhile, analysis commissioned last year by the Asia Cruise Association predicts a market size in Asia by 2020 of 3.8m, of which China will be 1.7m – just below what the UK is today. Cruises are typically of short duration and to serve 3.8m cruisers on 5 night voyages, the region will need the equivalent of eighteen 3,000 berth ships sailing in the region year round. It is unlikely to stop there.

Where will they come from, and what of traditional core markets?

Well, Royal Caribbean points out that the ports of Florida (with ships sailing to the Caribbean – the most popular cruising destination), will be operating with record levels, while from New York passengers will have the chance to cruise on ships not previously deployed from there.

In the UK of course, we look forward to seeing Anthem of the Seas – Quantum’s sister-ship – sailing from Southampton after she is launched next year. Longer term however, we could see a general shift away from current core markets unless there is an acceleration of new-build activity.

For the remainder of this year, apart from Quantum, there are just three ships over 2000 berths being launched worldwide – for Princess, Costa and Tui in Germany. Next year there are five, in 2016 there are six and in 2017 there are so far just three. While this may increase, it is barely enough to cover the Asian growth over the next six years.

Therefore, the challenge is on for the industry in traditional markets to keep the product and marketing fresh, to drive value and deliver exceptional levels of customer service – and the same goes for the destinations the ships visit.

Looking even further ahead – once the Chinese have tried cruising at a local level, they will without doubt be cruising further afield and coming to Europe.

So while we sort out the runway problem, it would be a good idea to sort out the UK Visa situation at the same time.