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.

No break in river lines’ France fever

By Michelle Baran
InsightThere appears to be no end in sight to the growth in demand for river cruising in France. Last fall, I wrote about river cruise companies that were adding more capacity throughout the country for 2014, and the trend is continuing into 2015.

Avalon Waterways announced this week that it will increase its France capacity for 2015 by 95%. The company is putting its 128-passenger Avalon Poetry II, christened last month in Dordrecht, Netherlands, on the Saone and Rhone rivers in 2015; and the 128-passenger Avalon Tapestry II, launching next year, will sail France’s Seine River.

That comes after an already huge christening season in France that saw Viking put three new ships in Provence, Uniworld launch its new S.S. Catherine there as well, and both companies introduce one vessel each in Bordeaux (Viking a newbuild and Uniworld a repositioned vessel).MichelleBaran

“We are very excited about the growth opportunity in France,” said Richard Marnell, Viking’s senior vice president of marketing. “Because of strong demand already this season, we have decided to increase capacity on those two itineraries in 2015. We will add a second ship, Viking Rinda, in Bordeaux, and a fourth ship on Portraits of Southern France, Viking Delling, which will be new for 2015.

“We also continue to see strong demand for our other itineraries in France and are nearly sold out for the entire summer season,” added Marnell.

AmaWaterways, Tauck and Scenic Cruises all repositioned vessels to France this year as well.

Direct-to-consumer operator Grand Circle Cruise Line announced last month that it was getting in on the France action too, having acquired the River Cloud II (from Sea Cloud Cruises), a 90-passenger ship that will operate a new itinerary in Bordeaux beginning in March.

And let’s not forget the little 96-passenger paddlewheeler, Loire Princess, that French river cruise company CroisiEurope plans on introducing on France’s Loire River next April.

So, what’s the deal? Are river cruise lines running out of space on the Danube? Or are river cruise passengers just embracing France with a new fervor? Guessing it might be a bit of both.

MSC to place two-ship order

By Tom Stieghorst
MSC Cruises ship renderingSTX France has signed a letter of intent to build two 167,000-gross ton ships for MSC Cruises that would be delivered in 2017 and 2019, plus options for two more.

The long-rumored order would expand MSC’s fleet from 12 to 16 if all four ships are built.

MSC Cruises USA’s president, Rick Sasso, said at the Cruise Shipping Miami conference earlier this month that MSC was ready to increase its North American presence from a single year-round ship if an order was made.

A statement from the two companies said the contract will be binding “when the financial package is secured.”

The companies did not give a value for the order, but said the two ships would provide 16 million working hours for STX France and its subcontractors. STX France genial manager Laurent Castaing said a competitiveness agreement signed with trade unions was “decisive” in reaching the letter of intent to build the ships.

Each new ship will have 2,250 passenger cabins for a double-occupancy capacity of 4,500, but MSC put the ship’s capacity at 5,700 passengers. The ships “will be able to call in most of the ports and destinations on earth, without compromise,” MSC said,

MSC President Gianni Oronato said the ships will boast “new panoramic spaces, a bigger theater and a spectacular amusement park connected to an outdoor aqua park as well as a two-deck inside promenade.”

The MSC ships will have specially designed cabins for families and an extended Yacht Club luxury area on each vessel.

Castaing said negotiations for the ships were particularly challenging “in light of today’s global competitive landscape in the shipbuilding industry.”

The main creditor for the troubled Korean company that owns STX Europe said recently it would like to divest the European asset by June.