The Cruise Industry’s Bet on China, in the Words of Execs

2015 was the year that cruising doubled-down on China serving as its top growth market.

North American cruise companies Carnival Corp., Royal Caribbean Cruises, and Norwegian Cruise Line Holdings increased their deployments in China in 2015 and beyond. But not all the news coming out of China was good for cruise lines.

Here’s what cruising’s top executives told Skift this year about the growth of cruising in China– and the potential pitfalls the industry faces in hinging its growth on one emerging vacation market.

The Chinese government and North American cruise lines are working together

“Cruising has been specifically listed by the Chinese government as an industry they want to encourage in ship building and creating domestic cruise brands. If the Chinese government is going to encourage state-owned enterprises to start building cruise ships and develop brands, we felt it was in the best interest for the industry for Carnival to be involved.” -Carnival Corp. COO Alan Buckelew

The vacation market in China is still inefficient and immature

“The reality is that with us growing and other people growing, other people trying to come in, that’s a lot for the distribution system that exists there to absorb and connect to the latent demand. There can be gaps. Even though the demand is there, they may not connect to it.

“We’re not interested in just being in China to be in China. We want to be successful in China and we want our distribution partners to be successful as well.” -Carnival Corp. president and CEO Arnold Donald

Demand from Chinese vacationers is skyrocketing

“In China, during Golden Week and Chinese New Year, there’s more Chinese travel everywhere. It could very well be that just because of that, we will have to make some adjustments here in the next few years. I wanted to give you some numbers. Australia now has the high cruise penetration in the world. About four percent of all Australian’s will take a cruise this year, it’s number one in the world as far as we know. U.S. number is about 3.5 percent. In China last year, about 700,000 people cruised, about 119 million international trips were taken for whatever purpose.

“The cruise industry had barely one-half percent of the people who traveled, never mind a percentage of the population. If we could just get to three percent or four percent of who’s traveling, the cruise industry would have to be very significantly larger than it is. We don’t necessarily need to be convincing people to leave China for the first time, we need to be competitive amongst the population who want to leave China, are leaving China.”

-Adam Goldstein, president and COO of Royal Caribbean Cruises

Cruising wants to take advantage of China’s shift toward a consumer society

“Six years ago in China we sourced about 3,000 or 4,000 Chinese guests. Next year will be maybe 700,000.

“If you think about the American and then in the markets all around the world that we’re in, it’s a very similar story. You start with a number and then it’ll grow and grow. They use the phrase China-speed, which is fairly true. It seems to be growing in an extraordinary way. To answer your question, what is the answer? Penetration in the U.S. market, 4 percent or 3 percent, whatever it is, just take that number and move it to China. 4 percent of 1.3 billion is 40 million people a year. There’s 11 million in America, but it took 30 or 35 years to get there. Here’s China, so maybe 40 million in what time?

“They talk about China converting, this big transition they’re going through now becoming a real consumer society. There’s a lot of opportunity there.” -Michael Bayley, CEO of Royal Caribbean International