While some cruise lines are pulling back on their presence in China, Carnival Corp. is moving forward with its long-planned joint venture with local partners. Will domestic travelers flock to a homegrown brand?
More than four years after first floating the idea, Carnival Corp. on Tuesday rolled out plans for its China-based cruise joint venture with China State Shipbuilding Corporation.
The company, called CSSC Carnival Cruise Shipping Limited, will start sailing by the end of next year using a ship transferred from Costa Group, a Carnival Corp. brand. And it plans to add as many as seven more to create a multi-ship, China-focused brand.
Tuesday’s announcement comes on the heels of a cooling-off period around China, which saw fast — some might argue too fast — growth over the last several years.
Costa Atlantic, a 2,210-passenger vessel, will be the first ship to join the new brand’s fleet and will eventually be joined by Costa Mediterranea, a sister ship with 2,114 passengers. The purchase price of the two ships was not available.
The venture also signed a contract to order two new China-built ships — firming up an earlier agreement — with the option to order four more. The first is expected to be finished by 2023.
Carnival has a minority interest in the partnership.
Shanghai Waigaoqiao Shipbuilding Co. is building the vessels through a separate joint venture with Italy’s Fincantieri shipyard, which is providing support throughout the process as well as a license of the ship platform. Carnival would not say what the platform will be, but the new ships will be designed to serve the Chinese market.
“The official launch of our cruise joint venture in China is a significant milestone in the strategic development of a strong and sustainable cruise industry in China,” Carnival Corp. CEO Arnold Donald said in a statement. “Together with our partners, we are excited about our ability to launch a new cruise line in China based on existing ships and new China-built cruise ships tailored for Chinese travelers.”
Lei Fanpei, chairman of CSSC, said in a statement that the goal is to build a cruise ecosystem in China — from design and building to operations and supply chain — that can support sustainable industry growth there.
Cruise operators have looked to China as a major opportunity to grow their customer base, but as more ships flowed in, prices faltered. Regional disruption such as the dispute between China and South Korea wreaked havoc on itineraries. And the concept of cruising is still relatively new in the region, making it a challenge to attract customers.
And another attempt to create a joint venture with a Chinese partner has already failed. Royal Caribbean Cruises said in March that SkySea Cruises, a joint venture with Ctrip, would stop operating its sole ship by the end of the year after the brand struggled to build awareness. Royal Caribbean International, on the other hand, has found success by sending some of its newest ships to China.
But during an earnings call in September, Carnival executives said was showing improvement in the short term and promising for the long term.
Indeed, Costa Group announced earlier this year that it would send two new Costa Cruises ships designed for China to the market in 2019 and 2020.
“China represents a very small portion of our global capacity, but we continue to see positive earnings there with the approaches we have taken in the marketplace,” Carnival Corp. Chief Communications Officer Roger Frizzell said in an email. “More importantly, we are well positioned for what will someday be the agent cruise market in the world with our current presence in China and now the joint venture.”
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Photo Credit: Costa Atlantica is shown in Tianjin, China. The ship will be transferred to a new joint venture, CSSC Carnival Cruise Shipping Limited, to sail in the market. Carnival Corp.