Cruise tourism in China at crossroads

The number of mainland cruise passengers is expected to hit one million this year

PUBLISHED : Tuesday, 20 October, 2015, 12:02pm
UPDATED : Tuesday, 20 October, 2015, 5:30pm

The price of cruises has declined sharply on the mainland since June, with some holidays costing only 500 to 700 yuan – down from 4,000 to 5,000 yuan – and that’s a problem for those predicting a promising future for the market .

“Two markets in China have experienced a transition from a bull market to a bear market this year. One is stocks, the other is cruises,” said Liu Zinan, North Asia and China regional president at Royal Caribbean International, the world’s second-largest cruise ship operator.

Liu was commenting at the CruiseWorld China summit in Shanghai last week, where the four world’s biggest cruise brands and hundreds of mainland travel agents assembled to address problems facing the Chinese cruise market.

The price collapse was triggered by the Middle East respiratory syndrome (Mers) outbreak in South Korea that peaked in June, with the country being one of the most popular cruise destinations for mainlanders.

Chinese have got used to sightseeing travel for a long time. They care about the destinations, but don’t know what a leisure vacation is
Zheng Weihang

However, Mers only had a short-term impact, and a longer-than-expected trend of falling prices has raised the industry’s awareness of deeper problems.

One of the biggest is whether mainlander are ready for holiday cruises.

Nine years ago, Costa Cruises, a brand of the world’s largest cruise line, Carnival, became the first international cruise line to sail from the mainland. Now there are nine international cruise liners home-ported there. The number of mainland cruise passengers surged 40 per cent to 700,000 last year, and is expected to hit one million this year.

“Despite the quick growth of passenger numbers, many still view cruises as a form of transportation,” said Zheng Weihang, executive vice-president of the China Cruise & Yacht Industry Association.

“Chinese have got used to sightseeing travel for a long time. They care about the destinations, but don’t know what a leisure vacation is.

“A cup of drink, a book, being able to lie down the whole day – that’s a vacation product,” he said, while adding that many mainlanders wanted more destinations and were not focused on relaxation.

Four- to five-day cruises to Japan and South Korea are the most common routes from China, because the two countries allow visa exemptions for Chinese cruise passengers.

“Educating the market is extremely important,” said Fan Min, chief executive of SkySea Cruises, a Chinese cruise brand. “On the other hand, we cruise companies should make our brands differentiated, in terms of food, entertainment and themes, to better convey our characteristics to customers.”

Another problem for the industry on the mainland is the peculiar business model that has been adopted there. Most cruise products on the mainland use the resale charter model, where big travel agencies charter the whole ship from cruise companies and then find distributors.

Cruise companies usually ask travel agencies to guarantee 100 per cent occupancy, which forces the agencies to dump unsold seats at rock-bottom prices. Some agencies have lost more than 10 million yuan this year as a result.

“Cruise products should not be cheap products, or they can’t survive,” Zheng said.

Travel agencies at the summit called for a softening of occupancy terms, and big cruise brand leaders said it was possible they could be lowered to maintain a win-win relationship.

There is still much to be done to improve the industry. Frank Del Rio, chief executive of Norwegian Cruise, the world’s third-largest cruise line, said he hoped the central government could sign visa-free agreements with more countries and encourage longer vacations for workers. Those employed for less than 10 years are now only entitled to five days of paid annual leave.

“In the US, the average cruise tour is eight days,” Del Rio said. “You can access more ports and fully enjoy the benefits of cruising.”