Saturday, 10 May 2014

China and the cruise industry's ongoing globalization

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.

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.