Are Chinese Cruises the Next Big Thing in the Travel Industry?

Carnival and Royal Caribbean are moving ships to Shanghai, and U.S. destinations are courting the hottest market in tourism.

May 27, 2014 at 12:30PM

For cruise-industry giants Carnival Corporation (NYSE:CCL) and Royal Caribbean Cruises Ltd. (NYSE:RCL), Shanghai is the place to be. This spring, each company announced plans to homeport new ships in the Chinese city, which serves as a departure point for cruises to Korea and Japan.

The fact that China's cruise market is the fastest-growing in the world isn't surprising, given the country's growing middle class and wealth. And it's just a sign of things to come, as global travel markets ramp up for more Chinese vacationers abroad.

More cabins and more luxury for Chinese cruise-goers

Carnival's Costa line has had a presence in Shanghai since 2012, when it homeported its 2,400-passenger Costa Victoria there. The Costa Atlantica was added a year later, with room for another 2,600 guests. Last week, Carnival debuted the 2,600-passenger Sapphire Princess for a four-month season in Shanghai. Some 70,000 guests are expected to sail on the Sapphire Princess between now and August to destinations including Seoul and Okinawa.

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Costa Serena. Carnival Cruise Lines: Matteo Piazza

Next April, the Greco-Roman inspired Costa Serena will homeport in Shanghai year-round. In a nod to Chinese travelers' growing expectations of premium amenities, the Costa Serena (christened "the Ship of the Gods") will feature a 64,000-square-foot spa with a Turkish bath as well as a Grand Prix racing simulator and more than 5,000 works of art.

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Quantum of the Seas. Royal Caribbean International

Royal Caribbean, meanwhile, will move its latest ship, The Quantum of the Seas, from New Jersey to Shanghai in May of next year, bringing on-board skydiving, 18 restaurants, and the capacity to carry 4,100 guests.

Royal Caribbean and Carnival seem to know which way the wind is blowing. Carnival expects China to become the second-largest cruise market, after the U.S., by 2017. And that growth is ramping up fast. Heng Shao at Forbes Asia reported that the number of Chinese cruise travelers doubled to more than half a million last in 2013, with more than 2 million passengers per annum expected in a few more years.

A desirable market for U.S. and European destinations

Chinese travelers are doing more than taking more cruises. They're also flying to overseas vacation spots in larger numbers, prompting hospitality industry efforts to bring on more Mandarin speakers to cater to this growing and big-spending market.

China Growth Forecast From Usta

Source: U.S. Travel Association

In 2013 China was already the seventh-biggest international market for U.S. travel, measured by traveler volume. Overall travel from China to the U.S., including business and leisure, is forecast by the commerce department to grow 19% year over year through 2018, with 4.3 million Chinese visitors expected here that year. Those projections make China the highest-growth market through at least 2017, according to the U.S. Travel Association trade group.

Chinese tourists are now officially the biggest spenders, too. The United Nations World Trade Organization says Chinese travelers spent $102 billion abroad last year.

More incentives to go shopping in the U.S.

Shopping is a popular vacation activity among Chinese travelers, especially for luxury brands that cost more at home. Overall, Chinese tourists spent $9.2 billion in the U.S. in 2012, and destinations around the U.S. are eager to cater to high-dollar Chinese tastes. Abe Sauer at MinnPost reported earlier this month on the efforts by Mall of America and Minnesota's state government to reach the Chinese market. That work included settling on a Chinese search-engine optimized version of the Mall's name and plans to add Chinese Union Pay card capabilities to all the registers in the mall's shops.

Chinese tourism -- all international tourism, in fact -- is getting a boost at the federal level, too. President Obama last week requested a streamlined entry process to cut wait times for would-be international visitors. The president and the travel industry hope speedier service will help the U.S. better compete with European countries such as France for Chinese luxury-goods dollars.

Setting sail for big business

It's clear that China is turning out leisure travelers in record numbers, both in its domestic cruise market and abroad. The expansion of Carnival's long-term presence in Shanghai and Royal Caribbean's splashy debut speak to that. With so many travelers who have so much money to spend, the real challenge for other services and destinations will be standing out from the crowd clamoring for Chinese business.

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