The World Travel Market, a group that reports on global travel market trends, recently explained why the Chinese cruise market is set to explode in the next three to six years. The group's recent report on the state of the travel industry explains why it thinks the Chinese cruise industry will become the second-largest in the world, behind that of the U.S., by 2017.
Cruise lines prepare to benefit from Asian growth
There are multiple reasons why Asia, and China in particular, are attractive cruise markets. To start, the travel market is rapidly expanding in the region as the economies of local countries grow, bringing more of their citizens into the middle class and thus providing them with the means for vacationing. Also, the waters around Southeast Asia are full of small, tropical islands and locations that serve as attractive cruise stops, much like the Caribbean.
Carnival (CCL 4.31%) expects at least 7 million cruise passengers to come from Asia by 2020. It is clear that Carnival is investing heavily to gain its share of this market with its recent announcement that it will open five new offices in China and appoint a new head of Chinese operations for its Asian subsidiary, Princess Cruises. The company expects one in every five of its cruise passengers to come from Asia over the next three to six years. Princess Cruises CEO Alan Buckelew stated that, "The cruise vacation market is in its infancy in China, and therefore we see this region as one with exciting growth potential."
Royal Caribbean (RCL 4.38%) is another cruise company showing excitement about the growing Asian market. The company reported that its Asia passenger count quadrupled from 25,000 to 100,000 between 2011 and 2012, and at the time it expected that number to double again during 2013. The passenger count total for 2013 is not yet available.
Royal Caribbean will surely please a Chinese market which is looking for the newest and most exciting travel options. The cruise line's newest ship, Quantum of the Sea, has been anticipated with much industry fan-fare. The ship boasts skydiving, bumper cars, and an arm that extends from the top of the ship which gives passengers a hovering view of passing islands.
Star Cruises is part of Norwegian Cruise Lines (NYSE: NCL), the third-largest cruise operator in the world with 16 different ships in its worldwide fleet. The company claims to be the leading cruise line in Asia-Pacific already with five ships devoted solely to the region. Norwegian Cruise Lines is owned in part by Genting Hong Kong, an Asian company that is also part of a company which owns casinos and other entertainment service companies around Asia. Partial Asian ownership, especially by a company that is well known throughout Asia and already deep in the entertainment and vacationing sectors, may be a big help as Norwegian Cruise Lines plans to take on the Asian cruise market.
Disney (DIS 2.40%) also has a bullish outlook on the Chinese cruise market. During the most recent earnings release conference call, Disney CEO Iger answered a caller's question about whether the company planned to build a fifth cruise ship after 2012 and 2013 delivered acceptable cruise profit levels, and also because customers have been booking over a year in advance in some cases. Iger said that the company does not plan to build another ship and that the cruise sector's current focus is to expand existing itineraries. However, Iger mentioned that Asian growth would create the next market for Disney, and this would provide the next reason for the company to build a new ship.
Bottom line: which company will win this market?
Which company is best-suited to take advantage of this Asian cruise growth? The three largest companies, Carnival, Royal Caribbean, and Norwegian Cruise Lines have each prepared to take advantage of this growing market. A good place to start may be Norwegian Cruise Lines. Because the company is owned in part by Genting Hong Kong, a local Asian company, it might have the Asian backing and know-how to get into this growing market faster than its competitors.
