Next Challenge to Chinese Cruise Market: New Destinations

By ,   July 31, 2016 ,   Cruise Industry

When the subject of Chinese cruise market came up at the news briefing on a preview sailing of Seven Seas Explorer recently, Frank Del Rio, Norwegian Cruise Line Holdings CEO, had plenty to say.

"So far, so good" was his initial verdict on the market, where U.S.-based cruise companies are increasingly committed to put new ships, such as the forthcoming Norwegian Joy.

But Del Rio talked about some "obstacles" that lines will have to overcome to have further growth. He drew an analogy to the way that the market for cruises developed in the U.S. 50 years ago.

In the beginning, Del Rio said, there were the Bahamas, and it was good. Cruises lasted three or four days.

"After a few years of that they said, 'Well, is there anyplace else we can go?' And they discovered the greater Caribbean basin, the western Caribbean, eastern Caribbean, and because by definition, the time and distance and speed of ships, the length of the cruise had to increase from three or four days to seven days. And the industry grew," he said.

Alaska and Europe followed, each with their own growth phase.

The problem in China, Del Rio said, is that it isn't immediately apparent where cruises can go if they're not three or four days long.

"Because while the Chinese government may be building a lot of berths and a lot of infrastructure in Hong Kong and Beijing and Shanghai, when you look out three, four or five days from those ports, where do you go? It's a couple of ports in Korea [and] a couple of what I would call secondary ports in Japan, because in three or four days you don't get to Tokyo, you don't get to Kobe, you don't get to Osaka."

Hong Kong


The key, Del Rio said, lies in getting older Chinese travelers to cruise, retirees that like in North America have more time and more savings so that they can afford a longer cruise.

"Because if we don't get that elderly person cruising, who's not working anymore, the cruises can't increase in length. And if the cruises can't increase in length, we can't have itinerary variety. And if we can't have itinerary variety, we're going to be stuck with three-, four- and five-day cruises out of Shanghai and Beijing. And if that's the case, we've got a problem."

Del Rio said the other solution, bringing Chinese travelers to already developed cruise markets, has its own obstacle: air service. The Caribbean represents 43% of industry capacity, but it's a long way to travel.

"In Miami, there's talk now of having a nonstop flight from Shanghai. It would be one of the longest flights, 18 hours  there are planes now that can make that journey. But those are some of the challenges that are sometimes overlooked that we in the cruise industry have to be cognizant of," Del Rio said.