Asia cruise boom in focus

Cruise lines, ports and yards look at regional trends and potential
Asia cruise boom in focus

By Michele Witthaus |

With China tipped to become the second largest global cruise market by 2017, various aspects of the significant uptick in the cruise business in Asia-Pacific were discussed at the Cruise Shipping Asia-Pacific 2014 conference, held in Hong Kong from 21-22 November 2014.

Looking ahead to the next few years, Anthony Lau, executive director of the Hong Kong Tourist Board, said: “The cruise potential of the region is 83 million people – four times the current number of cruise passengers in the world. Of that number, Hong Kong will account for 19 million.” The planned high-speed rail link to mainland China would be a strong contributing factor in this growth, he said.

Two new members of the Asia Cruise Fund were welcomed during the conference, with Hainan and the Philippines joining founder members Hong Kong and Taiwan. “The Asian cruise business relies on partnerships of this kind to succeed,” said Lau.

Christine Duffy, president and CEO of CLIA, said: “This year, cruise ship global deployment to Asia grew by almost 31% and more deployment is on its way for 2015.” In all, she said 62 ships would visit Asia between 2014 and 2015. “Cruise lines see Asia-Pacific as a huge opportunity,” remarked Duffy. She said the recent development of the Asia Cruise Association into two bodies, CLIA South-east Asia and CLIA North Asia, would boost the region’s cruise growth.

“In the next ten to thirty years, Asia is probably the only continent in which the size of the middle class will expand dramatically,” said Dr Zinan Liu, VP, China and North Asia, Royal Caribbean Cruises Ltd and chairman of CLIA North Asia. “We will see 26 lines and 981 cruises in the region in 2015.”

Although Royal Caribbean International, Costa Cruises and Princess Cruises are leading cruise deployment from abroad in Asia, local company Genting Hong Kong is enjoying the fruits of years in the region with its brand, Star Cruises, launched in the 1990s. Michael Hackman, the line's EVP marine operations and new shipbuilding, said that Star Cruises had a significant advantage over newcomers to the region as it had always served an almost exclusively Chinese market ever since its inception. The first of two upcoming newbuilds for the brand, Genting World, will debut in 2016, homeporting in Hong Kong. “The region has key gateway cities with huge population catchments, long-haul international flight capability, and potential ports of call already on the cruise map,” said Hackman. However, there were still challenges, he said, including “the need to keep ships full without excessive discounting, and operational challenges from pandemics and extreme weather to congested waterways and bunkering issues.”

Dominic Paul, SVP international, Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, explained the strategy behind deciding to deploy Royal Caribbean International's newbuild, Quantum of the Seas, out of Shanghai: “We decided to bring our new ship to China because with the changing face of cruise in Asia, we felt the demand was there,” he said. “In the next five years we are expecting the cruise market in Asia to more than double, which is incredibly exciting. It means huge opportunity to all of us.”

Ann Sherry, CEO, Carnival Australia and chairman of CLIA south-east Asia, said: “We’ve had a decade of 20% growth every year and cruise contributes three and a half billion dollars a year to the Australian economy. We are a business with a very long value chain but governments won’t invest money in cruise unless they can see the benefits. We need to be talking about our economic impact because that’s what gets politicians excited.” She added: “I think we can get 10% market penetration in Australia/New Zealand/ Pacific.”

The growth in numbers of Asians taking a cruise was addressed by several speakers with predictions ranging from 3.8 million by 2020, to as many as 10 million by that year. There was agreement, however, that whatever the numbers actually achieved, existing global ship capacity would quickly be exceeded by the vast numbers of new cruisers in the region.

The challenges of the regional operating environment were another hot topic, including distances, port charges, pilotage, fuel, water and provisioning costs, and visa issues. John Tercek, VP, commercial & new business, Royal Caribbean Cruises Ltd, and Bruce Krumrine, VP, shore operations, Princess Cruises, held a special cruise line/port interface workshop at which Tercek said that the distance between ports was a critical issue and that Royal Caribbean was willing to build facilities and create new attractions where none existed. “We are going to see greenfield ports growing up in south-east Asia, similar to those at Puerto Costa Maya in Mexico and Roatan, Honduras. Every port has to be developed for Oasis-class ships as a minimum standard.” The Philippines held great promise due to their layout and distances between islands, he said. “I believe the Philippines is going to become the ‘Caribbean of Asia’.”

Krumrine said ports needed to have a shared vision and a long-term plan, delivering a seamless experience that took account of regional interdependence. At the same time, “ports should differentiate themselves from other ports in the region and protect and preserve the best of their past.”

Several ports outlined their plans for expansion and development. Christina Siaw of Singapore Cruise Centre said: “Singapore Cruise Centre is the original cruise centre in Singapore and is very well located in a hub of intermodal connectivity." She said the port benefited from India as a fly-cruise source market and was working on attracting ships moving south from China as a winter anchor strategy.

Ki-Tack Lim of Busan port in Korea said that his port had recently held a ceremony to celebrate its one-millionth cruise passenger. “The Korean government has a firm national policy to support the cruise industry,” he said, adding that twelve new cruise berths would be developed by the end of 202. In 2016, new facilities will open in Jeju Island, Incheon and Busan.

Buhdy Bok, SVP Pacific Asia and China for Costa Cruises, said that Costa had been the first of the established cruise lines to deploy ships in mainland China in 2006. Looking beyond the current trend for short cruises for Chinese guests in particular, the line’s first-ever world cruise is set to depart from Shanghai in 2015, covering 18 countries over 86 days. “The China cruise market is also about longer cruises, targeted at middle and upper-class passengers,” said Bok.

Anthony Kaufman, SVP Asia Operations, Princess Cruises, said his brand had been cruising in Asia for over 30 years. He said Sapphire Princess's inaugural season out of Shanghai from May to August had been a success. “With our ‘Princess Class’ we have taken our core product and changed it to resonate with passengers in China,” he commented. Innovations include a World Leaders Dinner and Tai Chi at sea.

Steve Odell, president for Europe, Africa, Middle East and Asia Pacific at Silversea Cruises, described trends among his company’s luxury guests in the region. “Our Asian high-net-worth customers are young, independent and brand-loyal. They take on average three holidays a year, generally travelling in groups,” he said. “At the moment foreign brands reap the rewards as there are no homegrown [luxury cruise] brands.”

Although European shipyards have dominated cruise ship building and refurbishment for many years, the recent MOU between Carnival Corporation, the China State Shipbuilding Corporation and Fincantieri has fuelled speculation about how quickly Asian yards will begin to pick up cruise orders. Dr PK Ong, managing director of Sembawang Shipyard in Singapore, gave an overview of the yard’s regional activity in passenger ship refits. “We have nearly 100% market share of cruise vessel repair in Singapore and refit eight to ten vessels a year,” he explained. This work involved regular drydocks, as well as upgrading of vessels to suit Asian needs and revitalisation for major makeovers. “We are also seeing increased demand for Asia-based outfitting contractors and suppliers of hotel services.”

Paolo Moretti of RINA Services, which, together with DNV GL, has been involved in the financially beleaguered Mitsubishi Heavy Industries newbuild work for AIDA Cruises in Japan, outlined the issues preventing yards in China and elsewhere in Asia from successfully moving into cruise ship construction. “If you are not a well-established shipbuilder, there are big challenges. These include difficulty evaluating the building contract specifications due to a lack of similar vessels built, as well as the need for increased pre-outfitting at the block construction stage and the requirements of the flag administration.” He said newbuild yards also needed highly complex project management skills to meet inflexible deadlines. Routine drydock work on cruise ships was a different matter, however. “We are seeing increasing drydock work being carried out in China.”

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