Right time for Asia

Carnival Asia set for success with new offices says Foschi
Right time for Asia

By Tony Peisley |

A quarter of a century ago, a joint venture between Carnival Corporation & plc and South Korea’s Hyundai to develop a Carnival Asia product was abandoned. At the time, it was reported by the New York Times that this was because “Carnival was ill-equipped to offer the floating casinos Asian customers wanted.”

In fact, the reason for its failure – as it was for the equally short-lived Asian venture of rival Royal Caribbean Cruises Ltd (Sun Viking sailing year-round in the mid-1990s) – was the complete opposite: rather than Carnival not being equipped for the market demands, it was the market itself that was simply not yet ready for cruising.

Now it is ready, with Costa Cruises and Royal Caribbean International well-established alongside Star Cruises in the region. So Carnival Corporation has returned to its Carnival Asia concept (this time without a partner) and the man behind Costa’s pioneering China/Asia programme, its former CEO and still chairman, Pierluigi Foschi, was the obvious choice to head it up as Chairman and CEO. For, apart from his Costa credentials, Foschi also spent a good chunk of his working life in Asia prior to joining the cruise sector from the elevator company Otis.

He is now busy setting and staffing up the new venture’s Singapore headquarters, which he says will be 30-strong by the end of the year. “We currently have two brands in the region with Princess Cruises having joined Costa but the idea is for other Carnival brands to come here, too. Our role will be to coordinate such brand activity here by helping with things like marketing and infrastructure development.”

It will work in conjunction with Carnival Japan, which was formed a year ago and opened an office in Tokyo initially to market and sell the new Princess programme dedicated to the Japanese market, which will run for 87 days this summer. This programme will be substantially expanded in summer 2014, with a second ship and a longer season meaning that the expected number of Japanese passengers carried will increase from 18,000 projected for this year to about 100,000.

“Carnival Japan has also been set up to market other Carnival brands in the Japanese market,” says Foschi. “It is a similar story for the Carnival Asia office we are opening in Hong Kong as this, too, will first sell the Princess programme but will also be there to help other Carnival brands in the region, now and in the future.”

He believes that the size of the Asian source market will more than quadruple to about 7 million by 2020. “Most of the growth will come from the Chinese market but other Asian countries – like Japan – will also contribute. We know that the growth in Asian passenger numbers will not just be driven by Carnival as there are already other brands in the region and more will surely follow.”

Foschi isn’t just talking about other established international brands, either: “There are a lot of very big Chinese companies which may be lacking in cruise know-how but are very well resourced and recognise that interest in cruising has grown significantly. I don’t know whether they will be building their own ships and, if so, how soon but there are certainly going to be Chinese cruise companies. In fact, one major company (HNA Tourism) has already bought a ship from our Australia division and has begun cruising out of Chinese ports (Sanya and Tianjin) so we will be watching closely to see how that goes for them.”

Carnival has a somewhat chequered career with joint ventures as, apart from the Hyundai dead-end, it did not fare so well linking up with Greek cruise line Epirotiki and – more recently – the Ibero Cruises acquisition (which started off as a joint venture) has delivered more red than black to the bottom line. But don’t rule one out as Carnival Asia progresses. Foschi certainly doesn’t.

“We will keep an open mind,” he says. “There is a long history of Chinese joint ventures in other industries and, just because we have not gone down that route so far, does not mean we won’t. In fact, spotting such opportunities is another reason why it makes sense to have a corporate presence in the region. For the industry, it is not so much that the Asia market is the key to our future as that we simply need to be where the growth is in population and disposable income as this represents such huge potential.

“The biggest challenge we face in maximising that potential is in the area of demand, especially with the specific requirement for short cruises and the complications of the region’s seasonality. The pricing levels have also been volatile, going up and down so much that we just don’t know what they might be willing to pay in the end.”

There were, though, hopeful signs of better, more stable pricing on the Costa programme last year which – it was reported in the Carnival full-year results – was the first to be individually profitable since the brand first went to China in 2006. He says: “There has been a very gratifying response to the Costa product but we recognise that the market is still evolving, as is the consumer, so we have to be ready to adapt. We may have to customise the product much more to Chinese or other Asian tastes in the future as the consumers and their demands develop.”

There has been much debate about the need for more port and destination development in the region despite the significant recent and ongoing investment of the authorities in China, Hong Kong and Singapore. “The lack of ports might be an issue,” he says, “but this is one that is relatively easily addressed through more investment, if necessary by the cruise companies themselves. Down the line, we will be looking for investment opportunities in port and destination development. Quite what model we will be using, we have yet to establish.”

In fact, that situation applies to the whole Carnival Asia venture at the moment, as Foschi says: “We are still at the very early stage where we still working out exactly what we will and will not be doing in the future.”

But there is no doubt that it will have plenty to do as – after several false starts – Asia finally takes off as a major cruise source market.

Contact author


Subscribe to the Cruise & Ferry newsletter

  • ©2024 Tudor Rose. All Rights Reserved. Cruise & Ferry is published by Tudor Rose.