The world's most populous country is being targeted by the world's cruise ship industry as its biggest potential customer. But the industry must overcome a major hurdle, persuading Chinese to come aboard, JACK FREIFELDER reports from New York.

Simulated skydiving, surfing machines, robot bartenders, $5,000-per-person, per-night suites, all that and more is being used today to attract what is expected to be tomorrow's biggest market for the global cruise industry: China.

In 2014, 10 million Americans boarded cruise ships, but only 700,000 from China, according to US-based cruise company Carnival Corp. But the cruise-ship industry is out to change that and its projections explain why.

Cruise sales in China could reach $12 billion by 2018, up from $6.8 billion in 2013, according to market research firm Euromonitor. The market will soon be the second-biggest and could eventually surpass the United States, industry executives said.

A 2013 report by the Asia Cruise Association estimates the Asian market will grow to nearly 4 million by 2020 from 1.3 million passengers in 2012, with close to 1.6 million coming from China.

"The growth potential of the China market is unprecedented," Adam Goldstein, president and COO of Royal Caribbean Cruises Ltd, the industry's second-largest cruise company, told China Daily.

"China is already Royal Caribbean's third-largest market in the world, behind the United States and the United Kingdom. While China might not have been the first market you associated with the industry in the past, today China is among Royal Caribbean's most profitable markets globally and it continues to see significant growth in the industry overall."

Goldstein's comments were echoed by Alan Buckelew, COO of US-based Carnival, who relocated from Carnival's headquarters in Miami to Shanghai in September.

'Largest cruise market'

Buckelew told China Daily in an e-mail that the Chinese market could reach as many as 1 million passengers this year, and that China will eventually be "the world's largest cruise market".

But right now the cruise industry sees one major hurdle it must overcome: Persuading Chinese to get on the ships.

The challenge is Chinese consumers are still "fuzzy" about what cruising is all about, says Jiang Yushen, a deputy general manager at China's HNA Tourism Cruise Yacht Management, part of the HNA Group.

"Most of our customers start with the same question: What about the food?" said Wang Yang, CEO of Youlunhai.com, a Chinese travel agency that said it brokered around 5 percent of the cruise tickets sold in China last year.

"We have to educate them," Richard Fain, chairman and CEO of Royal Caribbean, told the South China Morning Post in January.

Fain said the awareness factor -- or the lack of it -- is one of the most difficult issues facing cruise lines operating in Asia. "You're talking about an industry that didn't even exist here five years ago that is not well known and about which there are a large number of myths," he told the newspaper.

Goldstein said that the future lies in expanding the appeal of cruise vacations to China's expanding middle class. "China's urban middle-class population alone, ifconsidered as a country, is larger than the entire US total population today," he said.

Despite the lack of awareness about cruises, Wang said, "The business shot up last year, but this year it is growing even faster." And Jiang said, "Competition is getting increasingly fierce."

Gateway cities

Goldstein said Chinese cities like Shanghai and Tianjin act as gateways for foreign tourists, and have become "very promising" markets for the cruise industry.

"As the largest populated area in China, Shanghai brings an increased volume of guests for sailings and has become a major hub for foreign tourists," he said.

Last year, more than 220 cruise ships set sail from Shanghai alone, according to a report by the Shanghai Center for International Cruise Economic Research.

Cruises originating from Chinese locales are expected to rise from eight ports to 12 in 2015, according to the China Cruise and Yacht Industry Association (CCYIA).

The number of cruises from China grew to 466 by the end of 2014, a climb of roughly 15 percent year-over-year, according to the CCYIA. In 2009, the number of departures from China was just 80.

Zheng Weihang, executive vice-president of the CCYIA, said the rapid development of the cruise industry has led to the flow of more capital into the sector, which could have benefits throughout the industry chain.

Some companies have shown interest in building up ship capacity, while others are focusing on the downstream side of the industry chain, like relationships with travel agencies, Zheng said in an interview with China Daily.

"We will see more itineraries introduced into the Chinese market in the next few months," said Cheng Juehao, deputy director of the Shanghai International Shipping Institute's Cruising and Boating Research Center. "The Chinese cruise sector will move up the industry chain with more companies taking part in shipbuilding, which will really inject more vitality into the economy."

Xiao Baojia, director of the Shanghai Cruising and Boating Research Center, said that despite the significant gains made in the past few years, "the cruise industry chain in China is quite incomplete" .

"We are now still unable to develop our own cruises, with European companies dominating this part of the market," Xiao told China Daily. "Most of the leading companies are reputable global names, while the Chinese companies are those that have just started operations.

"There is a severe shortage of professional services in the cruise industry and most of the Chinese ports focus more on appearance, rather than function," he said. "But the real concern is obviously the shortage of high-end cruise industry talent."

Huang Ruiling, general manager of Costa Cruises Shipping Services (Shanghai) Co Ltd said: "For one thing, the itineraries available now are quite limited."

One cruise industry company seeking to help build the domestic cruise ship building industry is Carnival Cruise Lines. It is a British-American owned cruise line and one of nine cruise ship brands owned and operated by Carnival Corp & plc, which includes Italy-based Costa Cruises and Princess Cruises in Santa Clarita, California.

Carnival was the first global cruise company to enter the Chinese market, with the Costa brand making its initial foray in 2006. Costa and Princess, the only two Carnival brands that offer service in China, control upward of 55 percent of the Chinese cruising market, company data showed. Carnival brand Princess Cruises based a ship in China for the first time in May.

Joint ventures

Furthering its push into China, Carnival Corp on Jan 26 announced plans to pursue joint ventures that could see the cruise giant owning ships and developing ports and infrastructure with a Chinese development company.

Carnival signed a memorandum of understanding (MOU) with the state-owned China Merchants Group (CMG) to form two joint venture enterprises. CMG, founded in 1872, focuses on transportation, infrastructure, financial services and real estate development.

The companies will explore forming a Chinese cruise line for the domestic market, using new ships designed and built in China. The joint venture might also acquire existing vessels.

In the other venture, Carnival would partner with CMG to develop ports and destinations in China and Northern Asia. CMG is already developing Prince Bay Cruise Terminal in Shenzhen.

In October, Carnival announced a separate MOU to look into a partnership to build vessels with the China State Shipbuilding Corp. That potential joint venture could also include Italian shipyard Fincantieri, which has a long history of building ships for Carnival.

In 2015, Carnival will be the first company to have four ships "home ported" in China. By then, Carnival's passenger volume in China is expected to approach 500,000 passengers, raising its market presence by 140 percent since 2013, the company said in a statement to China Daily.

This year, Royal Caribbean will move one of its new near-billion dollar Quantum class ships to Shanghai almost straight from the shipyard. Royal Caribbean Cruises is a Miami-based Norwegian-American global cruise company. It is the world's second-largest cruise line operator, after Carnival, with five subsidiary cruise lines. Royal Caribbean International, is the main subsidiary operating in the Chinese market.

Goldstein, with Royal Caribbean, said: "We would have done a few cruises in China now and then over the years out of Tianjin, but we started to think about experimenting with a China-based program that would actively market to attract Chinese guests onboard the ship. There was enough momentum to make us think to take more steps in the future, so we lengthened the program."

That program started in 2007, he said, with one of the fleet's smallest ships.

"Step by step we have been able to increase capacity, receive positive signals from the market in terms of demand and yield, and keep pushing to the next level," Goldstein said. "Now China has become the most active source of growth in our overall network as a company.

In April, Royal Caribbean announced that its newest ship, Quantum of the Seas, would make its home base in Shanghai (Baoshan), China, starting in May 2015. Quantum will be the company's third ship in the market.

Royal Caribbean will offer traditional Chinese fare such as xiao long bao (steamed buns) on the ship, which can carry more than 4,000 passengers and has nearly 20 different dining options and novelty experiences such as a North Star pod that takes guests 300 feet above the ocean.

However, there are still some big jobs to do in terms of building consumer awareness in China, Goldstein said, including familiarizing travel agents with the concepts and packages behind cruise ship offerings.

"We've further increased our exposure in China through a joint venture with Chinese travel company Ctrip and other partners," Goldstein said.

In November, Royal Caribbean and Ctrip.com International Ltd announced SkySea Cruises, a joint venture (JV) partnership designed to serve the Chinese cruise market. The new line will begin operation in the middle of 2015.

'What's that'?

Ctrip is one of China's leading online travel service providers.

Fain, Royal Caribbean's CEO, said SkySea Cruises is another opportunity for the company to broaden its reach in the fast-growing Chinese market.

"Our strategy for China is really very clear," Fain said during the company's Jan 29 earning conference call. "We want to be synonymous with cruising in China."

Despite the lack of awareness about what a cruise entails, Carnival CEO Arnold Donald said that may be a good thing.

"Here in the States and Europe, the people we're dying to attract actually have opinions. They have impressions they have lots of negative things in their mind. In China, they have no concept what a cruise is. You say cruise, and they say 'What's that?"'

Contact the writer at jackfreifelder@chinadailyusa.com

Shi Jing in Shanghai and Yang Feiyue in Beijing contributed to this story.

In April, Royal Caribbean announced that its newest ship, Quantum of the Seas, would make its home base in Shanghai (Baoshan), China, starting in May 2015. Provided To China Daily

China's fi rst luxury cruise liner, the Henna, berths at the Qingdao's port on October 28, 2014, prior to leaving for Okinawa, Japan. The ship has a maximum passenger capacity of 1,965, with 432 ocean-view staterooms and 298 interior staterooms, including nine suites with balconies. Provided To China Daily

(China Daily USA 02/06/2015 page20)