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Battered international cruise operators are eagerly awaiting the reopening of the Chinese market. They will have to wait a little longer.
China will resume cruises in December as its economy recovers and the pandemic remains largely under control. The problem is, international cruise lines that have spent the last decade building the market from scratch weren’t invited to the party.
With standard cruise routes from China to destinations like Japan and Vietnam closed by global travel restrictions, the country is tiptoeing back with cruises to nowhere that begin and end on the sunny South China tourist island of Hainan without stops. intermediate.
The government has granted the first permit to sail that route to Astro Ocean International Cruise Co. Ltd., a joint venture between two state giants. International operators such as Carnival Corp. and Royal Caribbean Group, which would need an exemption from Chinese laws that prohibit foreign ships from doing business between the country’s ports, have not received approval to sail.
Zinan Liu, president of Royal Caribbean Asia, said he expects mainland China ports to be among the last in Asia to reopen to foreign-flagged cruise ships, which have already been licensed to sail in Singapore and Taiwan. Among China’s main concerns, Liu said, is the risk of importing the virus through travel.
“We are not worried about Chinese consumers,” Liu said at a virtual industrial event in October. “It is the government we are dealing with in China, perhaps even in Japan, that regains confidence in the industry.”
Carnival, Royal Caribbean and others have spent the past decade opening up the Chinese market. These efforts paid off, with passenger volumes from China growing rapidly, until the coronavirus pandemic hit the world and cruise ships in a series of notorious incidents that stopped the industry.
The way back was slow. European cruises resumed in the summer with trial facilities and medical staff, but operators canceled or shortened trips due to increased cases in the fall. Taiwan began non-stop cruises in July; Singapore began similar trips this month.
In the United States, cruise operators must conduct simulations of departures and apply for a navigation permit 60 days in advance to obtain approval from the Centers for Disease Control and Prevention. To meet the long list of requirements, some Carnival cruise ships have extended their US sailing break until 2021.
China’s rapidly recovering economy has become a lifeline for companies struggling with reduced demand throughout much of the rest of the world. US brands from Nike Inc. to Tesla Inc. have found refuge in the world’s second largest economy, where consumer spending has rebounded and GDP is expected to grow for the year.
Cruise operators are also betting on that quick rebound pending the green light.
“We are currently in dialogue with local and central authorities to make sure we are ready to resume operations as soon as they feel it is safe to do so, working on the basis of our security protocols,” said Mario Zanetti, chief commercial officer of the Carnival unit. Costa Crociere. “China plays a strategic role for the Costa Group”.
The country’s large and increasingly affluent population helped cruise volumes grow at a compound annual rate of 38% between 2013 and 2018, according to Chart Management Consultants, making China the second largest cruise market in the world for passengers after North America. Nearly 2.4 million people in China took a cruise in 2018, the most recent data available, most of them on international fleets.
Yet the first sailing from the Chinese city of Sanya will be carried out by Piano Land, the country’s first luxury cruise ship and the only one operated by Astro Ocean.
Foreign-owned and flagged vessels are not allowed to provide transportation services in China’s domestic waters, a restriction that also exists in the U.S. The Chinese government has made an exception for the 25-year 13-bridge Land Plan, which It sails under the Flag of Bermuda, but is Chinese owned and operated.
Royal Caribbean chief executive Richard Fain said the company has no plans to find a joint venture partner in China and is in talks with the country’s central and local governments for future cruises.
“So far only a small operator has started – we don’t think being Chinese or having a Chinese partner would change that,” Fain said in an October interview. “We believe this worked well before the pandemic.”
Carnival China’s itineraries accounted for 4% of its passenger capacity in 2019, according to a securities filing. Prior to the pandemic, the company had plans to expand its fleet in the country, which was said to become the world’s largest passenger market for cruises.
Ted Blamey, director of consultancy Chart, said he believes foreign cruise ships will be able to return to China once the authorities feel comfortable enough to expand the pilot.
Genting Cruise Lines, part of the Malaysian conglomerate Genting Bhd, has received verbal consent from Chinese authorities to deploy a luxury cruise in Sanya starting in December, according to a person familiar with the deal. The Bahamian-flagged Genting Dream will be chartered and operated by a joint venture with a Chinese company, which holds majority control of the entity, the person said.
Genting did not comment.
International cruise lines went to great lengths to nurture the Chinese market before the pandemic. Carnival established a cruise joint venture in 2018 with state-owned China State Shipbuilding Corp., one of the country’s two shipbuilding giants. The Florida-based company also helped Italian shipbuilder Fincantieri SpA form a separate joint venture with the Chinese company and pass on its know-how in the construction of large cruise ships.
When Costa Cruises took its “Italy at Sea” trip to Shanghai, the company made sure that Chinese passengers not only found Italian cuisine, but also more familiar spicy dishes and mahjong games.
Royal Caribbean has also chosen Shanghai as the base for some of its newest and most luxurious cruise ships, such as Quantum of the Seas and Spectrum of the Seas.
North America accounted for half of the global passenger volume in 2018, while China reported just 8.3%.
“Even though China has become the second largest cruise market in the world in a relatively short amount of time, we haven’t even … scratched the surface of the true potential of the Chinese cruise market,” said Adam Goldstein, former CEO of Royal. Caribbean and president of the Cruise Lines International Association industrial group.
Write to Jing Yang at [email protected] and Dave Sebastian at [email protected]
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