How foreign cruise lines can success in China Cruise market?


China – A big new market for cruise industry

China cruise market is a new but a big market for the international cruise industry. According to the research of the Cruise Line International Association (CLIA), there were 2.4 million Chinese cruise travellers in 2017. This is less than 2% of Chinese overseas travellers and already became the No.2 cruise travellers market in the world, just behind the USA (11.9 million). CLIA predicts Chinese cruise travellers will grow 8-10 million a year by 2025.

The growing China cruise market became the target of the world cruise companies including the top two companies: Norwegian Cruise Line and Royal Carribean Cruises.

Here, we will examine two cases to see how foreign cruise lines can success in China – Norwegian Joy and Royal Carribean Spectrum of the Seas.

China Cruise Market
China Cruise Market

The withdraw of Norwegian Joy

Norwegian Joy was designed for the China market. It has Chinese style pictures painted on the ship, Chinese cuisines with Chinese menu, and 60% crews who can speak Mandarin.

It was a big story when Norwegian Joy started its first cruise on 28 June 2017 from Shanghai.

It was a big shock that Norwegian Cruise announced on 19 July 2018 that Norwegian Joy will leave China for the American market in April 2019. Just after one year operating in China.

According to Norwegian CEO Andy Sturt, the reason for Norwegian Joy leave China market is based on profit consideration in his interview with Skift. “China’s a good market. But it’s not as good as Alaska,”

But what are real reasons that caused Norwegian Joy withdraw from China market? And what we can learn from its failure in China?

The most popular reason in Chinese social media is that “Chinese Damas” (middle-aged Chinese women) ate too much and spent too little during the cruise.

According to a passager who posted five day Norwegian Joy cruise experience on social media, “Chinese Damas” are enthusiastic about the “Free” foods and beverages on the ship. They took more than they can eat and left many foods on the table.

The passager also pointed out because the cheapest price for this 5-day cruise is only 1,949 Chinese Yuan (about A$400) so “it seems that this giant American ship was eaten up by Chinese.”

However, is this the main reason for Norwegian Joy withdraw from China?

It is true that the lost on the foods and beverage will increase the cost and reduce the profit. However, it is rediculouse to belive a any cruse ship will be eating up by the passgers. For most of cruise ships, food and beverage cost is minimal in the total cost.

It is the “positioning” in China market that drove Norwegian Joy out of China market. There are inside and outside factors in this case.

Inside factors:

  • The are over-optimistic about China market: This giant ship is customised for China market with a capacity of about 5,000 passengers. However, it only sails to South Korea and Japan in its five-day cruise. With many other big and small competitors on the same route, it is hard to get enough passengers.
  • Wrong targeted customers: Most of the Chinese high-value travellers expect different cultural experience – especially western cuisine and beverages. They board on a foreign cruise ship to experience western culture not to eat local Chinese foods which they can enjoy in China. The cheap price will only attract passengers who do not have enough spare money to spend on board so they can only enjoy free foods and services.
  • Too Chinese: Many foreign companies believe Chinese culture factors are important for China market. While some Chinese essence is important to Chinese travellers like tea and hot water, they are looking for some different culture experience on a western cruise ship. Norwegian Joy is too Chinese. Just like you do not want to eat Australian steak every day when you visit Beijing, Chinese passengers will not eat Chinese food every meal on the ship.
  • Too many passengers and too small rooms: To have the maximum passenger capacity, most rooms are less than 10 m². The ship became very crowded when with near 5,000 passengers if fully boarded.
  • Overpromising: The advertisements put on by travel agents are overpromising about the facility and services on the ship. For example, they promote 10 restaurants for free dining, but in fact, only 5 restaurants are free.
  • Big gaps between rich and poor: The top suits offer Hemes items and 20% exclusive areas including a private pool, deck and restaurant while in normal cabins there is even no toothbrush. The passengers had poor experience posted many negative comments on social media.
  • Poor services: Most of the crews are new and less training. There are many activities you have to pay or prebooking.
  • Short sales and brand damage: Norwegian Joy does not have a clear brand strategy. It is not a luxury cruise nor a budget cruise. It is something in the middle and does not have a very clear targeted customer market. They just want to full fill the rooms but ignored the brand.

Outsdie Factors:

  • China -South Korea relationship: There was a period that the cruise lines halt cruise to Korea because of the poor China-South Korea relationship. The ship only visits Japan ports not South Korea ports. This caused the drop in bookings.
  • Oversupply: There are too many cruise ships fighting on this China-Korea-Japan routes. Norwegian Cruise is newer in China market than Costa and Royal Caribean Line. A price war is hard to avoid.
  • The selling model: They use Chinese travel agents to sell the tickets. The agents will book many rooms, sometime the whole ship to get a good price and sell to travellers in cheap price for their own profit. If they cannot sell the tickets, they will also big discount. Some customers just wait for the discount to get the vaule, most of them are retired “Dama” who had plenty of time to cruise but not enough money to spend on the board.

The coming of Spectrum of the Seas

While Norwegian Joy left China, The Royal Caribean will send Spectrum of the Seas to China for first sailing in June 2019.

This is another ship designed and made for China market. Will Spectrum of the Seas success in China?

Let’s have a look what are different here:

  • Similar passenger capacity: 4,264 passengers.
  • New technology and experience: They use VR technology to offer passengers to travel to another time and planet with their VR headset.
  • Dining is still a big thing: The three-level main dining hall can seat over 1,800 passengers with Chinese, Japanese and Western foods to choose from.
  • More activities: They offer Karaoke at Star Moment and the largest indoor sports and entertainment complex at sea – SeaPlex, where passengers can enjoy bumper cars and play sports like basketball and roller skating.
  • Higher prices: The prices on their web site are from $733 to $2535 for 3 to 7 days cruise to Japan and South Korea.

Time will tell if Spectrum of the Seas can success in China. Hope they can learn from the failor of Norwegian Joy and pay attention to:

  1. Target correct consumers
  2. Improve sale channels and control the price
  3. Improve brand not only sales

With more and more Chinese travellers experience cruise, there are also opportunties for Australian business to get benefit from this growing market sector. Things like:

  • Supply the cruise line with Australian food ingredients
  • Supply with services and management
  • Atract Chinese travelors to cruise in Australia

There are more opportunites for Australian business in China market. If you want to know more, let’s have a conversation.

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