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CSA-P: China as a Major Player

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Daniel Chui of Oceanic GroupDaniel Chui, managing director, Oceanic Group, which operates the Oriental Dragon cruise ship in Asia, sailing out of China seasonally, delivered an interesting overview of the Chinese cruise market at the Cruise Shipping Asia-Pacific conference and trade show in Singapore.

“The Chinese cruise industry still in its infancy stage and we are learning new things every day,” said Chui, parlaying the Chinese economic growth over the past decades, explaining that China’s middle class is still relatively young. In addition, most Chinese middle class citizens are near coastal cities, said Chui.

Currently, there are more than 300 million Chinese middle class citizens, said Chui, and as income rises, the consumers will devote a larger proportion of their household budgets to education, luxury items and holidays.

He also noted the booming growth of Chinese overseas travel, with some 30 million travelers in 2011, and around 500,000 cruise passengers, just a small percentage of the potential source market

 “The conclusion is we need more cruise operators and more ships in China,” said Chui, adding that the government recently lifted regulations that will allow foreign operators to come in.

The Chinese cruise market can be composed of four factors, Chui explained, the first is the emergence of customers with more money that are looking for unique experiences. The second is the population growth in the middle class near coastal areas, with robust economic growth being the third factor. The fourth aspect is that only three major cruise operators are in the market currently: Costa Crociere, Royal Caribbean International and Star Cruises.

“That makes up the mass market, but the luxury and premiums ships are still missing,” said Chui, adding that Costa, Royal and Star represent the three biggest cruise operators in Carnival Corporation, Royal Caribbean and Norwegian Cruise Line/Star Cruises.

His experience in the market, sailing a 1,200 passenger ship from Jeju to Shanghai a decade ago was faced with challenges from the start, Chui continued. "Immigrations, customs and logistics, at the time the Shanghai Port was not built, we were too ahead of our time and were ill prepared, but we learned lessons and came away with a bruised ego.”

In 2011, Chui started Jeju/Shanghai operations seasonally for the second time with the Oriental Dragon, a smaller, 600-passenger ship.

“Some of the challenges have disappeared but new ones have appeared,” he noted. “It is not as profitable as we hoped it would be.”

China is still a difficult market, he said, outlining the fact that cruise operators either need to venture in alone with deep pockets, or partner with a local company.

That market is still in its infancy stage, with patience and understanding needed for operators coming in.

“If the government is resolute in growing the industry, the industry is going to grow,” Chu said. He added that while new and bigger ships are good, China still needs a critical base of many types of ships.

As far as the Titanic II project that is set to be built in China, there are big implications, according to Chui. If it is built, the Chinese yards will have gained experience in modern cruise vessels.