When news media discusses China's economy,
headlines have switched from “economic miracle” to "economic crisis."
Most experts say the latter is overstated, and that while there have been
some Chinese government mistakes along the way, the slowdown was not
More importantly, as Justin Leverenz, Director of Emerging Market Equities
at Oppenheimer Funds observed in a national TV interview recently, the
service sector is continuing to grow massively in China; it’s exports that
are slowing down.
That distinction is pivotal to the cruise business because it is the
service sector/middle class workers that are booking the ever-growing
number of cruises. Cruise lines have not been going after the
generally low-paid manufacturing sector to the same extent they have the
Even so, how will the changing situation and perception affect the North
American cruise market? For years the trade has heard from its leaders
that developing markets such as China help mature markets such as North
America by allowing cruise lines to maintain or increase prices
even as they add capacity.
For the most part, it would seem that emerging markets have indeed worked well
in this regard. That said, clearly there have been challenges.
Cruise pax sourcing in Europe began its massive ascent about a decade
ago but has run into heavy seas of late, at least partially related to a
faltering southern European economy. Brazil-sourced cruising was initially
hailed as a success by some companies but has since slowed considerably,
with government problems cited as the main reason.
In essence, there’s a track record of initial exhilaration by the industry,
followed by realities imposed by changing economies and, sometimes,
changing governments. Overall, though, every major financial analyst
covering the cruise sector has indicated that globalization has
been a plus for the business.
When it comes to developing markets, the
big focus now and into the future remains China.
For instance, Carnival Corp’s recent announcements show how deep they are in
the Middle Kingdom, as they are not only moving existing ships to Chinese
homeports, but adding new ships specifically designed for the market.
Additionally, the company continues to place key execs in Shanghai. Michael
Ungerer, for example, currently President of Carnival Corp’s Germany-based
AIDA Cruises brand, was appointed COO Shared Services for Carnival Asia,
effective 01SEP. He joins former Princess CEO Alan Buckelew, who is now
Chief Operations Officer for Carnival Corp.
On the ship side, this summer
the cruise giant announced that 2 more vessels will be placed in
China for 2016, one from Costa and one from Princess. In the case of Princess,
not only will Golden Princess join Sapphire Princess for year-round China cruising in 2016, but a new-build
specifically designed for the China market will enter in 2017.
Execs are doing their homework and developing product in tune with the target
market. All indicators show that bookings are strong, which is why the
trade isn’t panicking about the recent slowdown in growth. Unless the North
American market itself begins to falter, it’s still relatively smooth
sailing for the cruise industry business in the U.S. and Canada compared
to recent years.