Despite Market Upsets, Globalized Cruising Going Strong

Cruise Week

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 entirely unexpected.

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 service sector.
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.

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