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International Cruise Lines Target Asian Market

Jun 30, 2014 | By Steve Chuang

To revive returns on investment and drive revenue growth, international cruise lines generally target the cruise travel market in Asia around China, a trend confirmed by John Tercek, vice president of Royal Caribbean Cruises, world's top-3 cruise line by market share, at the 2014 Asia Cruise Forum held June 18 in Kaohsiung, southern Taiwan.

At the venue, Tercek was invited to talk about the prospects of Asia's cruise travel market with some 100 industry specialists in the audience from cruise lines, including the other two top-3 firms: Carnival Cruise Lines and Norwegian Cruise Line.

Tercek indicated that global cruise tourists totaled 21 million last year, when the big three cruise lines commanded an 85% share of the market. The sector's overall revenue has steadily grown as a result, but the flipside, he stressed, is that profits have been gradually eroded by continuous, considerable investments needed to enhance cruise operators' capabilities to serve growing customers, given that the sector is a capital-intensive one.

To revive their profits, Tercek says that the world's major cruise lines are refocusing on almost saturated cruise travel markets in the Mediterranean Sea, Brazil and so forth to Asia, primarily because of the enormous growth potential.

For instance, the vice president said, there were around 5 million cruise travelers in China last year, or about 0.04% of the country's 1.34 billion population. With cruise tourism increasingly popular in Asia, he predicts the abovementioned ratio to surge to 0.5% to total about 5.6 million in China this year, when the overall number in Asia will soar to 16.5 million, including 5.5 million in India, 1.2 million in Indonesia and 650,000 in Japan.

With Asia gradually becoming the main driver of the world's cruise travel market, Tercek said that his company therefore has recently struck an agreement with the Taiwan International Port Corporation (TIPC), a government-linked operator of the island's commercial ports, to jointly set up a large cruise terminal and yacht harbor in Penghu, an archipelago off the western coast of Taiwan, as part of its effort to explore the Asian market.

On other trends in the sector, Tercek foresees ever more large cruise liners to be built to sustain the market in 2014-2018, when an estimate of 28 newly built cruise ships will be continually commissioned.

Taiwan Sees Fast-growing Cruise Tourism
With the government and TIPC's efforts to promote Taiwan's cruise tourism, the island's cruise tourism sector is rapidly growing.

At the forum, K.S. Yeh, Taiwan's Minister of Transportation and Communications (MOTC), indicated that Taiwan's cruise travelers are estimated to surge to 760,000 for a 40% notable growth this year from last year. The sector on the island has the potential to see continuing growth for several advantages, says  Yeh, including the island's pivotal position between China and Southeast Asian cruise network. Global cruise travelers will likely reach 30 million by 2020, with 40% in Asia, the minister says.

Chen Chen, Kaohsiung City Mayor, noted Kaohsiung City Government has actively worked with TIPC, Tourism Bureau under MOTC and related industrial bodies to develop cruise tourism in the city. Chen also predicted international cruise ship visits and passenger arrivals in Kaohsiung Port to notably rise to 47,000 and over 100,000, respectively, this year.

Meanwhile, the TIPC has also kicked off construction of cruise terminals in Kaohsiung Port and Keelung Port, scheduled to be completed in 2017 and 2018, respectively. The facilities will not just be new city landmarks, but also help attract more cruise passengers from all over the world by offering better convenience and comfort to drive overall tourist arrivals in Taiwan.

Tercek also evaluates Kaohsiung Port's potential to turn into a global cruise ship home port along with China's Xiamen Port in the future, though Taiwan has yet to be included in the world's top-10 home destinations at present.

According to MOTC's report, Taiwan's  tourists on non-scheduled cruises are estimated to surge to nearly 550,000 to generate output value of NT$2.63 billion (US$87.66 million) for the sector this year, with cruise liner visits to total 376. As of the end of this April, Taiwan's cruise passenger arrivals reached 159,000, sharply up 83.2% year on year. (SC)

Performance by World's Top 3 Cruise Lines
Company
Carnival Cruise Lines
Royal Carribbean Cruises
Norwegian Cruise Line
Year
2010
2013
2010
2013
2010
2013
Revenue
US$14.5 Bn.
US$15.5 Bn.
US$6.7 Bn.
US$7.9 Bn.
US$2.0 Bn.
US$2.6 Bn.
Net Profits
US$1.9 Bn.
US$1.1 Bn.
US$515 M.
US$473 M.
US$22 M.
US$101 M.
Returns on Investment
7.1%
4.0%
5.1%
4.6%
3.9%
6.8%
Source: Royal Carribbean Cruises


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