Royal Caribbean: China Market ‘Paying Off’

Royal Caribbean Cruises is confident on the long-term potential of the Chinese cruise market, not only placing the fifth Oasis-class ship there in 2021, but noting the strength of the market on its third quarter earnings call.

According to the 2020 China Market Report by Cruise Industry News, after years of pullback, the market is returning to capacity growth in 2020.

“And look at the China market, which is paying off very nicely,” said Richard Fain, chairman and CEO. “It’s a long-term strategic program, but our focus on developing the market has exceeded our expectations in terms of performance. Our sales in China are holding up well despite any economic concerns. The result of all these things is a very positive year. The markets in the U.S. and China have been particularly strong, but every geographical market we serve is up from last year, whether that’s North America, Europe, China, wherever, and our forward guidance shows that we expect that to continue.”

Fain noted that the company once had 80 to 85 percent of its Chinese business tied up in charter deals, and that number was now under 10 percent.

“And we learned to a lot of lessons during that period, and that’s — really gave us the impetus to change the model, and we’ve made significant progress with that change,” Fain explained. “So, if you look at our charter business now, it’s probably somewhere around 5 percent to 10 percent, if that. And we’ve really been pleased with the development of our direct business. It’s grown at a significant rate. I mean, direct in China and utilization of web, etc., is high … the landscape of our distribution today versus a few years ago is remarkably different.”

After basing the new Spectrum in China year-round in 2019, the new Wonder of the Seas will head to China following her spring 2021 delivery from Chantiers de l’Atlantique. She will feature new interior designs and concepts to appeal to the Chinese market, according to the cruise line.

The move will thus result in a 18.1 percent capacity increase in China in 2022 when compared with 2021, if the ship stays based there sailing regular itineraries for the year, according to data from Cruise Industry News.

“We’ve been on a journey in China for sure,” added Michael Bayley, president and CEO of Royal Caribbean International, speaking on the company’s third quarter earnings call. “We’ve been 10 years in the market. And we’ve been quite thoughtful about the development of the distribution channels. We all have a confidence that there is a market. We’ve done a lot of work and we made a lot of progress and we’re feeling quite comfortable with the progress that we’ve made with the distribution. 

“So, I think, there is a big opportunity, sometimes supply and demand gets a little bit out of whack, as we have seen in the past,” he continued. “But we really feel as if we’ve stuck the course and treated it like a marathon, and we we’ve built the distribution, we’ve built the brand and we feel as if we’ve got a good relationship with our travel partners and customers. And so, we’re feeling comfortable and relatively confident with our China strategy.” 

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