The Chinese Cruise Market Continues to Retrench
In another sign that the Chinese cruise market continues to retrench, Royal Caribbean Cruises and its Chinese travel partner, Ctrip, announced that they are ending their SkySea Cruise Line joint venture. An agreement has been reached to sell the three-year-old company’s single ship, and they expect to wind down operations before the end of 2018.
Launched in 2015, SkySea had been billed as “the first national cruise line tailor-made for Chinese travelers.” Hailed at the time as the next step in the development of the Chinese market, it was seen as a way of expanding the overall cruise market and further developing the domestic distribution network through Ctrip.com, China’s largest online travel agency. Prior to the launch of the cruise line, Ctrip had been marketing chartered cruise ships, but demand had outstripped their ability to obtain space on cruise ships.
Under the joint venture, Royal Caribbean and Ctrip each owned 35 percent of SkySea with the remainder being held by private equity investors and management. SkySea had been marketing the Celebrity Cruises’ 1995-built Celebrity Century as the Golden Era. The 71,454-gross ton vessel, which accommodates 1,814 passengers, had been sold to an affiliate of Ctrip in September 2014. She was refurbished for the Chinese market, including the addition of more gaming tables in the casino, expanding the shopping area and adding two new restaurants. Service began on May 19, 2015, with the ship being homeported in Shanghai and Xiamen.
SkySea has undergone a number of changes including a change in management in 2017. The cruise program was also expanded for 2018, with the ship operating from five seasonal homeports – Shanghai, Xiamen, Qingdao, Keelung (Taiwan) and Shenzhen – with more than 80 cruises scheduled calling at Japan, Manila, and their first cruises to Vietnam.
TUI AG’s Marella Cruises, operating in the United Kingdom, has agreed to acquire the Golden Era. Delivery is expected to take place in December 2018, subject to satisfaction of closing conditions. By the time of the final voyage, SkySea Cruise Line will have operated close to 300 cruises and carried nearly 500,000 guests in just over three years.
TUI Cruises, a joint venture between Royal Caribbean and Germany’s TUI Group, had previously announced plans to move both its Mein Schiff 1 (formerly the Celebrity Galaxy) and Mein Schiff 2 (formerly the Celebrity Mercury) to its U.K.-based Marella Cruises. The Mein Schiff 1 is scheduled to become the Marella Explorer in May 2018, but now the Mein Schiff 2 will remain in the German market with the former Golden Era replacing her in the U.K. market in 2019.
This shift is just one recent change announced for the Chinese cruise market. In January, Norwegian Cruise Line announced that its newest ship, the Norwegian Encore, which had originally been planned for the Chinese market, would instead launch sailing year-round from Miami in the fall of 2019. Royal Caribbean had previously announced plans to shift its Ovation of the Seas to Alaska in 2019 while Princess Cruises has announced plans to base its Majestic Princess seasonally in Australia. Both ships had previously operated year-round in the Chinese market. Currently, Royal Caribbean’s new Spectrum of the Seas, under construction in Germany, is due to debut in China and the Asia-Pacific region in 2019.
Despite these moves, cruise lines continue to believe in the longer-term potential of China to become the world’s largest cruise market. Industry executives have blamed the current retrenchment on growing pains, the need to educate the local market and further develop the internal distribution networks, and geopolitical issues that disrupted destinations in 2017.