Global Cruise Lines’ Best Practices In China
With the Chinese cruise industry becoming increasingly profitable in recent years, and more Chinese tourists expected to take to the seas this summer, according to the news site CBNweekly, the Anglo-American owned Italian cruise line Costa Cruise Lines, will change its China-Japan line in May to a China-Korea line traveling from Shanghai to Incheon and Jeju. An attempt to quell travelers’ fears about radiation in the wake of the recent Japanese earthquake and tsunami, Costa Cruise Lines is creating this new Korea line specifically for the China market. Although the China-Japan line will not be fully cancelled, it will be significantly scaled back for the time being.
Boasting 60 years of history, Costa Cruise is the largest Italian tourism group, and currently has Europe’s largest and most advanced fleet, according to the company website. Costa Cruise has a total of 14 ships in service and two further ships on order. Having entered the China market in 2006, Costa Cruise has targeted potential outbound Chinese travelers who are unable to afford flights to Europe or the U.S. Although its China-Japan/Korea lines have had profitability issues due to their relatively low pricing, the cruise group is hoping its attractive pricing strategy will attract a more high-end clientele in coming years.
Two months ago, Costa Cruise announced that it will add a new luxury cruise ship named “Victoria” to its China operations, designed for use in its new short-haul China-Japan/Korea routes. In the meantime, the company added that it plans to add more shore tour destinations such as Hososhima and Miyazaki, Osaka, Yokohama and Wakayama.
According to Liu Chenjun, general manager of Costa China, the company has launched 73 different Asian routes this year, and plans to continue to expand routes and logistics in China in line with the increasing number of Chinese tourists interested in outbound travel. Liu added that company’s new short-haul routes in the Chinese market will mainly focuses on seven lines departing from Shanghai to several destinations in Japan.
While Costa Cruise was an early mover in the China-Japan/Korea line arena, the American company Royal Caribbean Cruises has been working hard to increase its presence in the same market. Facing increased competition, over the past three years, Costa Cruise has seen its promotional expenses rise to 100 million yuan (US$15 million) per year. In order to fend off Royal Caribbean’s advances, in 2008 Costa Cruise sponsored director Feng Xiaogang’s blockbuster “If You Are The One” and kicked off a series of marketing activities around its release. (Ultimately, Costa’s cameo in the movie consisted of six minutes of product placement.) Additionally, Costa attempted to crack the Chinese online market by producing videos featuring interviews with guests describing their Costa Cruise trips, posting them on popular blog platforms and social networks like Sina, Tianya, Kaixin, and Baidu.
One lesson we can glean from Costa Cruise’s last few years of operations in China is its understanding of Chinese consumers. The company has made market research a key part of its business in China, and completed a wide-ranging market survey in top-tier cities Beijing, Shanghai and Guangzhou, then adjusting its business practices based on the findings. For example, Costa ensured its queues remain comparatively short to prevent guests from having to wait too long in the sun, and now provides travelers with predominantly Chinese food, having found its guests were unaccustomed to Western cuisine. Additionally, Costa augmented the card tables typically found on cruise lines with Mahjong tables.
Although Costa’s prospects are looking up, like any company working in China’s rapidly developing hospitality industry, it can’t afford to get lazy. Costa is now facing increased competition from domestic Chinese cruise lines and well-established competitors from around the world. Currently, there are more than a dozen international cruise lines, such as MSC Cruises and Disney Cruise Line, establishing agencies or expanding operations in China. Costa is also facing more competition from inland cruise line operators; As Jing Daily recently pointed out, the city of Chongqing is currently building a fleet of “Five Star” cruise ships to boost the inland cruise industry.
More recently, Jing Daily noted a report by the Boston Consulting Group that projected China may surpass Japan to become world’s second-largest tourism market in 2013. Not long after that, by 2020, the number of Chinese outbound tourists is expected to be nearly on par with Americans, and spending by Chinese tourists may be triple that of Japanese. Before then, as first movers and current market leaders, Costa and its rivals may benefit from China’s increasingly booming cruise line and outbound tourism market.