Royal Caribbean Bets on Asia With Quantum Move
by Andrew Sheivachman /Royal Caribbean Cruise Line signaled its faith in the globe’s hottest consumer market when it announced last week that the new Quantum of the Seas will home port in Shanghai, China, starting in May 2015.
By moving the first of its four planned Quantum-class ships to China, and leaving a six-month gap in the North American presence of its newest product, Royal Caribbean is placing a big bet on the emergence of Asia as a revenue-generating market.
“Every trend we are seeing in China tells us we can achieve real long-term competitive advantage and appealing returns on our investments in this fast-growing market by accelerating our presence there,” said Adam Goldstein, president and COO of Royal Caribbean Cruises, in announcing the move.
“We will have to be nimble, but the ability to move fast is one of our strengths,” Goldstein added.
Big capacity boost
When it debuts this November, Quantum of the Seas initially will operate seven- and 12-day Caribbean and Bahamas cruises out of Cape Liberty in Bayonne, N.J.
Then in May 2015, the 2,095-stateroom ship will join RCCL’s Voyager of the Seas and Mariner of the Seas in repositioning to Asia, increasing Royal Caribbean’s capacity in Asia by 66%. Quantum of the Seas will begin offering Asia cruises in June 2015.
In Bayonne, Quantum of the Seas will be replaced by Liberty of the Seas, an older build, until the second Quantum-class ship Anthem of the Seas will replace it beginning in winter 2015.
Disappointed agents
Some agents said they were miffed by the move to China, mostly because Royal Caribbean’s brand-new product has created a strong draw for cruise rookies and experienced cruisers alike.
“It’s an incredibly unique product that raises the bar on new ship innovation,” said Alan Rosenbaum, a CruiseOne agent in Johns Creek, Ga. “I’m disappointed I’m not going to be able to sell it in the U.S., because it is a great product.”
Rosenbaum described the move to China as “a leap of faith” for Royal Caribbean. “They’re committing a lot of resources in an area they haven’t been in for a while.”
Others thought it strange that Royal Caribbean wouldn’t stand by its new ship in the competitive North American market.
“I find it odd the Quantum will not even spend a whole year in the [U.S.] market to make it successful – especially since it was porting opposite another brand new ship in the Northeast, the Norwegian Breakaway,” said Rich Stieff, a Cruise Planners agent in Fort Lauderdale.
Positive impact
If the Quantum-class vessels are a hit, as some agents expect, limiting supply in the U.S. market in 2015 could create a sense of scarcity that helps boost bookings.
“The fact that the complete rollout will be delayed in the States could build up a bit of demand,” said Rosebaum. “People will be a little more eager to see the product, and maybe in the long run it will work out for Royal Caribbean.”
Agents said that positioning a marquee ship in China also could increase interest in Asia cruises from the U.S. market.
Could spur interest
“I have clients who want to cruise Asia, and this may be an incentive for them to finally do it,” said Rosenbaum.
The move may also appeal to Asian-Americans who want a new experience and a departure from their usual Asian vacations.
“For the Silicon Valley market, the home-porting [in Asia] of a truly world class ship offers many of our first generation Asian-American clients the chance to return to their homeland and vacation with their Asia-based families,” said Darlene Figueroa, a Cruise Planners agent in Cupertino, Calif.
Will it pay off?
Oivind Mathisen, editor-in-chief of Cruise Industry News, commented that home porting Quantum of the Seas in China is an investment for Royal Caribbean – and something of a gamble.
“It’s a move to draw Royal Caribbean to the No. 1 position in a market with huge potential,” said Mathisen. It is also to preempt competition; Carnival is in Asia with Costa ships, but the Costa ships are old, relatively speaking.”
“Hopefully the revenue will be there for them,” said Mathisen. But while demand in Asia for cruises right now is what he termed “reasonable,” the revenue “isn’t quite there yet,” he said.
Preempting competition
Mathisen said he believes the move will forestall growth in Asia from Princess Cruises and Star Cruises.
According to CLIA’s latest state of the industry report, Asia will account for just 4.4% of cruise capacity in 2014.
The move could also be a reaction to weak fundamentals in the North American cruise market. “The North American market has slowed down in the last few years, and pricing has not gone up,” Mathisen said.
With rampant discounting at home, a move to Asia could bring a wealthier, high-spending cruiser to Royal Caribbean’s ships. “They’re definitely gambling on China,” said Mathisen.