China’s ban leaves cruise lines scrambling

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Majestic Princess

Cruise lines have started to tear up their northern China itineraries following an order from the Chinese government to the country’s travel agencies to stop selling itineraries that include South Korea.

The Chinese directive follows the announcement late last month by the South Korean and U.S. governments that components for a new U.S.-developed anti-missile system were to arrive in South Korea last week for installation.

Known as the Terminal High Altitude Area Defense system, it is designed to intercept missiles up to 125 miles away as a means of protecting South Korea from missile strikes by North Korea, which has undertaken a series of long-range missile tests in recent months and tested a nuclear weapon as recently as last September.

The Chinese and Russian governments have objected to the installation of the missile-defense system because it employs powerful radar technology that the two countries assert can see into their territories.

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Genting Dream

Japan and South Korea are the main cruise destinations reachable from northern China on the four- and five-day itineraries preferred by most Chinese. With Korea suddenly off limits, cruises operated for Chinese passengers out of ports such as Tianjin and Shanghai will now focus primarily on visiting Japan, experts said.

In a statement, Costa Cruises said it would “remove calls to South Korean ports for our upcoming cruises homeported out of China, replacing them with cruising at sea or calls to destinations in Japan.”

Royal Caribbean International also said it will curtail visits to South Korean ports due to “recent developments regarding the situation in South Korea.”

Delivery of the parts for the missile-defense system came as North Korea tested four missiles launched in the direction of Japan that fell into the sea.

Dwain Wall, an executive at CruisingStore.com and a consultant familiar with the Chinese market, said there is no question that the Chinese government has the authority to order Chinese travel companies to stop selling cruises to Korea.

“There is a very tight licensing and regulatory control over travel agencies” in China, Wall said. “It does impact cruise, but it’s low season, thank God, and [the cruise lines have] been sort of able to regroup and change the ports to Japanese ports.”

If China’s ban persists into the busier summer months it could both overwhelm the port capacity in Japan and reduce demand for cruises in China because of the lack of destination variety.

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Richard Fain, chairman of Royal Caribbean Cruises Ltd., said he could not predict how long the chill in China-Korea relations might last.

Stock analysts blamed news of the Korea tiff for a pull-back in cruise shares last week but said that it was excessive.

As a share of cruise lines’ global capacity, the analysts said China accounts for 9% of RCCL’s, 6% of Carnival Corp.’s and 4% to 5% of Norwegian Cruise Line Holdings’. Further, they pointed out, not all of that capacity is sailing from north China.

Norwegian has no plans to reduce China service, Del Rio says

Norwegian Joy
It’s full speed ahead in China for Norwegian Cruise Line.

Despite recent announcements by other lines that ships once scheduled for year-round service in China would move to Australia for part of the year, Norwegian Cruise Line Holdings chairman Frank Del Rio said his company has no plans to follow suit.

“I’m glad to see that the others are leaving,” Del Rio said. “That leaves us perhaps the last man standing, and that’d be great. I’ll take all the demand.”

Del Rio’s comments came during a conference call with analysts to discuss first-quarter financial results.

Cruise selling in China has been disrupted since March by the Chinese government’s move to halt travel to South Korea, a protest of a decision by the South Korean government to install a U.S.-made missile defense system.

“The disruption caused travel agents to be distracted from focusing on contracting charters further out into the year, then trying to book, in some cases rebook, [and] find new customers [for those] who no longer wanted to go on sailings that didn’t include Korea,” Del Rio said. “But it’s also had a bit of a chilling effect on overall demand.”

He added that sales for new cruises had started to pick up in the past two weeks. “The South Korea situation, we believe, is a temporary bump in the road, and time will tell,” he said.

Norwegian Cruise Line is scheduled to start sailing the 3,883-passenger Norwegian Joy, its first ship custom-designed for the Chinese market, from Shanghai in late June.

Princess Cruises recently said that its Majestic Princess, also custom-built for the Chinese market, will be deployed to Australia for six months in 2018-19. The move follows the redeployment of the Sapphire Princess from China to Europe in the latter half of 2018.

Because Norwegian is new to the Chinese source market, Del Rio said he’s being cautious about predicting the impact of the Norwegian Joy on the company’s performance in the second half.

“So in many ways, all the good things that I have to say about how our business is operating on the other 24 ships is being somewhat tempered by the potential that could arise in China,” Del Rio said.

A strong Wave

Del Rio said on the call that this year’s Wave was “the best Wave season that we and likely the industry has experienced in quite some time.” As a result, NCLH brands have fewer cabins to sell for the rest of 2017, and it expects higher prices on those bookings than last year.

NCLH, which also includes Oceania Cruises and Regent Seven Seas Cruises, posted Q1 net income of $61.9 million, compared with $73.2 million a year earlier. Revenue rose 6.8%, to a record $1.15 billion.

Del Rio attributed the net-income decline to higher-than-expected maintenance and repair costs, particularly for the Norwegian Star, which broke down in Australia for five days in February.

Outside of that, CFO Wendy Beck said the results were driven by “strong close-in demand in the Caribbean, coupled with strength in onboard revenue.” Cuba itineraries are now available on all three brands, and “the performance of that itinerary is just astonishing,” Del Rio said. NCLH is also doing better than it planned in Europe this year, which Del Rio attributed to a combination of less inventory to sell than at the same time last year and positive market conditions. “That is resulting in very, very strong sales in Europe at significantly higher prices than the same time last year,” he said.

River Cruising Grows Up

Baby Boomers Are Jumping On BoardAvalon new head

It’s no coincidence that river cruising continues to boom as Baby Boomers expand on their collective purchasing power. The last of the Baby Boomer generation reached 50 in 2014, and today, this generation comprises the most powerful consumers in the marketplace. Baby Boomers are 77 million people strong—and they outspend other generations by an estimated $400 billion each year on consumer goods and services, according to the U.S. Government Consumer Expenditure Survey.

And while some of their priorities might vary, if there’s one thing Boomers do agree on, it’s the importance of spending money on travel. AARP’s 2016 Top Travel Trends found that an astounding 99 percent of the Baby Boomers they surveyed intended to travel this year, with 45 percent expecting to take an international trip. Reinforcing this finding, British Airways recently surveyed over 2,000 U.S. Baby Boomers (55 and over) and discovered that not traveling enough is one of the biggest regrets for one-fifth of the respondents when thinking back on their life so far.

“Generational values tend to be persistent through time, and the desire for adventure and learning have been in existence since this generation was in its formative years,” says Brent Green, a writer, speaker and trainer about marketing to the Baby Boomer generation.

“I started my own international journeys at age 50 with the intention of getting my most active travel done before I hit my 80s,” says Green. “That’s the way my wife and I proceeded to do it, and we’re not atypical—that’s reflective of the overall Boomer propensity for adventure and active travel.”

The Rise of River Cruising

The journey itself is the experience on a river cruise, with cities and towns strung like pearls along the waterways. Europe is usually the first destination people choose, but as Patrick Clark, the managing director for Avalon Waterways calls it, the “river cruising travel style” is available around the world. That makes river cruising a great repeat option for travelers, with an ever-growing array of possibilities.

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Kakadu & East Alligator River Tour

“Once they’ve experienced it, people come back and choose river cruises in other destinations,” says Clark. “They want to enjoy that familiar experience of cruising on the river, whether it’s in Vietnam, Cambodia, China or the Amazon. For some of these more exotic destinations, it’s even more comforting for them to know they have the familiar ship, crew and food waiting for them at the end of the day.”

That’s one of the reasons river cruising has become the travel industry’s fastest-growing segment, with double-digit growth last year. Overall, it’s now one of the top three international travel destinations, up from #4 in 2015, according to a Travel Leaders Group survey this summer. The trend is even stronger among well-heeled travelers, with river cruising cited as the top travel trend (along with multigenerational travel) in the 2016 Virtuoso Luxe Report, sponsored by the international network of luxury travel agencies. 

Trish Mercer, a home-based Virtuoso travel agent in Columbus, Georgia, touts the ease of the travel experience as one reason that river cruising is “absolutely, positively going up” in popularity. “There’s almost always something interesting to see while you’re sailing, and then you pull up to shore and have the opportunity to be involved in things right away,” she says.

Mercer’s experience is echoed by travel agents who participated in the third Travel Agent Cruise Industry Outlook Report of 2016 by Cruise Lines International Association (CLIA)—more than six out of 10 (64 percent) expected to sell more river cruises this year. 

“River cruising is a great option for travelers who are looking to explore multiple memorable destinations in one vacation,” says Lorri Christou, SVP of strategic communications and marketing for CLIA. “River cruises offer an intimate and immersive experience for people to explore new and different cultures.” 
    

A Perfect Fit for Boomers

“When you look at river cruising, Baby Boomers represent the core of all the travelers on cruise ships,” says Clark. “That segment is living longer and they have a greater desire for travel than their parents.”

And as river cruising continues to develop and mature, increasingly sophisticated amenities are being offered that appeal to Boomers and differentiate the river cruise experience from a land tour or an ocean cruise.  “There’s more interest now in what’s happening with the cruise’s themes rather than just the destination, including a focus on things such as wine, heritage and biking,” says Daniela Harrison, a river cruise specialist with Flagstaff, Arizona-based Avenues of the World Travel. “Cruisers want a unique focus on the sightseeing portion.”

Baby Boomers are looking for all that and more. Here’s a look at five major trends in river cruising that Boomers are seeking out in their travel.

The Joy of Discovery 
First and foremost, travelers crave the unknown, and that makes discovering unique places the No. 1 must-have experience among Virtuoso’s Top Travel Trends for 2016.

Harrison hears that “more so with river cruising than anything else,” because it allows Boomers to explore a variety of places. “They want itineraries with multiple ports in a country that are close to each other so they get to know the region in depth, like sailing the northern part of the Rhine,” she says. “Plus, the excursions are more hand-crafted on a river cruise, and there’s more free time to stroll through the city afterwards to take it all in.”

It’s not hard to see the appeal for explorers when simply sailing down a river is such an ongoing sensory treat. “They’re interested in the scenery and what’s passing before their eyes constantly,” says Mercer.

Meaningful Experiences

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Another must-have reported by Virtuoso’s travel advisors is the quest for experiential travel in order to create the unforgettable memories travelers are looking for from a vacation. “Baby Boomers want to take a much deeper dive into a destination,” says Green.

He points out that immersive travel engages people in the “flow experience,” a phenomenon where travelers become intensely focused on the activity itself. “The flow experience increases mindfulness and overall contentment with what you’re doing and you become more productive. It’s not enough to just see the sights, you have to dive deep and engage in it. That’s the direction all smart travel is going for Boomers.”

Theresa Mullen with Enchanted Waterways agrees that river cruising gives people a story to take back home. “In addition to the included excursions, the optional excursions offer river cruisers the opportunity to enjoy cultural activities such as a Viennese evening concert or being welcomed into the homes of locals to enjoy home-made refreshments and conversations about their lives; visiting local schools and engaging in activities with students; and enjoying cultural presentations. On board, cruisers will enjoy dining on wonderfully prepared local cuisine, local guest lecturers and entertainers sharing their lives through history and local song and dance.”

Traveling with Family
An important part of creating meaningful memories comes from sharing those experiences with the people you’re closest to. Though river cruising has been traditionally considered a couples’ vacation, there’s been a recent rise in multigen travel on river vessels.

“Multigenerational travel is an indication of our times,” says Clark. “Everyone has busy lives and they don’t always have the time they want to spend together as a family. It’s often on a vacation that families reconnect. Where we see it the most is the Christmas Markets in Europe in December, and we also see it around theme cruises that focus on food, wine and music.”

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Not only does this include younger Boomers and their parents, it also means Boomers are traveling with their young-adult children. “I see more of the older millennials taking their Boomer parents and treating them to the cruise,” says Harrison. “They usually tend to do the more active itineraries.”

Healthy Activities
An emphasis on health and well-being is another key element for Boomers, who are living more active lifestyles and looking to maintain those lifestyles even while traveling. “In how they’re leading their lives in terms of diet and exercise, they’re much more conscious of taking care of themselves than perhaps the focus was of the previous generation,” says Clark. “River cruising is appealing to the Boomers who are attracted to a more active life.”

To meet the demand from cruisers, more adventure excursions are being offered as part of the experience, whether it’s going for a horseback ride over the hills or canoeing down the river.

“One thing that is really nice about a number of river cruises is they bring along bicycles, either traditional or electronically enhanced bikes that are very easy to ride,” says Mercer. “On some ships, you can ride 10 or 20 miles to the next stop and the people who don’t want to bike that day can stay on board. It’s something for everyone at every level.”

Hassle-Free Travel
The ease and convenience of sailing to multiple destinations along a river, without having to pack and unpack or deal with different hotels and transportation, is very appealing to Boomers. They want something new and exotic without a lot of the stress and inconvenience associated with traveling. River cruising suits that desire—it’s like staying in an intimate boutique hotel that floats from one destination to the next, making it an independent but controlled experience.

“You have some Boomers who are completely self-propelled, like two couples traveling together,” says Green. “On the other hand, there are other people who want the fully catered vacation where they show up and everything is handled from that point on and they don’t have to do a thing. Then there are those who want the hassles removed, but they want to be able to plan their own details.”

River cruising offers that flexibility, with the added benefit of all-inclusive pricing. “Now almost all river cruises are all-inclusive, so that peace of mind is very nice,” says Harrison. “Travelers have a wide selection of excursions they can choose from as part of the cruise, or they can walk off, do their own thing and add a little adventure of their own. It empowers the traveler to know they can’t make the wrong choice.”