Costa Serena to Sail Two Cruises from South Korea

Costa Serena
Costa Serena

The Costa Serena will deploy to South Korea for a pair of week-long sailings next May as the ship has been chartered by Lotte Tour.

The first voyage sails for seven days and six nights, from Incheon to Busan, according to a spokesperson. Calls include Ishigaki, Taipei, and Keelung.

Second cruise sails eight days and seven nights, round-trip from Busan, with calls in Sokcho, Vladivostok, Tomakomai, and Hakodate.

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Competition for Chinese guests intensifies with Princess ship deployment

Shanghai Cruise Terminal

By sending its next ship to sail from Shanghai, Princess Cruises will vault into the vanguard of Western cruise lines seeking to source passengers from fast-growing China.

Princess said it will use the third ship in its Royal class, set for delivery in 2017, to establish a year-round presence in China, one of only three cruise lines to have done so.

The 3,560-passenger ship will be from the largest class of vessels that Princess sails, one-third larger than the 10-year-old Sapphire Princess, which begins its second season of summer sailings from Shanghai next week.

“Deploying our next new ship in China underscores our strong commitment to growing the China cruise market,” Princess President Jan Swartz said in a statement.

The move echoes the decision in April 2014 by Royal Caribbean International to commit the Quantum of the Seas to Shanghai even before it had been delivered. After six months of interim sailings, the ship left New York on a transit cruise May 2 and will begin year-round cruising in China in June.

At the time, Royal Caribbean CEO Adam Goldstein said the company felt it had an asset in the Quantum that was impossible to match.

The Princess ship, as yet unnamed, will be a follow-up to the Royal Princess and Regal Princess, which will remain on U.S.- and European-based itineraries. When they were introduced in 2013 and 2014, respectively, they made a splash with their protruding SeaWalk platforms, dancing water fountains and a pair of elegant chef’s table restaurants.

In addition to those features, the 2017 ship under construction at the Fincantieri shipyard in Italy will be customized for Chinese guests, using the Princess Class elements pioneered on the Sapphire Princess.

They include the World Leaders Dinner, a traditional English afternoon tea, a Lobster Grill, Ultimate Balcony Dining, an oceanview, hot-pot dinner option, ballroom dancing and expanded duty-free shopping.

“And as this ship is still in the design phase, we are looking forward to creating other new and exciting venues and experiences catering to the Chinese vacationer, which we will reveal in the coming months,” Swartz said.

In announcing the ship, Princess said it will be “the first year-round international luxury vessel designed and built specifically for Chinese guests.”

The announcement comes as competition begins in earnest for the Chinese customer.

On May 15, a joint venture between Royal Caribbean Cruises Ltd. and Chinese online travel agency Ctrip will begin sailing the former Celebrity Century from Shanghai.

The 1,800-passenger ship has undergone a renovation, which included the addition of an ice bar, a trampoline and minigolf as well as a makeover of the restaurants to tailor them to Chinese tastes. It will sail under the name SkySea Golden Era.

On May 21, the Sapphire Princess begins its second summer of sailings from Shanghai, followed by the arrival of the Quantum in June.

Carnival Corp. is also represented in the Chinese market by Costa Cruises, which has been sailing the Costa Serena from Shanghai since April.

In a note to investors issued after the Princess announcement, UBS Securities predicted that 2015 will be the tipping point for China to become a “game-changing force” for the cruise industry.

UBS analyst Robin Farley said China will not only provide a new source of demand but will reduce capacity and strengthen pricing in more mature markets such as North America and Europe.

The international cruise industry’s presence in China has been growing since 2008 when Costa first put a ship there dedicated to the Chinese market. Carnival Corp. sent then-Costa chairman Pier Luigi Foschi to oversee its Asian operations.

After Foschi left Carnival, former Princess Cruises president Alan Buckelew was named chief operations officer and was dispatched to China. Although Costa has two other ships, the Costa Victoria and Costa Atlantica, also sailing from China, the shift of a Princess newbuild to China will significantly step up Princess’ presence there.

After the 2017 delivery, Princess has no new ships on order, although Carnival Corp. recently announced an agreement in principle with two European shipyards to build nine vessels from 2019 to 2022.

Carnival Corp. has also agreed to explore a joint venture with Fincantieri and the China State Shipbuilding Corp. to develop the first “world-class cruise ship” to be built in China.

Norwegian Cruise Line has formed a task force to evaluate whether and how to enter the Chinese market. However, its largest shareholder is Genting Group, a Malaysia-based company that also owns Star Cruises, a line that is focused solely on the Asia market.

China redeployments could help boost Caribbean cruise prices

By Tom Stieghorst
China is suddenly the hot spot for large new cruise ships, a development that could help cure the plague of overcapacity and low prices seen in the Caribbean market this winter.

The latest ship to join the fleet cruising from China is the Costa Serena, which will be stationed in Shanghai, starting mid-2015.

At 3,780 passengers, the Serena will be the largest of three Costa vessels operating year-round from China and the largest Carnival Corp. asset in the region. The company’s Princess Cruises subsidiary plans to offer a summer of sailings from Shanghai on the Sapphire Princess, starting May 21.

The Costa move comes on the heels of a head-turning announcement by Royal Caribbean International that it will put the as-yet-undelivered Quantum of the Seas year-round in Shanghai, after a six-month stint at Bayonne, N.J.’s Port Liberty from November to May.

Robin FarleyRobin Farley, a leisure industry analyst at UBS Securities, said that, taken together, the moves have implications beyond the Asia market.

“We believe the emergence of China as a major sourcing market can provide new demand for tonnage that can be redeployed from more mature markets, which could also potentially drive pricing in those existing markets,” Farley wrote in a note to investors.

More specifically, she said, the withdrawal of the Quantum from the domestic market reduces Royal’s capacity in North America by 1.5%; the ship represents 3% of its 2014 Caribbean capacity.

Except for the Oasis-class ships, at 4,180 passengers the Quantum would be the largest ship in the Royal fleet.

The impact of the shift of the Serena is a little more indirect on the North American market, since it is currently deployed on Mediterranean and Red Sea itineraries.

But if the loss of one ship in those regions results in Costa shifting a ship from the Caribbean (in the winter) to cover the void, it could reduce capacity in the Caribbean another 1%, Farley said.

Although the changes are small in absolute terms, a reduction at the margins could have a relatively larger impact on pricing as supply and demand come back towards equilibrium.

Sourcing of cruise passengers in China on a sizeable scale only started in 2006 when Costa positioned its first ship there, the 1,000-passenger Costa Allegra.

Since then, it has ratcheted up capacity with a series of bigger ships, including the current Costa Atlantica (2,680 guests) and Costa Victoria (2,394 guests) operating from Shanghai.

The debut of a second brand, Princess, with its 2,670-passenger Sapphire Princess, will increase Carnival Corp. capacity in China this year by 74%. Adding the Serena next year will mean 140% growth over two years.

Carnival has set up a dedicated unit in Asia (Carnival Asia, based in Singapore) and is laying the groundwork for selling more cruises to residents of that region, particularly in China.

“We have never been more committed to China as a market of great strategic importance for our company,” Carnival CEO Arnold Donald said.

Carnival has set up 10 offices in Asia, including five in China: Shanghai, Beijing, Tianjin, Guangzhou and Chengdu. It said seven of its 10 brands sail in Asia, and 23 ships will visit 90 ports with an estimated 1,439 port calls planned this year, including 220 in China.

Patrick Scholes, a leisure industries analyst with SunTrust Robinson Humphries, said the cruise lines are relatively slow to fully concentrate on China compared with other leisure industries. “It almost seems like the U.S. cruise lines are a day late,” he said.

Scholes pointed to the gaming giants like Las Vegas Sands and Wynn, who were not in the China market 10 years ago but “now they get the vast majority of their business out of Macau and China.”

Global hotel operators also converged on China about 10 years ago. “Now their strongest pipelines for opening new hotels are in China,” Scholes said.

Recently, Scholes said, cruise companies have started to shift their development attention to China. “Welcome to the party,” he said.

Scholes agreed that the increased desire to put competitive tonnage in China could help solve the industry’s structural impasse of recent years in which prices have been anemic even as capacity growth has been kept moderate.

“It sounds like [Caribbean] capacity for the first half of next year will be down simply because a lot of the ships are moving to Europe and Asia,” Scholes said. “So that will be a positive.”