Ctrip and Royal Caribbean end SkySea Cruise Line joint venture as Chinese market slows

ASIA PACIFIC. Royal Caribbean Cruises Ltd. and Chinese travel agency Ctrip have announced that they are ending their SkySea Cruise Line joint venture as the Chinese cruise market comes under pressure. TUI-owned Marella Cruises has agreed to purchase the JV’s ship Golden Era, with delivery expected in December.

Golden Era had 5,250sq ft of luxury retail space run by Starboard Cruise Services, which made its maiden voyage in May 2015 from Shanghai. The joint venture said at the time that it aimed to take advantage of the growing Chinese cruise market.

However, after several years of strong growth, the Chinese cruise market struggled to grow in 2017, with restrictions on travel to South Korea a major factor. According to Cruise Industry News, Chinese cruise passenger numbers will slip from 2.8 million in 2017 to an estimated 2.4 million in 2018, and all of the big cruise lines will cut capacity.

End of a Golden Era: The SkySea joint venture said last year that it planned to deploy the 1,800-passenger vessel to five seasonal homeports in China and Taiwan, but is now winding up the partnership

After the sale of Golden Era, it is expected that SkySea will wind down its business operations by year end, said Royal Caribbean and Ctrip. The companies said that “business conditions in China and elsewhere will allow them to absorb most SkySea employees into available positions at RCL and Ctrip”.

Royal Caribbean said: “Through its Royal Caribbean International brand, RCL will continue to serve the Chinese market, with the largest fleet deployment in the region and a strong collaborative relationship with Ctrip.”

Royal Caribbean expects the impact of the transactions to fall in a range of US$0.12 to US$0.15 per share in FY2018.

As a result of the transaction, TUI Cruises (a JV between TUI and Royal Caribbean) will now retain Mein Schiff 2 in its fleet, rather than selling it to Marella Cruises, giving TUI Cruises increased capacity in the German market.

Jing Travel, a content partner of The Moodie Davitt Report, commented on the winding up of the SeaSky joint venture.

It noted: “China’s cruise was set to boom in the next few years according to both international stakeholders and the Chinese government. So much so that the Chinese government stepped up regulation and infrastructure development for the cruise industry. Regardless of both apparent interest by global firms and the Chinese government, we’re already seeing the decline of the Chinese cruise industry. The latest sign is a major break in one of the ventures that heralded the “rise” of the cruise industry in China between tourism juggernauts Ctrip and Royal Caribbean.

“In the past few years, China’s cruise industry has seen growth in the number of passengers of around 70 percent. This year, the number of passengers is expected to fall by about 14 percent.

“It was already clear in 2017 that the cruise industry would be facing challenges in China this year, with predictions that major cruise lines would be cutting capacity. The breakup of the joint venture established by the world’s biggest cruise company and China’s most important online travel agency (OTA), while not expected, is understandable given that the long-term growth potential of the cruise industry in China is unclear.

“Much of this uncertainty is tied to political disputes in East Asia, namely between South Korea and China. South Korea has been a key cruise destination for cruises out of China. However, the ban on the sales of tour packages to Chinese citizens going to South Korean destinations has placed substantial strains on the cruise industry.

“While all of this news doesn’t necessarily mean the end of the cruise industry in China, it does illustrate that international firms were perhaps overambitious in terms of their expectations for the development of the sector. Given the unprecedented growth that the Chinese outbound and domestic tourism industries have experienced, it was not entirely unreasonable to expect a similar increase in demand for cruise experiences in the China market.

“In all likelihood, the cruise industry still has a bright future in China, but will not be experiencing the kind of growth that justifies the immense amount of fixed capital investment associated with the cruise industry.

“The growth of China’s tourism market and the overall size of China market point to an eventual recovery in the cruise market.”

For more on this story and on the Chinese travel market from Jing Travel and Jing Daily, click here.

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