|The State of the Industry in the Asia Pacific
Conference speech presented at the Seatrade Asia Pacific Cruise Convention (Singapore, 4-7 December 1996)
By Aloysius Lee (Star Cruises) (25/03/97)
The macro issues
The cruise industry, like any other industry, exists in a wider economic framework. As such, it is affected by various Macro issues that influence, and to a large extent determine, the genesis, development and growth of the industry. The two major widely known issues are the positive economy and tourist within the Asia Pacific Region.
The Seasonal year-round cruise
Examining the present Asian cruise industry closer, one finds that both Seasonal and year-round cruises can be found in Asia, which provides two major cruising grounds along the eastern coastline of the Pacific. These are largely determined by the weather of the Northern hemisphere. The northern ground stretches from Hong Kong and above, and is very much affected by the winter weather in the Japan Sea, Yellow Sea, as well as the heavy Northest Monsoon throughout the East China Sea and the Straits of Taiwan. During the end-October till early April period, cruising is not comfortable in this region.
On the contrary, the Southern ground that extends from Thailand southwards, provides year-round cruising weather and has similarities to the Caribbean waters.
Let us now look at the North American market, which is the biggest provider of passengers and cruises in the world.
The North American cruise passengers to Asia still remains small when compared to the cruise passengers carried in America. The 4 million plus cruise passengers carried in America even exceeds the total North American tourism of 2.5 million to North Asia and 1.3 million to South Asia in 1995.
The future expansion of the Asian cruise industry will be highly dependent on the expansion of Asian cruise companies to develop regional traffic in Asia, because:
1 - The US leisure market to Asia as a whole is relatively small.
2 - The shorter annual leaves in US; 2 weeks Vs & weeks in Europe and Australia.
3 - The lack of port facilities to handle volume traffic.
4 - The slow and costly process in developing attractive ports-of-call.
5 - The aviation policy and cartels in Asia makes charter flights and extra scheduled flight capacity not possible.
6 - Cruises with Asian passengers as the core market are not appealing to the US markets. On the other side, the US market cannot fill up the cabins of the Asian based year-round cruises.
It is therefore, suggested that the seasonal cruise, with long itineraries in Asia will continue to capture the niche US market with passengers who are more established, greater disposable incomes; and more leisure time.
However, the volume and growth are significant.
Port in the Asia Pacific
The National Tourist Offices (NTOs) are most aggresive in promoting cruise market in Asia Pacific. The Singapore Tourist Promotion Board has been the motivator to bring Seatrade to Asia Pacific. In addition, the Malaysia Tourism Promotion Board, Tourism Authority of Thailand as well as the Hong Kong Tourist Association, most of them have a vision and had dedicated professionals to coordinate and help the cruise liners to establish dialogues with the various government bodies to provide passenger friendly infrastructure as well as reasonable port charges.
Unfortunately, some of the terminal authorities act differently. The supporting services are minimum and not user friendly. Sometimes, you cannot find logic in berth allocations. The difference between airport and seaport developments are so extreme that a passenger often finds himself in two different world.
As such, it is essential, that like in the Caribbean, the cruise liners are forced to develop their own cruise terminals in order to handle larger volume of passengers as well as guaranteeing passenger services.
Cruise development in Asia Pacific
Lastly, some of my views on the cruise industry in Asia includes the legend of the cruise industry being glamorous and everyone talks of its success. I guess we are often reminded that there are only limited profitable major cruise lines. For every profitable company, there are probably 10 unprofitable cruise lines.
The common industry characteristics of a successful cruise lines are those that are building large new vessels and are selling and scrapping their old vessels. The unprofitable cruise lines are those lumbered with older vessels as well as mixed fleet.
Although there are a lot of companies talking about starting cruises in Asia, purchasing of old vessels which has no common fleet identity, difficult to operate as each ship is different, inconsistency of product to the consumers on a mix fleet, will be an unlikely winner.
In addition, we are often reminded that the cruise industry has a very high land cost and infrastructure requirements, like airlines. Smaller operations are unable to amortise their head office cost across a big fleet and as a result, whatever money that they made on the ships will be spent on supporting a shore organization and advertising.
We believe that there is no short cut to a successful cruise industry. Success is a combination of customer driven marketing, major investment in new ships, major commitment in manpower, major head office, major systems and procedures for worldwide sales distributions.