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Royal Caribbean Expects Asia Market to Repeat U.S. Growth

Royal Caribbean Cruises Ltd. (RCL) expects Asia’s leisure-sailing market to repeat the U.S. growth rate over the last three decades as the Chinese become richer.

“The number of Asians cruising today is very similar to the number of Americans who were cruising in 1980s,” said Adam M. Goldstein, president and CEO of Royal Caribbean International line, the largest brand at the world’s second-biggest cruise line. “While the markets are not the same, we think that China has terrific potential to grow,” he said yesterday in an interview from Hong Kong.

The global cruise market is estimated to grow 4.5 percent this year to $36.2 billion, according to industry data and analysis provider Cruise Market Watch. Asians now take are about 1.5 million cruises a year, similar to the 1.4 million in U.S. some 30 years ago, Goldstein said. The number of U.S. voyagers has grown to about 12 million, and Asia accounts for only 6 to 7 percent of the world’s total cruises, he said.

Awareness of cruising is still low in China, Goldstein said. The Miami-based company said this week that China will overtake the U.K. in two to three years as its largest market after the U.S as demand from the Chinese middle class rises.

The number of Chinese passengers at Royal Caribbean quadrupled to 100,000 last year from 25,000 in 2012 and is expected to double to 200,000 this year, Goldstein said. The company, which has focused on destinations within Asia for Chinese customers, will eventually seek to take them farther away to places such as Europe, he said.

Little Awareness

“In China, there is extremely little awareness of cruise products or cruise brands,” Goldstein said. It is vital to build a better distribution network in the country with travel agents savvy about cruising, he said.

Royal Caribbean already has home ports in the Chinese cities of Shanghai and Tianjin, as well as Singapore, and it plans to set up one in Hong Kong later this year, Liu said.

Hong Kong opened its second cruise terminal on June 12, joining Singapore in expanding facilities to capture the growing cruise market in Asia. Passengers are expected to rise 3.3 percent from a year earlier to 20.9 million this year, with Asia accounting for 6.5 percent of the traffic.

Disposable income per capita for urban households in China has doubled since 2008 to almost $1,200 in the first quarter, according to Bloomberg Industries data.

Non-Binding Resolution

Royal Caribbean shareholders last month approved a non-binding resolution to eliminate staggered terms for directors. Its passage could lead to broader changes, including separation of the chairman and CEO roles and turnover at the board, said investor Robert Kurte, who with his father sponsored the proposal and a similar one that failed in 2009.

The Kurtes’ plan calls for each board member to come up for an annual vote. Directors at the company currently serve three-year terms, with no more than four standing for election at a time.

Such staggering of board terms presents a hurdle to activist investors, because they require a multi-year effort to make changes. Advisory firms Institutional Shareholder Services and Glass Lewis & Co. recommended the plan.

The company’s largest investor, Oslo-based A. Wilhelmsen AS, had said it would vote its 19 percent stake in favor of the proposal.

Chairman and Chief Executive Officer Richard Fain has said the board, which opposed the measure, would consider the results.

To contact the reporters on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net; Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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