Arnold Donald, CEO of CCL - commentary on China
- Absorbs capacity from Caribbean
Alan B. Buckelew, COO of CCL
- 90% of trips are to Asian destinations, most of them reachable by sea
- Out of 98 million outbound trips, 88 million are in Asia.
- Affluent Chinese growing at ~20% (>US$34K), Upper middle class growth ~22% (US$16-34K) CAGR (2012-2022)
- Lower Passport Application fee $135 (before 2013); $32 (after 2013)
- Japan: visa-free entry for Chinese cruisers, started March 2015
- Korea: Visa-free entry to Jeju for Chinese cruisers started in last 3 years
- Chinese Govt expects tourism to be 5% of GDP by 2020
- Ministry of transport of PRC provided a detailed map of available Chinese ports
- Chinese passenger projected to increase: +34% CAGR by 2020
- Carnival entered Chinese market in 2006 with Costa. Costa reached profitability in 2013 and Princess reached profitability in 2014.
- Costa: has 20 offices in China
- 26,000 travel agents in China
- 2,700 have outbound travel licenses and can sell cruises. Only Chinese companies can secure an outbound travel license.
- Carnival strategic partnerships: CSSC, CMG
- Princess target segment: age 30-40; affluent young adults with previous international travel experience, +150k RMB
- Costa target segment: age 25-45; +120k RMB
- Chinese prefer shorter cruises (3-6 nights)
- Revised casino with baccarat
- Market share: Carnival has 43% market share; RCL: 32%; Star: 12%; local Chinese 14% (e.g Skysea)
Q & A
- Would consider selling older ships... to Ctrip for example
- Again, this would make a lot of sense for CCL
- Constantly evaluating taking other brands to China
- JV MOU - will be a domestic, Chinese brand
- Very close on finalizing agreement. Hope partnership will be done in 2015. Ship won't be in the water 'for a couple of years'.
- Will be a while before you get true competition within China
- "Demand already exceeds supply"
- Most Chinese cruisers are new cruisers
- Carnival sell a lot of their Chinese inventory through distribution charters
- Do not see that system changing any time soon
- Pricing integrity: charters pay Carnival and then go market the cruise
- New Princess ship in China: expect higher double digit ROIC (above fleet average)
- Carnival's inventory goes through a wholesale/charter model
- Lots of charters. No one charter has a significant portion of CCL's bookings.
- Working with Fincantieri on ship-building capacity in China. Could possibly build a ship from China in next 5-7 yrs.
- China is a margin driver
- New onboard initiatives: taking discounted cabins and targeting them towards gamblers.
- Cuba: still waiting for green light from Cuba govt regarding lifting the ban on leisure travel
- Japan market: not going to have same growth as China because culture is quite 'cautious regarding travel'
- Drydock days in 2015: used to put in more efficient fuel technology
- Trends in Europe: economic malaise and geopolitical tensions pressuring results. Cruise demand concern as well because of popularity of European beaches. Germany is doing well. Europe doing better in 2015 vs 2014.