Carnival exploring China shipbuilding partnership
In a move meant to fuel the growth of the cruise industry in China, the world’s largest cruise ship company announced late Tuesday that it is exploring a partnership with a Chinese shipyard to build vessels there.
Executives with Doral-based Carnival Corp. and the China State Shipbuilding Corporation signed a memorandum of understanding to look into the possibility of a joint venture at the Ninth China Cruise Shipping and International Cruise Expo in Tianjin.
A potential joint venture could also involve Italian ship building company Fincantieri. Carnival, which has a fleet of 101 ships across 10 brands, would contribute its design and construction know-how to help come up with plans for a China-built vessel.
Details of a potential partnership, including how costs would be split and who would operate the ships, are still to be determined, a Carnival spokesman said.
“It is our cruising expertise, experience, leadership, presence and access to our partners that will be our main contribution to the relationship as part of this MOU,” spokesman Roger Frizzell, in China for the announcement, said in an email.
In addition to looking into the possibility of a joint venture for building ships, the parties will also consider potentially partnering to establish a domestic cruise company, develop ports, train workers and improve supply chain and logistics capabilities.
“This is really a breakthrough day for all of us at Carnival, as well as our friends at the CSSC and all Chinese travelers who are increasingly turning to cruises for their vacation experiences,” Carnival Corp. CEO Arnold Donald said in a statement. “This landmark agreement enables us to work closely with our partners at the CSSC to fully explore the possibility of forming a joint venture to further develop China into a leading cruise market, supporting local economic development and bringing vacation enjoyment to millions.”
The China Ministry of Transport has said that it wants the country to become a leading cruise market as part of an effort to grow the overall tourism industry.
Next year, Carnival will have four ships based in China. The company recently announced that it was moving chief operations officer Alan Buckelew to Shanghai to oversee growth there while holding on to his COO duties.
In a report last month, UBS Investment Research leisure analyst Robin Farley wrote that she sees “significant long-term potential” in the market. Cruise line penetration in China is “well under 1 percent,” the report said, while Chinese itineraries command higher fares than voyages in the Caribbean.
Farley wrote that the growth of cruising in China has been driven by additional capacity there.
“End demand for the product and the longer-term potential is substantial,” she added, given “lower penetration rates and healthy demand from first-tier cities [and] ... the value proposition of cruising as a family-oriented vacation alternative for the average Chinese consumer, as often three generations of families live under one roof.”
This story was originally published October 15, 2014 at 5:43 PM with the headline "Carnival exploring China shipbuilding partnership."