Tourism & Cruises

Carnival to introduce Chinese cruise brand with local partners

Carnival Corp. executives appeared in Shanghai in mid October, when the company announced it would add new ships to the Chinese market in 2016 and 2017. That announcement preceded Wednesday’s release of a joint venture agreement between Carnival and Chinese interests that will create a domestic cruise line in China.
Carnival Corp. executives appeared in Shanghai in mid October, when the company announced it would add new ships to the Chinese market in 2016 and 2017. That announcement preceded Wednesday’s release of a joint venture agreement between Carnival and Chinese interests that will create a domestic cruise line in China.

In an industry first, Carnival Corp. said Wednesday it will develop a domestic Chinese cruise brand with Chinese partners.

The Miami-based company formed a joint venture with China State Shipbuilding Corp., the largest shipbuilder in China, and China Investment Corp., a sovereign wealth fund with $740 billion in assets. Carnival Chief Executive Officer Arnold Donald formalized the accord Wednesday in a meeting in London with Chinese President Xi Jinping, who is on a state visit to the U.K., according to a statement released by Carnival.

In a media call following the announcement, Alan Buckelew, Carnival’s global COO, pointed to previous statements by the Chinese government that it intended to encourage and participate in the cruise industry. “We thought it in the best interest of our corporation and the industry to partner with them,” he said. “If this is an inevitable activity there, then we want to be part of this and help direct it.”

Carnival, the world’s largest cruise company, said it spent the past year negotiating the arrangement. The partnership will encompass two different entities, one that will own and operate the multi-ship line, and a second venture involving the Chinese partners and Italian shipbuilder Fincantieri that will build the vessels.

Under the operation / ownership agreement, the Chinese partners will hold 60 percent of the venture, while Carnival will hold 40 percent. The two parties have committed to $4 billion in capital investment during the first 10 years, Buckelew said. The arrangement will last at least 25 years.

The shipbuilding deal has not yet been finalized, according to Buckelew.

The move is designed to increase Carnival’s share of what is expected to become the world’s largest tourism market. In 2014, 110 million Chinese traveled outside the country, Carnival said, a number that has grown 12 percent so far in 2015, despite slowing growth in China.

The parties are still developing the concept to determine the Chinese market segment and product that will fit it best. That process will guide how big the ships will be — likely medium to large ships, Buckelew said — and many ships will be deployed. Announcement of a final timeline is likely months away, he said. Carnival will operate the ships.

“It’s very early days,” he said. “There’s a lot of market research to do.”

Initially, the new Chinese line may use some existing ships in the 102-vessel Carnival fleet, he said.

The country in which the ships will be registered also has not been finalized. “We’re leaning toward a UK flag,” said David Dingle, chairman of Carnival UK.

Carnival Corp. now bases ships from the Costa and Princess brands in China. In 2017, it will add ships from its Carnival and German AIDA brands and introduce a new Princess ship specially built for China, giving the company a total of 11 total ships based in China.

The three major global cruise companies — all based in Miami — are racing into the world’s most populous nation as wealth there grows into the middle and upper classes. Early this year, Royal Caribbean positioned its groundbreaking Quantum of the Seas in China after a brief stint in the U.S. Recently, Norwegian Cruise Line announced it will bring a new ship built for the Chinese market into service in Spring 2017.

Bloomberg contributed to this report.

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