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Testing Asian waters again
Royal Caribbean International president, Adam M. Goldstein, visited Singapore, Japan, the Philippines, Hong Kong and China recently. Raini Hamdi susses out his interest in the region.
Is your visit related to an Asia deployment in the near future?
While Iím here, Iím doing three things for sure ≠ helping them (local sales offices/representatives) sell/market all our cruises in these countries; to look at the potential deployment of our ship here; and to look at opportunities in the supply chain, such as purchasing.
You had positioned ships in the region before ≠ Sun Viking (December 1995-February 1997; the ship is now under Star Cruises) and Legend of the Seas (December 1999-March 2002). What is your reading of the Asian cruise market now?
We got involved with Asia 15 years ago. We understood then there could be tremendous potential and that was even before India and China began to emerge on the world scene.
Today, it seems the potential is even greater. If you put the market development and our brand development together, this creates an opportunity. We are thinking about it quite a bit.
But your basing a ship here remains just Ďthinkingí?
We donít have a lot of specifics. The other two times we came out here, our orientation for each programme was on bringing North Americans here for cruising, not so much on local market sourcing. We now know we can be successful in local market sourcing. As we develop our ideas, the balance will shift; it wonít be North American-heavy and Asia-light, Iím confident about that. We will come here, it is a matter of when, what ports, what cruise line.
Why are you confident about local market sourcing now?
In the five years since Legend, weíve had tens of thousands from this region sail with us and the feedback from those customers and tour operators in this market is the customers enjoyed it. Weíve had many more Asian customers in this last five years than the previous five years and the five years before that. Confidence on cruising has risen and our product is better too, with more choices on board and improved services.
So youíre happy with your sales figures from Asia?
Yes. We havenít concentrated financial resources in the region but the team (regional office and international representatives) does a terrific job and make each dollar go far.
We need to market and sell more and, at some point, bring a ship to the region again. We do a good job of selling cruises far away, but in every region, it is helpful to have cruise ships (for branding purposes).
Do you adapt the product to suit the Asian market?
Fundamentally, the Royal Caribbean product delivery is pleasing to people from all over the world. The basic formula works, but we frequently tweak at some levels. Usually itís about adding, not removing. So we create more options. In the UK, for instance, we might add English breakfast but we donít take away the normal breakfast.
So what is stopping you from having more concrete plans to base a ship here?
I donít think there is anything that is stopping us, itís a matter of timing and strategic planning. We have new ships coming in 2007, 2008 and 2009. The arrival of new ships creates the opportunity to deploy other ships and there is opportunity in different parts of the globe.
Are there more ports than there are ships competing for cruise companiesí deployment?
There are more markets available to us and certainly the growth of the European market is an important development in this decade. The UK has grown fast, Germany growing, Spain too, so we have responded to those opportunities while keeping our major presence in North America. We have also responded to the opportunity in South America.
There are also many more home ports in North America. We are basing ships now in 20 ports in North America ≠ a big change from 10 years ago (about 10 ports).
There has been competition for our ships, but as I said, market development, brand development and new ships arriving all converge to create opportunities that are exciting.
The Asian market is not huge yet, compared with North American (nine million) and Europe (three million), but the accelerated development of China and India, together with South-east Asia, makes the region is extremely interesting. Wealth generation here is tremendous and it will expand. And the cruise experience is something people do with discretionary income and is one of the most enjoyable experiences you can have.
The markets say players such as yourself should come in and create the demand and that you have Star Cruises to thank for, for introducing Asians to cruising.
(Laughs) It is true, it takes cruise lines, ports, ships, customers ≠ all players. Everyone has a role to play and accelerate market development. We think we have, by being here in the past, and looking at our role in the future here. You canít look at just one element and expect ports, or travel agents by themselves, to make a market happen, everyone needs to contribute.
If you base a ship here, would it be in north Asia or South-east Asia?
Not sure yet. We typically announce early in the year and weíre eight months away for 2008/09.
Letís discuss calling on the Far East, since basing a ship is indefinite yet. Many of your competitors have returned or are returning from this year (according to the Cruise Lines International Association (CLIA), eight CLIA-member lines and
14 ships will offer South-east Asia itineraries ranging from nine to 30-plus days in 2006 and 2007) but Royal Caribbean is not among them. Surely they believe North American interest in cruising the Far East has returned since 9-11? Are they wrong, or are you wrong?
It has rebounded, small though. There is opportunity for the region over time to build up North American cruising, but in terms of volume and potential, there is more from here to North America, than North America to cruise to Asia.
Royal Caribbean is not coming in 2007/08 for the reasons I told you (expanding deployment) but our sister Celebrity will be in Australia/New Zealand in 2007/08 and I think that is an encouraging start to come back this way.
How is Freedom of the Seas doing and why are you obsessed with being big?
Freedom is doing great. The future is in delivering experiences that customers want to have. In recent years, customers have made it clear they want a large number of choices in their cruise experience. They donít want us to tell them what to do and when. We have built bigger ships because that is the way we can respond to their desire for more options and create more excitement in their experience. We do not know what will happen in the long term, but we are confident in the near term that trend will remain in place. This is why we have Project Genesis and more Freedom ships.
(Editorís Note: Project Genesis will be the worldís largest and most expensive cruise ship when it is delivered in fall 2009. The US$1.24 billion vessel will hold up to 6,400 passengers. Freedom is the current largest; it can hold up to 4,370 passengers, eclipsing the previous largest, Cundard Lineís Queen Mary 2.)
We are at the forefront of the large cruise ship experience, it is what we do. But there is a role for ships of all sizes, and multiple cruise lines, and travel agents helping customers choose them.
What do you think of Stelioís easyCruise (TTG Asia, From the Top, April 8, 2005)?
The low-cost innovation is incredibly important. The modern cruise industry started only 40 years ago, so there is still a lot of room for experiments and new directions. What Stelios is doing very different from what we do and it is not a bad thing.
What changing demographics do you note?
Our average customers have gotten younger and family travel, including multi-generation travel, is of increasing importance to us.
Itís never been about retirees. The average age at first was in the 50ís, now 40ís. The classic Royal Caribbean customer of the seventies and eighties was a couple in their 50ís, travelling without children, but they were still in the workforce.
Now, we get a cross-section: young, old, retired, singles, couples, families, everyone. That is because we have become mainstream; our ships also can deliver different vacation experiences to people in the same ship at the same time.
What is the impact of fuel costs on you?
It is challenging and continues to be challenging. We donít control the cost of a barrel of oil so we try and use as little fuel as possible. We have many initiatives in place or under evaluation that would reduce our fuel consumption.
The marine and hotel aspects of the business consume a lot of fuel.
Another way to minimise fuel costs is to buy as efficiently and cleverly as possible, and the third way is, in certain cases, we use alternative grades of fuel, where the fuel is cheaper, lasts, but powers the engine effectively.
So how do you think the company will perform this year?
Weíre optimistic about the business. We feel the market in North America has low penetration, there are still many millions in our target market that would love to cruise but who havenít tried. In Europe and Asia, the penetration is much less, there are again millions of customers who never cruise but would love it if they did. We also believe the demand generation in South America is there. The world economic conditions are strong so we are quite optimistic about the industry going forward.
Would world uncertainties throw a spanner in the works?
We live in a world that has dangers, whether we are operationg on water, land or another area. So we build in precautions and preventions. Our customers expect us to provide them with safety, and the overall track record of the cruise industry shows it is a very secure vacation choice and our mission is to keep it that way.
Do you take a cruise vacation?
About every year. We (my family) went to Galapagos ≠ wow, a major wow, everybody should do it. Occasionally, we cruise in the Caribbean. I just spent 31 nights on Freedom ≠ that is a lot of nights on one ship at one time.
I love to cruise. I also love to take other vacations. And that is true of our guests. We donít expect people to just cruise. People will take both in a year, or take land vacations and return to cruising at some stage.
Adam M. Goldstein
Royal Caribbean International
Mr Adam Goldstein was named Royal Caribbean International president in February 2005. He oversees fleet operations, sales and marketing, brand development, supply chain management, government and community relations and Royal Celebrity Tours. Before this, he was Royal Caribbeanís executive vice president, brand operations, with similar responsibilities, from 2002 - 2005.
Mr Goldstein has been with the company since 1988. He serves on the board of directors of the Travel Industry Association of America and the board of trustees of Our Kids, Inc, a nonprofit for foster care and related services for about 5,000 children in Miami-Dade and Monroe counties.
Royal Caribbean Cruises Ltd (RCCL) is a global cruise vacation company that operates Royal Caribbean International and Celebrity Cruises, with a combined total of 29 ships in service, three under construction and two on firm order.
The Royal Caribbean brand which has 20 ships, including the largest cruise ship on earth, Freedom of the Seas (look out for the review in our next cruise report, August 11).
Ms. Raini Hamdi
Editor, TTG Asia, TTGmice, BTN Asia-Pacific
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