Page 272 - 2019 White Paper on the Business Environment in China
P. 272
9 White Paper on the Business Environment in China
2.9 Travel and Tourism
Background As the growth of international air travel out of
China slowed down from the double digits in the last
According to the former few years, cruises seemed like the next frontier for
National Tourism global Chinese travel. The sudden downturn of China’s
previously booming cruise industry isn’t only a setback
Administration, direct tourism investment broke 1.5 for international cruise operators, but also the Chinese
government which had grand ambitions for a “made in
trillion yuan in China in 2017, and the country’s 144 China” cruise and shipbuilding industry. Major cruise
lines entered into a wide variety of joint ventures and
tourism investment funds were worth 800 billion yuan. strategic partnerships in China, as well as started the
construction of purpose-built cruise ships for the
More than 2,000 big-scale tourism projects are now Chinese market in anticipation to the staggering growth
in China’s cruise market. China’s Ministry of Transport
under construction, involving more than 5 trillion yuan expected 4.5 million Chinese cruise passengers by
2020. The reasons for the downturn are multifaceted,
in investment. A total of 130 scenic spots have seen and it’s impossible to put it down to one major reason
alone. Instead, a potent mix of heavy-handed Chinese
investment above 10 billion yuan each, and 45 above regulation, tourism bans, and downward price pressures
proved enough to turn a booming industry into a
20 billion yuan each. Investment in culture and tourism declining one. Chinese regulation that blocks cruise
companies from selling their products directly to
towns, theme parks, ethnic and religion tourism, Chinese consumers meant that cruise companies were
at the mercy of China’s highly competitive online travel
camping sites and those offering TV, film tracks and agencies. Left with no other option than mostly selling
tickets in bulk to these players, per-ticket revenue in the
performance have been on the rise in recent years, Chinese market ended up significantly lower than in
other markets. While all is not lost for cruising in China,
supported by the country’s favorable policies towards there are undoubtedly good reasons to revise a bullish
outlook on China’s cruise industry to a bearish one—at
tourism investment, including those that help qualified least until the Chinese government proves that it’s not
all talk with its 4.5 million cruise passenger projection
tourism enterprises go public. Private companies for 2020. As it turns out, tourism growth isn’t marked by
decree but by providing an environment conducive to
have put more focus on medium and high-end travel industry growth (Meesak).
experiences and invested more in leisure at first-tier “China is stable, it’s still a work in progress in many
ways. We all see it as a long term investment and are
cities, while governments and state-owned companies willing to be patient,” according to Frank del Rio,
president and CEO of Norwegian Cruise Line Holdings.
have put money in tourism infrastructure in the central “She’s still not achieving optimal results.” Most industry
leaders believe that at some point in the future, perhaps
and western parts of the country. distant future, China will be the largest cruise market
in the world. Executive chairman of MSC Cruises
Sea Cruise
The number of Chinese cruise passengers was
expected to fall for the first in 2018 to about 2.2 million
(CIN, 2018 State), down from 2.8 million in 2017. Cruise
passenger numbers grew 70 percent annually in China
in the four years through 2016. But cruise operators see
long-term potential because of the low penetration of
cruises in China, where just 0.2 percent of the population
have cruised compared with 3.5 percent in the US. Cruise
companies also are trying to enhance their appeal to
higher-spending millennials. Royal Caribbean’s Quantum
of the Seas, which sails from Shanghai, features a
skydiving simulator and an observation pod attached
to a giant mechanical arm. “The market may be choppy
at least for the next few years,” S&P Global Ratings said,
but “we expect operators will continue to invest in the
market over the long run” (Hancock).
272
2.9 Travel and Tourism
Background As the growth of international air travel out of
China slowed down from the double digits in the last
According to the former few years, cruises seemed like the next frontier for
National Tourism global Chinese travel. The sudden downturn of China’s
previously booming cruise industry isn’t only a setback
Administration, direct tourism investment broke 1.5 for international cruise operators, but also the Chinese
government which had grand ambitions for a “made in
trillion yuan in China in 2017, and the country’s 144 China” cruise and shipbuilding industry. Major cruise
lines entered into a wide variety of joint ventures and
tourism investment funds were worth 800 billion yuan. strategic partnerships in China, as well as started the
construction of purpose-built cruise ships for the
More than 2,000 big-scale tourism projects are now Chinese market in anticipation to the staggering growth
in China’s cruise market. China’s Ministry of Transport
under construction, involving more than 5 trillion yuan expected 4.5 million Chinese cruise passengers by
2020. The reasons for the downturn are multifaceted,
in investment. A total of 130 scenic spots have seen and it’s impossible to put it down to one major reason
alone. Instead, a potent mix of heavy-handed Chinese
investment above 10 billion yuan each, and 45 above regulation, tourism bans, and downward price pressures
proved enough to turn a booming industry into a
20 billion yuan each. Investment in culture and tourism declining one. Chinese regulation that blocks cruise
companies from selling their products directly to
towns, theme parks, ethnic and religion tourism, Chinese consumers meant that cruise companies were
at the mercy of China’s highly competitive online travel
camping sites and those offering TV, film tracks and agencies. Left with no other option than mostly selling
tickets in bulk to these players, per-ticket revenue in the
performance have been on the rise in recent years, Chinese market ended up significantly lower than in
other markets. While all is not lost for cruising in China,
supported by the country’s favorable policies towards there are undoubtedly good reasons to revise a bullish
outlook on China’s cruise industry to a bearish one—at
tourism investment, including those that help qualified least until the Chinese government proves that it’s not
all talk with its 4.5 million cruise passenger projection
tourism enterprises go public. Private companies for 2020. As it turns out, tourism growth isn’t marked by
decree but by providing an environment conducive to
have put more focus on medium and high-end travel industry growth (Meesak).
experiences and invested more in leisure at first-tier “China is stable, it’s still a work in progress in many
ways. We all see it as a long term investment and are
cities, while governments and state-owned companies willing to be patient,” according to Frank del Rio,
president and CEO of Norwegian Cruise Line Holdings.
have put money in tourism infrastructure in the central “She’s still not achieving optimal results.” Most industry
leaders believe that at some point in the future, perhaps
and western parts of the country. distant future, China will be the largest cruise market
in the world. Executive chairman of MSC Cruises
Sea Cruise
The number of Chinese cruise passengers was
expected to fall for the first in 2018 to about 2.2 million
(CIN, 2018 State), down from 2.8 million in 2017. Cruise
passenger numbers grew 70 percent annually in China
in the four years through 2016. But cruise operators see
long-term potential because of the low penetration of
cruises in China, where just 0.2 percent of the population
have cruised compared with 3.5 percent in the US. Cruise
companies also are trying to enhance their appeal to
higher-spending millennials. Royal Caribbean’s Quantum
of the Seas, which sails from Shanghai, features a
skydiving simulator and an observation pod attached
to a giant mechanical arm. “The market may be choppy
at least for the next few years,” S&P Global Ratings said,
but “we expect operators will continue to invest in the
market over the long run” (Hancock).
272
