Spotlight on Asia Cruise Retail

Asia is a truly fascinating area for cruise retail, having gone through so much development and challenges over the past decade. Today, the canvas provides a fascinating glimpse of some of the fastest changes that have been happening in the industry and will continue to evolve at lightening speed.

State of the Asia Cruise Market Today

It's fair to say that Asia/Pacific has recovered from the Covid pandemic in a much different way to other parts of the cruise industry.

In 2023, 2.6m went cruising in Asia & China vs 4.0m in 2019, a decrease of -35.6%. In China, the source market volume was even lower with 156k cruisers in 2023 vs 1.9m in 2019. (Source: CLIA State of Industry Report 2024). But the recovery is coming fast, in the first half of 2024, there were nearly 500k cruisers sailing from China alone, and in the 2nd quarter of 2024 there was a 60% increase in cruising vs the first quarter, thanks to a number of initiatives by the China Ministry of Tourism including the relaxation of visas (Source: South China Morning Post). According to Cruise Industry News Annual report, there will be 90 ships operating in the Asia/Pacific region in 2024, a 40% increase vs 2023. Today there are 8 ships operating out of China from 7 different companies travelling to Japan, South Korea, Philippines, Vietnam with Adora Magic City (Adora Cruises) being the flagship being the first ever cruise ship built in China.

In other parts of Asia, there has been some encouraging signs also with the international cruise lines slowly starting to re-enter the market, MSC Bellissima (MSC Cruises), Costa Serena (Costa Cruises), Norweigan Spirit (NCL), Diamond Princess (Princess Cruises), Spectrum of the Seas (RCCL) and Genting Dream (Resort World Cruises) back in action on various different itineraries across the many Asian markets.

Opportunities

Asia cruising has traditionally been one of the strongest cruise retail markets in the world. Competitive prices, strong guest demand for onboard shopping and ships that have been adapted for Asia with increased retail spaces have always helped to present one of the best places for brands to connect with guests onboard cruise ships. Indeed, recent ships builds, Spectrum of the Seas, Adora Magic City, MSC Bellissima have all had extended and well adapted spaces devoted to increasing their onboard retail offer.

Not only this, there are new builds and additional ships from existing fleets coming in the next years. Adora's 2nd newbuild ship is progressing well with the ship assembly nearly completed. In 2025, Disney cruises will launch the Disney Adventure specifically built for operating in the Singapore cruise market for at least 5 years. Also, Disney announced with their Japan partners that they will add a new ship specifically for the Japan cruise market in 2029 (Source: Reuters). And from their existing fleet, MSC Splendida is expected in December 2024 to double the MSC Cruises Asia fleet size. You can see that the family cruise market in particular looks like it has huge potential to grow here. What opportunities will this give for retailers?

Whilst local brands in the Asian market have traditionally been less known in the cruise retail space, there really is huge potential for many to enter and provide a local and tailored offering in the 'Asia becoming more Asian' trend. In cruise retail the scope and potential of these is pretty significant.

To note when thinking about opportunities, in India, the market is still primarily a domestic one, with Cordelia cruises the only significant player, but this area could be one to watch in the coming years, if the operating model can be changed somewhat. The development of Dubai and Singapore as potential destination markets for Indian cruisers is one to watch with real interest. The speech by Anne Kavanagh from APTRA at the recent DFNI Cruise Conference provided a fascinating spotlight on the sheer scale and potential that the Indian market has.

Headwinds

There are however some challenges facing the cruise retail market in Asia. The 2 most significant ones are the changes in guest demand and the regulatory framework that can affect the onboard potential.

Looking at recent news coming out of China, there has been a shift in guest demand in specific areas. Luxury Watches (one of the best categories in the China cruise retail sector) for example continue to face a difficult market with recent reporting from Richemont and Swatch Group as example showing the current challenge of the Chinese market. But in other categories, particularly in mid-market fashion, China continues to flourish. Can cruise retail adapt quick enough to see this change in demand in onboard offering?

But probably more significantly this year, for cruise retailers has been the tightening of Daigou rules. Daigou, which was the once very popular trend of buying items at duty free prices to then be re-sold in the domestic market, has been discouraged and as a result, the demand for many parts of the Asia duty free sector has slowed down somewhat, with Korea and Hainan in particular showing challenging numbers since the restrictions have come into effect. Cruise retail was a popular part of the daigou market and this change has required many of the operators to adjust their strategies accordingly.

This article on Jing Daily provides a really fascinating view of what is happening in the evolution of the daigou market. As brands try to readjust their operating models away from highly competitive prices in the duty free sector compared to domestic in each of the main countries, cruise retail could end up being challenged on traditional pricing advantage more than previously saw.

Not only this, the still soft demand for Asia cruising against much stronger demand in existing markets such as USA and Europe also means that the potential for increased capacity to be sent to Asia is still somewhat limited. An example of this is the very recent decision by RCCL to send Ovation of the Seas to Los Angeles home port rather than back to China in 2025 because of how strong the demand continues to be domestically for them. (Source: Seatrade Cruise News)

Expect Unpredictability and Growth in Asia cruise retailing

Since the real start of the Asia cruise market back in the middle of last decade, one thing has been constant, unpredictability. This is a very dynamic cruise market that is still in infancy compared to the more established areas such as Caribbean, Alaska and the Mediterranean. As such, there will be plenty of amazing opportunities and headwinds which will continue to shape and increase the Asian cruise retail sector in the next years. Cruise retailing in Asia is really at the top of the potential for the industry, and even with all these different circumstances, still provides the highest spend potential for operators and brands alike, as well as a strong trajectory back to full growth again.

If you have any further comments or thoughts on this, then please do add a comment below.

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Also, if you enjoyed reading this blog, then check out this other blog on why cruise retail is the opposite of airport retail.