How Important Chinese Market is for Cruising Industry - Term Paper Example

How Important Chinese market is for Cruising Industry Introduction The global tourism and hospitality sector has grown rapidly in the past few years.Among various other reasons, establishment of technology along with drastic infrastructural change have substantially contributed towards the development of tourism sector of the world. In the present day context, people are quite engaged with their personal as well as professional responsibilities further having minimum scope for leisure activities in their daily work life. In this context, holiday and leisure activities have become significance in the recent time that has in turn, boosted tourism sector services at a different level. To be noted in this regard, the hospitality and tourism industry has been recorded as one of the fastest growing sectors of the world. The prominence of the industry has augmented considerably over the past few years, where a large proportion of population deemed to have become dependent on this sector. The industry includes categories such as lodging, restaurants as well as theme parks among others. The services relevant to cruise line also include in the hospitality and tourism sector. The industry also performs a key role in dealing with unemployment as it employs millions of people throughout the world. In the contemporary context, the industry has undergone various noteworthy changes wherein its economic role has also gained noteworthy attention. With continuous innovation and expansion, various dimensions were added to the sector, offering diversity to the industry players. The cruising sector can accordingly be noted as one of the major sections of the global tourism sector, which is becoming extremely popular amid the tourists, especially in the domain of leisure tourism. The industry provides an all-new paradigm of leisure to the people, providing unique amenities and services to them (Theobald, 2013). Over the years of its existence, the cruising sector of the world has been largely dependent on the markets of North America for its growth and existence. However, in the last decade or so, countries like China have shown immense growth within the cruise industry with the number of customers increasing rapidly in the last 10 years. As per the recent trends, China is gradually emerging as one of the major cruising destinations of the world, operating extensively in the cruise line sector. Contextually, it can be estimated that in the years to come, the cruising sector of China will provide growth opportunities to international cruise companies to operate in this particular market in an extensive manner. In this particular thesis, focus will be correspondingly delivered to the issue, reflecting upon the importance of Chinese cruising industry in the current phenomenon. Literature Review Agreeably, the world tourism sector has been growing rapidly in almost every dimension, including business, leisure and others. Growth and expansion of the hospitality and tourism sector can be witnessed in various nations today, irrespective of them being economically developed or lagging. Similarly, when considering the cruising industry, as one of the integral parts of the hospitality sector, its rising trend is observed to be on an ever-increasing growth spree. The contribution of the cruise industry upon the overall tourism sector is also quite commendable. This can be comprehended from the development of the cruise industry within the travel sector of the US. Illustratively, over the past few years, 13.5 million passengers sailed the sea in the year 2009, while in the year 2010, the number rose to 14.3 million (Cruise Lines International Association, n.d.). Such growth prospects were also apparent in the context of Chinese cruising industry. However, it is worth mentioning in this context that the Chinese market for cruising is also at its booming stage, wherein its importance in the global as well as national economy shall determine its potential of sustainable growth. Chinese Cruise Industry China is regarded as one of the fast growing markets in the global cruise industry. As reported in China Daily (2014), the country is on the course to become one of the leading markets within the cruise industry of the world. Industry evidences and comparisons also depict that the nation is on the verge to soon become the largest cruise market of the world, as many of the cruising giants are making their way to operate in the country owing to the vast opportunities it ensures for the entire industry. To be noted in this regard, the growth of the overall Chinese market is also forecasted to depict an increase of 140 percent from 2013 to 2015 with due consideration to the latest trend of the sector. The data and the forecast can further be affirmed from the fact that in 2012 more than 142 global ships were routed in the Chinese ports, which further depicted an increase of 49.5 percent from the preceding year. In 2013 again, international cruise service providers were able to expand their services in the Chinese markets by more than double, which further depicted the increasing popularity of this particular market. The growth and popularity of the Chinese cruise market can further be comprehended from the fact that as one of the biggest cruise service providers of the world, i.e. Royal Caribbean Cruises Ltd, has around six cruises operating in the markets of China (China Daily, 2014). Shankman (2013), in this regard asserted that the shipping market of China is on the verge to become the largest cruise markets of the world that can easily surpass the industry giants, including the US and the UK, in the coming future. It has been forecasted from the present trend of the Chinese cruise market that by the year 2017, the country will surpass the growth rate of the US cruise market and emerge as one of the leading tourism dimensions of the world. This is well comprehended and justified with reference to the fact that the cruise industry, within the Asian subcontinent is quite small and young, where only 6-7% people consider cruise sailing for their leisure and other travel activities. Hence, it is quite apparent that the growth prospect in this part of the world is high in the future. To support this particular notion, the increasing popularity of cruising within the tourism sector of China can also be comprehended with reference to the growth attained by some of the pioneering cruising companies of the nation. For instance, the business of Royal Caribbean Company increased 4 times in 2012 as compared to that of the preceding year, which was also observable among other companies operating in the domain (Shankman, 2013). Accordingly, as per the facts presented in Wen (2014), the Chinese cruise markets are leading comprehensively in the Asian Subcontinent. The country is experiencing an annual growth of around 33 percent within the cruise sector, which is again quite noteworthy with regard to the global figures. Moreover, the increasing focus of the tourism authorities of China towards the cruising sector also depicts the significance of the market in the future context (Wen, 2014). Importance of Chinese Market for the Global Cruising Industry From the discussion conducted in the previous section, it is quite apparent that the Chinese cruise industry is on a growth spree especially in the recent times. It is in this context that because the industry has been showing utmost potential owing to which, the attention of the global companies has shifted towards the Chinese cruise market. In this context, the study of Flannery (2014) depicted that top international cruise companies are considering China as a major market with regard to ensure their business growth and profitability. Flannery (2014) also affirmed that Royal Caribbean Cruises, which is one of the biggest services providers in the Chinese cruising sector, has considered as well decided to make Shanghai their operational hub, which would increase the growth potentials of the industry in manifold. Apparently, the company sees China as one of the most profitable markets of the world, following the markets of the UK and the US cruise industries. Since the growth of the number of people, using cruise is at its initial stage in Asia, the growth potential in the future is quite high, which can even exceed the growth of the UK and the US. It has also depicted that the tastes and preferences of the customers in the Chinese market has been world class, as they prefer grand and notable services from the companies. This has also enhanced the potential opportunities that the market is ensuring for the global service providers. Emphasizing a similar context, Flannery (2014) argued that the future growth of the overall cruise industry is largely dependent on how it attracts the middle class consumers of the global society, constituting the largest consumer group in the world. As noteworthy in this context, the number of middle class people within the Chinese society is itself larger than the overall population of the US today (Flannery, 2014). This also depicts the growth opportunities offered by this particular market to the cruise companies of the world. Inauguration of the Wusong port in the year 2014 has also been a major leap taken by the country to increase flow of international ships, which has also increased its ability to accommodate international cruise in large numbers (China Tourism, 2014). This particular fact also projects the growth potentials and the importance of the cruise market in China. According to the study of Yap (2013), the authorities within the nation emerged with plans to facilitate more and more ships in China in the coming future. With the same vision, the country has been focused on establishing high-end amenities for the international cruise along with the policies that can ensure smooth operations of the same (Yap, 2013). As further noted in Bachman (2014), with the increasing number of first time guests in China, this particular cruise market can be regarded as one of the most important within the industry. Notably, with the growing number of customers from the middle class section of the Chinese society, the opportunity for business growth has expanded substantially to accommodate the international and the domestic players. As per the estimation provided by the Asian Cruise Association, by the year 2020, the number of Asian or local customers for the cruise industry will increase by more than triple, reaching to around 3.8 million (Bachman, 2014). Such expansion planning and estimations also depict the rising importance of the Chinese cruise industry in the current industry context. The number of potential customers in China is quite large in comparison to that of other sectors of the world. Notably, only 0.02% of the population of the country is noted to be the active customers for the cruising industry. Accordingly, based on the population, if the percentage of potential customers is to be considered, China is the second largest in the world after Russia (Tercek, 2013). The table below provides a better understanding of the same. (Source: Tercek, 2013) It has been comprehended that since China is the largest country of the world in terms of population and it has also developed immensely in the recent times; companies from different sectors of the world are becoming increasingly aware of the extensive opportunities provided by the same. Policies of the Chinese government have also been quite appreciative towards the foreign cruising brands to facilitate the growth of the industry in future. Contextually, these aspects are also deemed beneficial for the Chinese cruising sector in the near future. With due consideration to these aspects it can be asserted that the Chinese market is slowly and steadily becoming one of the most preferable markets of the international cruise companies, owing to the extensive growth opportunities this particular market has for the business units (Dowling, 2006). Hence, from the overall analyses of the secondary sources, it can be asserted that China is fast emerging to be one of the biggest markets of the world, which in turn advocates its importance in both the national and the international domains. The number of potential customers in this particular market has also been increasing in the recent time, which further attracts worthy international cruise companies to penetrate and in turn, enrich the region with resources. Analysis The global cruise industry is rapidly developing and augmenting in terms of its scale and widespread operations rooted in different parts of the world. Notably, in the present day context, the interest of people towards luxurious leisure activities has also increased owing to which, the overall tourism sector and the cruise industry has seen unprecedented growth. Contextually, China has emerged as one of such markets within the cruising sector that has been developing in terms of size and magnificence. The country is one of the largest in the world offering a large number of potential customers, which expectedly will increase in the subsequent years. As noted by Sun & et. al. (2014), there is many growth opportunities as well as the challenges that are associated with the Chinese cruising industry. In the initial days, the global cruising industry was largely concentrated towards the markets of North America, which is now observed as transforming rapidly, with its focus on the Asian market(Sun & et al., 2014).. This can be justified from the figure provided hereunder. (Source: Sun & et al., 2014) However, with the passing years, the industry has moved its operations in others parts, which includes European and the Asian countries. In this context, China, with its potential customer base, amenities and support from the government has emerged as a suitable market for the cruise industry. The growth of the market can be seen in terms of both the number of cruise as well as the number of ships visiting the country annually. However, an in-depth and thorough understanding has to be gained in this regard in terms of the present growth rate of the Chinese cruise market. It has also been learnt from the study of Sun & et al (2014) that the Chinese cruise industry is just in its early stage of development with due consideration to the large population of the nation, where the number of potential customers for the cruise industry is supreme. The government of the nations is certainly emerging with numerous projects of infrastructure, specifically for the cruise industry and its welfare. This aspect can also be justified from the fact that in the present day scenario, around 20 ports in the country operate specifically for its cruise sector. Governmental efforts also show considerable belief on the growth prospects and importance of the cruising industry that has encouraged the overall cruising sector in China. For instance, marine department along with the ministry of the nation has emerged with large number of policies that can favor as well as promote the development of cruising in China. This approach of the concerned authorities has also targeted towards encouraging the flow of operations of international cruise companies operating in China (Sun & et al., 2014). The growth and prominence of the Chinese cruising industry can be comprehended from factors such as supply chain, industrial cluster and global cruising value chain among others. The policy making approach of the Chinese government towards the cursing sector can also be taken into consideration when determining the growth trends of the Chinese markets in the cruising sector. Although the history of Chinese cruising industry is 10 years old, its prominence in this market took place in the year 2002 (Sun & et al., 2014). Contextually, it can be said that the industry is quite young and its potential to grow in the future is yet to be extensively identified. International cursing companies, owing to several key factors, see China as a favorable market. These factors might include its favorable geographical structure, its rich cultural charm, its importance as a tourist destination and its huge potential for tourism growth among others. With consideration to the above-mentioned factors, many of the global cruising companies have initiated their operations in China and made it their operational hub. Many of the top companies have also developed their local and regional offices in the mainland of China (Xiea & et al., 2012). This particularly reflects how foreign companies are leveraging the benefits and opportunities provided to them by the Chinese cruising market. Positive governmental intervention have also been a major encouraging factor wherein the Chinese government had formed China Cruise and Yacht Industry Association (CCYIA) responsible for the development and welfare of the domestic and international cruising companies in the mainland of China. The body is also responsible for communicating data about the growth trend of the cursing industry in China for the government of the nation. As per the forecast report of the association, by the year 2020, the number of outbound tourists in China is expected to reach to around 100 million, which further depicts the growth potential of this particular market. Attaining the forecasted figure is quite likely to further make the Chinese market, one of the largest economic sectors in the world in terms of outbound tourist rates. This assumption of the concerned authorities on the growth of the Chinese cruising industry can be justified from the past data recorded in the duration between 1999 and 2011, both for inbound and outbound tourists. It is noteworthy in this context that as per the figure below, the Chinese market has increased continuously over the past decade within the cruising sector (Sun & et al., 2014). With consideration to the past growth rate too, the future growth forecast can be comprehended as completely justifiable. (Source: Sun & et al., 2014) China, which accounts for more than 1/5th of the world population has coastline of around 1800 km, is also one of largest in the world. This has also raised the potentials of this particular market for the global cruising sector. Furthermore, the aspect that China has gained utmost economic and political stability in the recent years has also contributed towards encouraging international cursing companies to operate in this particular market quite extensively. Furthermore, the importance of the market for the cruising sector can also be affirmed from the fact that China has the largest population in the world with only 0.05 % of the population being active cruise travellers. This particular fact depicts that in the coming years the number of potential customers will surely increase, further providing unprecedented growth opportunities for international cruising companies. In this similar regard, it has also been learnt that the income of the people of China is also augmenting quite rapidly, which has further influenced their purchasing power in a positive manner. Notably, the above-mentioned facet can be justified with reference to the immense increase witnessed in the GDP growth of the nation over the recent past. It has also been observed that in the year 2006, the overall GDP of the country was $2000, while in 2011, the figure raised to $5412. This particular aspect can also enhance the importance of China as an emerging market within the tourism sector (Sun & et al., 2014). Notably, more than 300 million people, from the overall population of China, live in the coastal areas. This figure is quite large in comparison to the other potential markets for the cruising industry, which also depicts the probable future growth prospect in terms of customers associated with the Chinese cruising market. This particular aspect also makes the Chinese market an important part for the cruising industry. The prominence of the Chinese market for the global cruising industry can also be comprehended from the fast growing tourism domain of the nation. Correspondingly, with the economic improvement of China, the flow of tourism in the nation has also raised immensely (Zhou, 2014). The number of inbound and outbound tourists in China has also shown a steady and continuous growth over the last 10 years or so. In this regard, it will be worth mentioning that on an average, the tourism sector of the nation has experienced an annual growth of around 18.9% over the past decade (Erbing & et al., 2014). However, one of the most vital facts that should be mentioned depicts that on an average, around 1.2% growth was observed in sea travellers within the tourism domain of China. However, though the growth percent is comparatively small, the future prospects associated with the same could not be ignored either. The growth of the cruise industry in the Chinese markets can be better understood from the graph provided hereunder for the last 10 years (Sun & et al., 2014). (Source: Sun & et al., 2014) The data provided in the graphical representation above clearly depicts that the Chinese market is fast emerging as a potential destination in the global cruising market. Increasing tourism activities and augmenting interests of people toward cruising, has further helped the Chinese market to rank among the most opportunistic markets for the global cruising industry. However, there are certain key challenges that concerned authorities in China need to deal with, and suffice the expectations of the international cruising companies. Notably, as compared to the countries of Northern America, which are well established in terms of the cruising industry, China is yet to develop itself completely gaining competitive advantages from its international rivals. The development in the Chinese markets can be mainly identified in the domain of infrastructure, which needs to be enhanced to meet the global standards and to accommodate the continuous flow of international cruise service providers in China. In this regard, the challenges for the concerned authorities in the Chinese market can be identified in the domains of finance and availability of appropriate coastline area (Sun & et al., 2014). Conclusions and Recommendations From the overall analysis of the paper, several key facts can be highlighted about the present growth and potentials of China as a market for the global cruising industry. Analysis of numerous secondary sources also suggested that China is fast becoming one of the most vital markets for the global cruising sector. It has been learnt that in the present day phenomenon, people all over the world travel from one place to another for leisure, business or healthcare purposes. However, the number of leisure tourist is quite large in number and has been on a continuous growth spree in the recent past. This particular aspect has certainly influenced the global cruise sector in a positive manner. Notably, cruising sector provides unique experiences to leisure tourists with the deliverance of products, services and amenities that are extremely different from other domains within the tourism sector. Over the years of its existence, the cruise business was largely concentrated towards the operations of the UK, the US and other parts of the northern American region. However, over the last decade or so, the Chinese cruising industry has emerged as an important part of the global cruising sector. As per the present trend and steady growth of the Chinese cruising industry, it is estimated that in the near future, this particular market will emerge as one of the leading sectors in the world and thus, can be asserted to have considerable importance in the current day context. This particular estimation can further be justified from the range of benefits and opportunities this particular market has in offer for the global cruising industry. From an overall perspective, it can be asserted that the country has maximum potentials to grow in terms of the number of customers for the cruising industry, as only a minimal percentage (i.e. around 0.5%) of the population are noted as the active customers of the cruising industry. The findings obtained from the study also suggests that the governmental policies as well as facilities provided to the international and domestic cruising companies further encourage the same to operate extensively in the Chinese markets. Moreover, the increasing GDP along with augmenting buying power of the customers are also expected to influence the operations of the cruising companies in a positive manner along with the other growth indicators. Hence, it can be concluded that China is indeed an important market for the overall cruising sector. However, as per the analysis conducted, there are several challenges that concerned authorities are dealing with, with the aim to control the immense growth rate of the cruising sector in the nation. The problems were mainly identified in the domain of infrastructural developments to accommodate the increasing flow of cruising operations in China. This development primarily included huge investment that can further influence the financial balance of the nation. In this regard, it can be recommended that the country must plan properly with regard to allow the expansion of the operations of both domestic and international cruising companies in China. This expansion should be executed based on the capabilities of the nation to provide cruising amenities to the international and domestic companies. References Bachman, J. (2014). In China, cruise lines hope to woo millions of first-time guests. Retrieved from http://www.businessweek.com/articles/2014-05-22/in-china-cruise-lines-hope-to-woo-millions-of-first-time-guests China Daily. (2014). Nation on course to become worlds largest cruise market. Retrieved from http://www.ccyia.com/en/News/20140825/1681.html China Tourism. (2014). Shanghai port will receive 554 ships in 2014 with the open of Wusong port. Retrieved from http://www.tldchina.com/EN/WebSite/news.aspx?id=4810&listid=9 Cruise Lines International Association. (n.d.). Profile of the U.S. cruise industry. Retrieved from http://www.cruising.org/pressroom-research/cruise-industry-source-book/profile-us-cruise-industry Dowling, R. K. (2006). Cruise ship tourism. US: CABI. Erbing, C., Jianyong, S., & Hongjuan, D. (2014). Review of research on cruise tourism of China in recent five years. International Business and Management, 8(1), 67-71. Flannery, R. (2014). Royal Caribbean sees profit, growth potential in Chinas cruise industry. Retrieved from http://www.forbes.com/sites/russellflannery/2014/04/22/royal-caribbean-sees-profit-growth-potential-in-chinas-cruise-industry/ Shankman, S. (2013). China’s cruise industry is on course to surpass America’s in four years. Retrieved from http://qz.com/143416/chinas-cruise-industry-is-on-course-to-surpass-americas-in-four-years/ Swarbrooke, J., & Horner, S. (2001). Business travel and tourism. UK: Routledge. Sun, X., Feng, X., & Gauri, D. K. (2014). The cruise industry in China: Efforts, progress and challenges. International Journal of Hospitality Management, 42, 71-84. Theobald, W. F. (2013). Global tourism. UK: Routledge. Tercek, J. (2013). Cruise industry trends 2014. Retrieved from http://www.cruising.org/sites/default/files/leadershipforum2013/3B.pdf Wen, W. (2014). China to lead Asian cruise industry. Retrieved from http://usa.chinadaily.com.cn/epaper/2014-04/07/content_17412078.htm Xiea, Hui., Kerstetter, D. L., & Mattila, A. S. (2012). The attributes of a cruise ship that influence the decision making of cruisers and potential cruisers. International Journal of Hospitality Management, 31, 152-159. Yap, B. (2013). Rough seas forecast for Chinas fast-growing cruise industry. Retrieved from http://www.reuters.com/article/2013/08/15/us-china-cruise-idUSBRE97E05820130815 Zhou, R. (2014). Research of cruise industry development bottlenecks in China. International Journal of Business Research and Management, 5(4), 64-71. Read More